Nifty and Banknifty weekly analysis for the coming week

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After a huge fall, we saw some recovery in the market on Friday. Now, what should be our strategy for the coming weeks? In this post, I’m trying to share Nifty and Banknifty weekly analysis for the coming week based on charts.

Nowadays the market is highly volatile. In this type of market, our first priority must be to safeguard our capital. Return and all other things should be our secondary targets.

Before going further, I just wanted to share two things. One is Risk Management and second is Black Swan events. Let us talk about Risk Management first.

Why Risk Management is Important?

In my every article, I always say that “Risk Management is the only keep to success in this market”. Everything we are following here, whether we are using technicals, fundamentals or any other data, Everything is based on assumptions.

Assumptions like this will happen next or these levels we may get in the coming weeks or months. Here one thing we need to keep in mind that when we are making some predictions, it will have a 50% probability either market will go in our direction or it will reverse from here.

In other words, we can say that 50% is the winning rate. Now what we all are doing here? Normally, We always focus on that 50% winning probability and calculating our profits based on it.


But if we want to be a successful trader, we have to calculate our risk in those 50% losing trades too. If we are taking care of those loss-making trades, we will definitely manage ourselves to generate some consistent return.

*Here I’m just sharing a basic prediction method. Obviously we can increase our winning percentage by using some advanced strategies.

So here I just wanted to share that, we must focus on our risk management and always calculate how much max we can loose in a particular trade.

Why we should keep ourselves ready for the Black Swan Event?

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.

These Black swan events can destroy your entire account in a few seconds and as the name suggests, You don’t know when will be the next Balck Swan event. So you have to be ready for these events all the time.

You should keep your portfolio with proper hedge even if there is no news or a very low probability to go against your prediction. Because Capital protection must be our first priority.

So before Initiate a strategy, focus more on downside risk. Your downside risk must be locked. You can keep your risk on the unlimited side on the upside (only if you are an advanced trader) but downside loss must be fixed.

The reason behind this is, Bears are always stronger than Bulls. In an upward direction, you will get a step by step rally. You will get enough chances to adjust your positions but downside movement is much much faster than upside movement, you will not get any chances to adjust your positions. If a trade has slipped from your hands, it will be very difficult to catch that trade and it can give you a huge pain.

That’s the reason I always prefer a strategy that has limited risk on the downside. Because we don’t know what will happen next in the world. So be ready all the time.

Keep your positions in such a way that if market open 10% Gap-Down tomorrow, your risk must be limited.

Nifty Weekly Analysis for coming weeks

Nifty weekly chart today

This is the weekly chart of Nifty50. We saw a huge decline in the last 3 weeks. On Friday, 13th March 2020 We hit the lower circuit even in just 30 mins after the market opens. As per circuit rules Exchange closed trading for 45 minutes.

We saw a huge rally once trading resume after 45 mins. This is the only relief after this bloodbath in the market. Most of the traders are struggling with very high volatility in the market.

Now, what should be our strategy for the coming weeks when there is huge uncertainty in the market due to coronavirus issues?

One thing I want to share before going further that when the market is running based on sentiments, No data or levels will work in such cases. So if you are totally depending upon these levels then it’s time to take a break and let the market give a proper indication to entre on its own.

You can see the in the last week, Nifty has broken all the crucial and psychological levels without much effort. This is the power of bears. Based on the chart, We can see that 8800 – 9100 is the strong support zone for a long term trend.

On Friday, Nifty hit that support zone (8800 – 9100) and reverse from here. This indicates that we are reaching towards the bottom and this is the best time for your long terms investments.

India VIX is trading at 41.16 and made a high of 59.42 on Friday. This is the first time we saw such a high range and it’s not good for short term traders. So if you are trading with naked trades, It’s a very dangerous situation for you. So please keep your position with a proper hedge.

One more thing we have to keep in mind here that there is no positive news about the current coronavirus issue and the market is full of sentiments, so it’s a little early for short term decisions.

But you can take this level (8800 – 9100) as a reference for your investment-related decisions. If you are trading with option strategies, Trade with limited risk strategies only.

For investment, I prefer only bluechip stocks right now. Invest in some good quality stocks only. Focus on quality only not on quantity.

So here our strategy should be investing in good quality stocks. I suggest do not trade short term until we are not seeing any cool-off in Volatility.


Banknifty Weekly Analysis for the coming weeks

Banknifty weekly chart today

Banknifty has started its bull rally in back 2017 after a breakout from 20650 on 20th February 2020. If we draw a Fibonacci retracement tool from the low on 26th February 2016 (13407.25) to the recent high on 30th December 2019 (32613.10), We find that 50% – 61.8% zone is 23028 – 20748. Normally this zone is acting as a reversal zone.

*Here one thing we need to keep in mind that no tool is 100% accurate. Every tool has its own limitations. So always follow two data points for confirmation.

You can see that 20700 is also a good support level for the long term trend. So any sign of consolidation here will give a new opportunity to buy for the long term.

As you know banknifty is a banking index. It tells the overall performance of the banking sector. So every dip or a sign of consolidation will give you an opportunity to invest in good quality banking stocks.

Personally I’m following a few stocks like HDFCBANK, AXISBANK, and ICICIBANK. So every dip will give us an opportunity to invest in these stocks.

Due to high volatility in the market, I suggest, stay away from short term trading in bank nifty for a few weeks until we get some relief from this coronavirus issue.

Final thought:

Due to very high volatility and huge uncertainty in the market, I suggest we should look for some investment opportunities. Stay away from short term trading especially from naked trades.

Trade with limited risk strategies only. Due to very high volatility, we may get some good credit in credit spread which will help to keep your risk on the lower side. So focus only on limited risk strategies.

Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Analysis with Option strategy, Nifty Option Strategy for Budget SessionA low-risk options strategy in LICHSGFINAn iron condor options strategy in ICICIBANKReverse Jade Lizard options strategy in UPLA high probability options strategy in YESBANK

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*( Please avoid any question like which Call or Put we should buy in the coming week).

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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods.  This information should only be used by investors and traders who are aware of the risk inherent in securities trading.

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Sachin Sival is the founder and CEO of Replete Equities, an options trading company that specializes in delta hedging. A self-taught trader, Sachin has a passion for volatility trading and stock trading. Sachin loves to hone his skills by reading up on new strategies and techniques as well as taking part in industry events. In addition to being a successful entrepreneur, Sachin also takes pleasure in photography - as a hobby.

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