Nifty is at an all-time high, What next?

Hello guys, I hope you are doing well. Despite widespread talk of a recession, the stock market is at an all-time high. What is your trading strategy now?

As I always said the market is unpredictable and no one can predict it right all the time. So if we react based on the data and chart, chances are high that we will be on the right side of the market and manage our traders well.

In this post also, I'm not trying to predict anything but to analyse data and create a trading plan based on the picture the market is showing to us.

before moving further let us look at the daily chart of Nifty and BankNifty to find overall trends and important levels for the coming sessions.

Nifty and BankNifty Chart Analysis

Now if you look at the daily chart on Nifty and Banknifty, you will find that where Nifty is trading at an all-time high, BankNifty is still struggling to reach the recent high and trading in a range. That's the reason we may see some pressure in Nifty also.

For the coming sessions, both Nifty and BankNifty must give a positive sign together for the fresh highs on the upside in both indices.

So based on the chart, I avoid creating any fresh long position here until I don't see any sustainable breakout in both Nifty and BankNifty together.

Now what would be the important levels for the coming week? Let's find it in the next section.

Trading Plan for the next few weeks

Now when we don't see any strong sign on the charts for upside, should we create a bearish trade here?

My answer is: NO

Don’t sell just because you don’t see any buy signs. You need to see if the sell signs are strong or not.

Nifty and BankNifty have very low volumes. This means that both buying and selling are weak.

So, I prefer to wait for some more days to check whether it's a successful breakout or just a trap in Nifty while maintaining a neutral view in BankNifty.

To get more clarity about the breakout, I always give more importance to OI data rather than price action. Because I find Open Interest data is more reliable than price action to manage our option strategies.

I talk about this concept in my intraday strategies course in more detail. You can check here: Advance Course to Learn Intraday Option Strategies

So let us look at the OI data to find the range and levels:

Option Chain Analysis of Nifty and BankNifty

Now let us look at the Nifty Option chain data first:

Based on the OI data, the strong support and resistance are 22000 and 22500 respectively. While immediate resistance is at 22300 having the PCR of 0.37 which is important for the next week.

A breakout from 22300 will trigger the next upside till 22500. But you can see that people have shorted more calls compared to puts which indicates that somewhere Nifty is facing good resistance from higher levels and is expected to fall in the coming sessions.

But as I mentioned earlier, this alone is not the sign to initiate a bearish trade here.

Now we must keep an eye on these levels; if the PCR at 22300 goes above 0.60 then only we may see a sustainable breakout for the higher levels.

If the PCR at 22000 falls below 2, the Nifty will fall from 22000 and we may see some selling pressure in the coming week.

So for the coming week, 22000 - 22300 is the range we may keep on the radar.

Now let us look at the BankNifty OI data:

In BankNifty, strong support is at 46000 and resistance is at 47500 while immediate support and resistance are 46500 and 47100 respectively.

Based on the Oi data, the trend looks completely neutral in BankNifty. So we can focus on neutral strategies for the coming sessions.

The concept of PCR helped me a lot to make a strong trading plan. I have written a detailed article on this concept. You can check here: How to find Support and Resistance using Put Call Ratio or PCR?

Weekly option strategies for the coming week

Based on the above chart and data analysis, I prefer to go with neutral strategies until I get a clear confirmation of a sustainable breakout.

One of the best strategies that I recommend for beginners is Iron Condor option strategy.

For example, I have created the below strategy this week in Nifty:

You can create a similar strategy based on the above range. If you don't know how to make and adjust these option hedging strategies, you can join our Option Strategies: A Mentorship program.

In this mentorship program, we teach everything from very basic strategies to some advanced strategies for weekly and monthly expiries.

Conclusion

I hope now you understand how to analyse data to make a trading plan based on open interest data.

Always keep in mind that every system has some limitations and a proper understanding of the basics is required to manage your traders well. So invest in your learning and find a good mentor to bring some real change in your trading.

Have a profitable trading!

DISCLAIMER: – we are not a SEBI research analyst. Views are posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this article 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.