NIFTY for 26th February

As of now, DJIA is 150 points down approximately and European markets are in red – FTSE is 1.40 % down, CAC is 0.1.37 % down and DAX is 1.22 % down. Our markets, or especially banknifty made a valiant attempt at rising but could not sustain the highs and came back down. Corona virus epidemic has claimed more than 2700 death worldwide and new cases are being discovered in hitherto not so exposed countries like Iran, Italy & South Korea. The situation in each of these countries is very serious. It will take months to understand the real damage done to world economy in general and these economies in particular. Please check my video posted on youtube under channel name Market Movers India for slightly more exhaustive and analytical content. Now what about exposure to our markets?
Three reasons why our markets are in strong bearish phase:
1) India VIX (volatility index) is now at 16.9. The budget day high was 17.9 meaning that we are near very high levels. This can also be seen in nifty and banknifty premiums which are very costly due to high IVs (Implied volatility). And when India VIX is high, there is a strong probability that markets might fall, so brace for downturn.
2) Provisional figures given today show FIIs were net sellers by a whopping 2315 Crs (and DIIs were net buyers by 1565 Crs). The final FII figures for 24th February, show that FIIs sold heavily in equity (1001 Crs), index futures (1245 Crs) and stock futures (990 Crs)- all segments. FIIs are either selling or trading!
3) On daily chart, Nifty made a strong bearish candle with lower high, lower low and lower close, is trading below 20, 50 and 100 DEMAs and broke the crucial neck-line of ‘head and shoulders pattern’ yesterday decisively and closed much below it. The next ostensible support is at 200 DEMA, 11717, but that too might crumble given the state of world markets.
According to option chain data, we see complete absence of Put writing on any strike even though there is good total OI (32.70 lakhs) at 11800 strike on PUT side. This makes me believe that PUT writers are not confident about any support which in turn means that avoid buying at any level as of now. On CALL side, at 11900 strike, we see good Call writing and 2nd highest total OI (36.74 lakhs). So mantra is to sell on rise. The Selling areas are marked on 15 min chart. So I would actually divide my capital in two parts to take trade there. As for buying, 11700 could be bought at but buy with strict SL since markets are not conducive to buying at all.
All the best. Happy trading.