Trade setup for 4th August

 It looks like the bears are sleeping. Nifty has closed in the green for 6 consecutive days and on these days it has added close to 1000 points. Every dip is being bought. No analysis, or technicals work. As per mean reversion theory, it should have gone to 17100 for this week. But now we are challenging 17500.

Tomorrow is the RBI policy and we are going to the event in an overbought condition. So is there more steam left in this rally or will we fall from here? Markets cannot be going up like this. There will be a time when the bulls are exhausted and the market will fall. But in the bull markets, the fall will be brutal and sharp. Catching and timing would be very difficult. So, sell deep OTM calls. 

I think this is the first time I am seeing nifty rallying close to 1000 points in a week with no major event or news. In fact, there was some problem in Taiwan but our markets did not care at all.

RSI is now above 75 on daily charts which is overbought. Nifty is at almost 5% away from its 20DMA which is also overbought. Will tomorrow even trigger the fall or will China do something in Taiwan? Is the market going to the event expecting something big?

China has responded quickly to Taiwan. They have banned some imports and exports and they have conducted some military drills around Taiwan.

The small stocks are having some fun. Zomato, yes bank, spicejet. All are rallying as they have some news associated with them. Even if you are investing in these, make sure you are aware of the risks as these fall at the same rate.

Yesterday there was the US economic data and the data was good which took the US markets higher.

Today is expiry and usually, if there is a huge rally in the week then expiry day will be a profit booking day. The vix has also fallen yesterday. So there will be crash in the premium if markets open flat. I feel that the 9:20 straddle guys will make good money today as it may not trend.


  1. Yesterday I had to close my intraday algo trades as I wanted the margin for adjustment. I did not expect markets to break 17300. I was able to make around 4-5k yesterday in algo.
  2. Today I will not be running the algo as there is no margin. Everything is blocked in positional trades. 
  3. If markets close above 17500 then I will buy 17500ce in the monthly expiry as I have sold 18k ce
  1. US markets closed higher after good economic data. Dow had fallen 2 days and yesterday it closed in the green. Nasdaq gained more than 2%
  2. Today morning the Asian markets are higher. 
  3. SGX is suggesting a +ve start
  1. Now FII's are buying continuously. But entering now when nifty has shot up close to 1000 points is not a good idea. I will enter when there is a dip.
  2. Yesterday FII bought for 750+cr and DII sold for 500+cr
  1. Crude is around $97
  2. $ is at Rs79.11