There is volatility because there is uncertainty. Markets can handle good news and bad news, but it cannot handle uncertain news. Now there is a lot of uncertain situations.
1. China's covid situation is uncertain. We are still determining how this will go across the globe. China has reported huge number of cases in the last week.
2. Inflation and recession. It's highly uncertain whether there will be a recession or not.
Don't think that markets will only fall during uncertain times. Markets will move sharply on both sides. Trading these markets is slightly difficult as your SL will be hit easily. At the same time, the profit will also be good if you catch the rally which is difficult.
I feel that more fall is in place. So I am not confident in buying this dip. I may be wrong but I prefer to be wrong than repent. It's just common sense. See how the banknifty has rallied from oct. It has ralled almost 7k non stop. Now it has fallen almost 3k in last 7-8 trading session. This fall was expected. But the big question is how much more will it fall from here?
The other side of the coin is, we had a massive fall in 2020 due to covid. The same reason cannot cause the markets to fall again. At that time it was a surprise. But this time it is not surprise. And recession is something that is playing out from many weeks now. When a tsunami hits, it always comes as a surprise. They don't give you any pre warning before coming. Since recession is going around for some time, we don't know if that will be a huge impact. Markets would have factored to absorb that.
The thing is it is uncertain. So during these times, what I do is I take a bullish trade in nifty and a beraish trade in banknifty. I had taken a bearish trade in monthly expiry in banknifty long time back. Now I will take bullish trade in nifty for this week.
Whenever markets fall, it will first be observed in auto stocks. They usually fall first. Now you can see that tamo, either, hero, bajaj are all falling. So be cautious.
Last week I told you that Tesla and Adani group rallied simultaneously. Now Tesla is falling in the US and Adani will fall in India. From almost 4000+, it is close to 3600. Even now there is an opportunity to short this stock. Executing call ratio spread will give you an advantage.
MY TRADES
- I will be executing the below trade in nifty for this week
- +1 X 18000ce
- -3 X 18200ce
- -3 X 18300ce
- -3 X 18400ce
- The US futures are in the green.
- SGX is up by 860pooints
- $ almost at Rs83. Keep an eye on this.
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