MENTORING 7, DAY 03: 06 Oct 2022

Hello team,

Today, market might make a pause candle.

Daily candle is near 20 EMA, we have to see how 20 EMA is acting. If it is

opening gap up then 39560 might act as a resistance. Expiry play can be
between 39300-600 levels.

Spot Level

39400-39700 are the upside levels of resistance. If market opens above

39700 then 40000 could be the next target. If price is opening above 39400
then the trading range could be from 39400-39700.

Price have given us good move on Tuesday. Ideal scenario, if market

opening gap up would be a price making a base which would help for
another round of up move. If market goes higher without making base, the
way it came down, it will not be a healthy move. Market consolidating or
giving a pull back and then breakout will be good.

Consolidation and breakout

Pull back & breakout

OI Analysis

We can see that total Call OI change is -36 lakhs and Put OI change is 87.1
lakhs which gives us a bullish bias.

At 39000, Put writers are looking confident highest Put OI of 21.2 lakhs
contracts has been created there. Even thought there is similar OI in the Call
side there is no build up happened. There was an unwinding of 3 lakhs of OI.
Next hurdle is at 39500 with total Call OI of 17.9 lakhs. 39500 would act as
resistance. They have collected a premium of Rs 100 and they will be in
panic only when the market breaches 39600 and sustains above it.

If market is not able to sustain above 39500 in the first half then it could
chop between 39500-300. This is just a probability of how market shapes up
after a gap up opening.

We could also see ITM Put writers who carried the positions are not that
strong enough comparing to Call writers. They could create more position
after market making a range. Market settling around 39300-500 for a while
and making a base and price breaking out would a good scenario.

Premium would settle down if market is chopping around in a area which is

good for the buyers.

9:08

Preopen settled. Bank Nifty opened gap up, 0.6%.

Pre-open settled around 39350. So, the first level of resistance is 39413 and
39700.
Trades and Logic
1) Took a PE trade, the strike price has OH. In daily candle price went up and
rejected the super trend which we discussed in pre-market analysis. Price
also filled the gap in the shorter time frame.

Entry

We were adding quantities and booking profit in between.

Added again
First candle turned Eno

Exited all

Scalping/momentum trade
 Rejection level

Gap Fill

2) Took a PE trade, strike had OH pending to hit and 15-min candle is

looking bearish. There is also a gap down side to be filled.

Entry
 Added again
OH candle

Added again

Added again
5-min candle closing above the spot level 39413 is the stop loss. Because
there was a sharp rejection in the first candle.

Reduced few qty

Reduced few qty

Exited all

Scalping trade

Note: When our market closed on Tuesday, Dow moved 750+ points,
yesterday it was sideways and today it was showing 100 points positive.
This means Dow has moved around 1000 points when our market was
closed. But still out market opened gap up, 0.6% which suggests that there
was no much of conviction of up move.
Bank Nifty gave a sharp rejection and Put OH gave more conviction for Put
trade.

OI Analysis

As of now total Call OI change is 2 crore and total Put OI change is 1.9 crore.
This suggest a sideways bias. We did discuss that to give an up-move market
need to make a range and it could be between 39300-500. Now market
might be making a range and we have to see if the range is getting broken.

Bank Nifty now is at 39450, 39500 Call is having a premium of Rs 127. If

someone is using an algo system the SL would be based on mathematical
calculations and generally not based on the charts. The stop loss could be
super trend/VWAP or a certain percentage of premium. On expiry day they
might keep 100% premium and normal days it could be 25-50%.

If we observe 20 EMA, it does work as support or resistance most of the

time. It is a widely used set up, so some algo would consider it as
entry/exit/stop loss/target at or near 20 EMA based on calculation.
Wherever the crowd I more we need to keep a watch on it. Algo would start
working at these kinds of levels.
Now, if we see 39500 total OI is around 48 lakhs and if market is rallying
upside then these writers would see how the price move shapes up.
Premium is around 120 Rs and they might have a buffer of 100 points. Some
people would keep stop loss as spot crossing 39620, other guy might be
keeping a stop loss of 100-point buffer. If a move comes beyond 39630,
then it could be furious. That is the time when most of the stop loss would
be coming in place. There could be other confluences too like
RSI/EMAs/super trend. These confluences would also trigger more people
coming in which would trigger more up move.

As per data, we could expect a sideways market until the range is broken.

Multi strike OI change

We could see 39500 Call writers at top and they are looking stronger. In the
second position it is 39300 Put writers. This could be the range now
between 39300-39500. Beyond this level they might have premium buffer
with them.

39500 Call is Rs 115 and 39300 Put is Rs 99 this could be a strangle play
going on. Combined premium is around 200 points. 39500 Call writers
would start to panic above 39700 and 39300 Put writers below 39100 level.
If market is consolidating with in a range then the premium would decay
and the stop loss would start coming down and that is when the breakout
or breakdown happens. If we have to take any trade with in this range it
should be scalping trades. As per the data we know that it is giving a
sideways bias.

Note: *We have to analyse volume when breakout/breakdown is

happening or when support/resistance is broken.

Price breaking out with

volume

Here price broke out with volume and went higher.

*OH trades, if we have to go in for a OH trade we have to see if price is

crossing above the VWAP of the strike price. Today, it was a different
scenario. It had other confirmations to take the trade.

OH is mostly a destination trade. It is not certain that OH would hit every

time. E.g. on Thursday there were OH on Put side and it was never hit.

*Now, for an ideal trade price has to break day high or VWAP.

Day high

VWAP
3) Took a PE trade, 500 qty as price was breaking VWAP and M pattern on
15 minutes.

M pattern

Entry

Exit

Scalping trade

Switched to CE trade, 1000 qty as the candle is trying to close above VWAP
and making an Eno candle.
 Entry

Exit

Scalping trade

4) Took a PE trade, 3000 qty as price was struggling at VWAP and took trade
expecting a breakdown.

Entry

Next target if VWAP

breaks

VWAP
If VWAP of the strike price is broken then the next target could be 50 EMA.

Added 1000 qty

Price below VWAP and 20 EMA

Reduced 1000 qty

Reduced 1000 qty

Reduced 1000 qty

Reduced 500 qty

Exited all

Scalping trade

Price making lower

highs
Price was also making lower highs in the candles which gave confidence to
hold the trade.

5) Took a CE trade, as price was trying to breakout. Even though it went

below VWAP shorts were not able to take the market lower and the high
was tested multiple times. So, more chances of up move.

Entry

Reduced few qty

Reduced few qty

 Reduced few qty

Added few qty @ 12:51

Reduced 500 qty

Price also broke out the spot level. 15-min candle is also a full body candle
breaking day high and next target is 39700.
 Next target

Breakout of resistance

Banking stocks are looking good.

39500 has Put build-up of 45 lakhs and Call OI is 57.5 lakhs. If market is
sustaining above breakout level then these Call writers would be trapped.

Added again
 15-Min candle full body candle

Ideal SL

Charts of banking stocks.

Hourly candle

Price going down

without volume
Price closing below 20 EMA is the stop loss of the trade.

Generally, when the level where the highest OI is there and it is breaking
out there would be good momentum.

Sideways

Price behaviour
Up move

Sideways Up move

Exited all

Breakout trade

6) Took a PE trade, 5000 qty as price is rejecting 20 EMA.

Entry
First target

Reduced 2000 qty

Hourly candle

Reduced 1000 qty

Reduced 1000 qty

Reduced 500 qty

Exited all

Exit candle in 5min TF

Scalping trade
7) Took a PE trade as hourly candle is looking bearish and price is rejecting
VWAP and 50 EMA. 15-min candle was also not looking good.

Entry

Hourly candle

Added again

Reduced few qty

Reduced few qty

 Reduced few qty

Exited all

Scalping trade

A set up we learned today:

We need to book the stop loss if the trade is not working as planned even if
it is a high probable set up.

Today, Trade 5 was looking very probable. Price was trying to breakout.
Even though it went below VWAP shorts were not able to take the market
lower and the high was tested multiple times. Even the 15 min candle made
a full body candle at the breakout level. But we kept the stop loss below 20
EMA and booked the stop loss with out second thought!
We have shared the momentum setup and other relevant study materials. If
you still have not seen it or have any doubt regarding the set up kindly
watch the videos and read the pdfs in the google drive.

Momentum Mentoring 7

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