Why I risked my money?
Yesterday was 9/12/2022 Friday,
I am overnight short with the naked put option, which is going to expire next week.
So, the bet here is-
I must be right with the perfect timing otherwise I will lose the entire premium paid to buy the put option, in the next 4 trading days but no worries, my position size is so small that the thought of trade outcome will not affect my bias.
Disclaimer: I am not advertising or recommending or suggesting, It’s my personal opinion, finding, and experience.
The important question is:
Why I am bearish for next week & how many chances of success are here?
Let’s understand step by step…
Nifty50 was making new highs every week (the trend was bullish) but in last 3–4 weeks, price action behavior changed. The last 4th candle on this chart was the 1st bearish attempt which was such a weak move that it’s low & high both were higher than previous candle’s low & high respectively. Last 3rd and 2nd candlesticks both were forming a pattern which is called a ‘Ladder Top’, with the opening weekly bar lower than the previous week's close and closing higher than the previous week's high. On this weekly candle, price made a lower low and lower high with a bearish candle closing. Here, I am expecting a down move of 414 pts (which is a technical range measurement).
As Nifty50 made a new lifetime high but the RSI & MFI indicators didn’t. This means RSI (strength indicator) and money flow (participation indicator) are not supporting this up move. Strength and Participation are not as higher as it was earlier when nifty made a life high last year.
The most interesting factor is Money flow: September 2022 when the nifty made a swing high, that was the last time money flow was going up with the price despite in current momentum, money flow doesn’t increase but increased only in the previous week's closing and slightly moved up this week.
It represents- Participation is towards the bearish move.
This finding is really new to me, but I remember that Mr. Charles Henry Dow said something similar through his principles that both averages should be in sync otherwise the major trend of the market is losing strength. Here, what I found is whenever the Nifty is closing bearish with a proper pattern but the bank nifty is closing sideways or bullish, next week both indices fall. There is a high probability that this divergence of movement in both indices will end here and both indices will move in a similar direction next week.
So, now you tell me! How many chances of success are here?
I would say ~51%
On the lower side, we have these support levels on Nifty future-
Measured move: 18,169
Previous Swing high: 18,123
Fibonacci support: 17,868
On the higher side, resistance levels on Nifty future-
All-time high: 18,998
Fibonacci resistance: 19,394
Thank you :)
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