Our Prediction of Nifty has gone right once again ! Few days back I had written a blog on the fact that nifty was in a tug of war and there were two trigger points that we should all look out for.
One of the two trigger points, was a day in which Nifty Gaps or moves up and sustains. Why this inference you ask ? In the recent past we have been seeing that Nifty has been gaping up and then selling off. This was becoming a very easy and a consensus trade for everybody to make money and hence I had asked everyone to look out for a day in which it doesn’t sell off and sustains trapping everybody. If you notice the Nifty hourly chart below, the small yellow arrows shows how everyday Nifty used to gap up and then sell off. Then you see the big white arrow which shows us the day where it sustained and even took out the days high over the horizontal line.
Like I have mentioned a few times earlier as well, markets always have a tendency to trap people who aren’t able to read through the lines. Even in the case of when Nifty broke 900O on the downside, there were clear indications that the options data gave us, to a bounce back above 9000. The same happened over here as well, in which Nifty played out against the general consensus view.
One more point worth noticing as well is when the first big move took place in Nifty, you would have noticed that the discount in the Nifty futures from there on was almost 80 to 90 points from the spot price. This essentially meant that, there were still a large amount of shorts in the system as people were expecting the market to go down. Once Nifty stared to hold ground and continue to move up day after day, the shorts got trapped into the system leading to the huge short squeeze that you saw today in the market today. This short squeeze has also trimmed down this discount to a considerable extent.
I reckon that, because the entire down move was so fierce and rapid, the entire up move that will happen will also be fierce and will continue to come at a time when everybody expects it the least. Keep in mind also the fact that the long term moving averages are close to the 11000 mark. We were abler to take advantage of this up move by getting into a calendar ratio spread between June and July series. Safe and completely hedged.
