This post is to help you people trade based on the #skyfall alerts on our slack channels which come in every 10 minutes based on the market activity.
Let’s keep this very simple so that you don’t have to break your head understanding the market and divert that effort into execution.
Things to look at
*Step-1:Beginning of the day additions whether on CE or PE side
*Step-2:Price behaviour after such addition.
*Step-3:Identify the theme of the day and look for trades and confirm with fresh alerts
*Step-4:Placing the trade
Let’s break these things one by one
Step-1: Beginning of the day additions
By this i mean the first 10-30 minutes of additions i.e from 9:20 to 9:40
Let’s look at the BNF additions on 30th September from #skyfall alerts channel, if you observe the alerts that have come in you can notice that
*9:20 alerts are more in put side
*9:30 alerts are more in call side
*9:40 alerts are more in call side
Now once you note these things check what was the market doing during these intervals
during 9:15 to 9:20 BNF was heading down considerably- buying puts when market is already heading down – stupid behaviour – Monetary Value involved is high as seen from alerts – Rs.54 Crores
during 9:20-9:30 – market was sideways with +ve bias – Buying calls – Not a stupid behaviour – Monetary Value involved is high as seen from alerts – Rs.91 Crores
during 9:30-9:40 – market was heading on upside – buying calls when market is going higher – stupid behaviour – Value involved Rs. 15 Crores
From the 3 observations made above we noted that some people were involved in buying puts at higher prices and some people bought calls at lower prices compared to market open.
Now we move onto step 2 i.e. analyzing price behaviour to understand what the market has on it’s mind i.e. adapting ourselves to reality.
Step-2: Price behaviour after such addition
For doing this you can take the chart of the strike with highest value addition from the alerts one from CE side and one from PE side, if not available on both sides then from either CE/PE side depending on alerts. But in this case we have both sides let’s pick two strikes one from CE side and one from PE side.
Picked strikes
6th Oct expiry 37500PE
6th Oct expiry 37500CE
what do i mean by analyzing price behaviour? nothing but price action. We are looking to identify strength/weakness.
Let’s look at the chart of 37500PE first as below
Chart is on 2 min timeframe with the following indicators added
*Supertrend(7,3)
*Boll%b(20,Low,2,ma) with overbought level set at 55 and oversold at zero
How to identify strength on this chart
- If boll%b(20,low,2,ma) reading is > 55 then price is trading on strength AND
- Price is able to make moves above breakout high of supertrend and not finding enough selling on breakdown of supertrend.
If either of these conditions are not present then the price is trading on weak note and doesn’t warrant a good option buying opportunity.
Now see the above chart you can notice that at 9:43 supertrend had a breakdown and price found enough selling after the breakdown and Boll%B reading was never above 55 until 11:50 AM. This is called clear strength and you should never try to buy this strike and burn your hands until strength comes in.
Now let’s look at 37500CE chart
In the chart of 37500CE you can notice that
- Boll %B is staying over 55 for longer time
- price is able to make a move above supertrend breakout high as well.
This sginifies strength on price.
Based on step 1 and step 2 we can figure out that late and late/stupid PE buyers went wrong and dip buyers of calls have got success this was the day’s theme in a nutshell, so the sooner you figure out this on the chart the more you can benefit from the trend.
Step-3: Identify the theme of the day and look for trades and confirm with fresh alerts.
Based on insights from step2 have a bias and look for trades in that preferred direction and follow guidelines from step-4 for option buying trades.
Step-4: Placing the trade
Buy the options only when you have the following conditions in place
- Price is in strength as per step-2 above
- Price is hesitating to fall and boll%B is staying over 55 and making a higher high > 55.
This is momentum type trade and the most safest one but with less absolute points per trade as one spike will make the price revert back to it’s mean but it’s worth it for the success rate it gives.
Refer the chart in step-2 above of 37500CE and time after 10:00AM until 10:50AM is a good time to scalp.
Also follow no.of trade limit per day max of 2-3 for doing well on the longer term.
Best times to place trades 9:45-11AM, 2-3:15PM