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Nifty Outlook & Learn How to Improve Short Term Accuracy in Nifty Trades by Correlating Volatility Index (VIX) and Put Call Ratio (PCR)

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Nifty Outlook & Learn How to Improve Short Term Accuracy in Nifty Trades by Correlating Volatility Index (VIX) and Put Call Ratio (PCR) Nifty Outlook & Learn How to Improve Short Term Accuracy in Nifty trades by correlating Volatility index (VIX) and Put Call Ratio (PCR) 29th June, 2018 VIX – Volatility Index – India Vix • It is a measure of implied volatility calculated by the NSE from “at the money options” on the CNX Nifty 50 index. • Greed and Fear Index. • Inversely related with Index. • High Value of VIX means - Excess Bearishness/Bears are confident. • Low Value of VIX means – Excess Bullishness/Bulls are resting. PCR- Put/Call Ratio • CALL Option: The right to buy an underlying but not an obligation is known as a Call option. • PUT option: The right to sell an underlying but not the obligation to sell is known as put option. • PCR: means O/S open interest of Put options Divide by O/S open Interest of Call options. • High Value Indicates – Excessive Bullishness. Confidence on writing Put options. • Low Value Indicates – Excessive Bearishness. Confidence on writing Call options. Formula for Trading Strategy: VIX, PCR & Price Pattern • Following parameters are mandatory to design trading strategy: • To initiate Buy Call on Nifty: • Higher Vix – higher possibility of resumption of Bullish trend. • VIX - between 18-20 and Nifty (Positive Reversal Formations- Hammer/DOJI/BIG BULLISH CANDLE) • If PCR falls to 0.80 then it would be one more confirmatory tool to initiate Long positions. Formula for Trading Strategy: VIX, PCR & Price Pattern • Following parameters are mandatory to design trading strategy: • To initiate Sell Call on Nifty: • Lower VIX – Higher possibility of resumption of negative trend. • VIX – between 11-9 and Nifty (Negative Reversal Formations – Inverted Hammer/DOJI/ BIG BEARISH CANDLE) • If PCR rises to 1.50 and above then it would be one more confirmatory tool to initiate Short positions. Case Study of High VIX- likely bullish reversal (18-20) Vix High Nifty Reversal pattern Date of Reversal Date of Vix High (Nifty Comments levels Formed pattern in Nifty bottom) 28th Aug 2013 36.02 5200 Inverted Hammer 28th Aug Buy Nifty 12th May 2014 39.3 7200 Big White candle 12th May Buy Nifty 25th Aug 2015 35.57 7900 Inverted Hammer 25th Aug Buy Nifty 11th Feb 2016 36.87 7000 Inverted Hammer 12th Feb Buy Nifty 187th Dec 2017 18.25 10300 Inverted Hammer 18th Dec Buy Nifty 8th Feb 2018 24.03 10500 Doji 9th Feb Buy Nifty Source - Bloomberg Case Study of Low VIX- likely bearish reversal (9-11) Vix Low ( Reversal pattern Date of Reversal Date of Vix High Nifty levels Comments nifty Top) Formed pattern in Nifty 09th Jan 2013 12.58 6000 Big Black Candle 11th Jan sell nifty 24th Nov 2014 9.3 8500 Big Black Candle 25th Nov sell nifty 28th Dec 2015 10.37 7800 Doji 29th Dec sell nifty 25th Aug 2016 10.92 8600 Doji 29th Aug sell nifty Failed to form any 23rd Jun 2017 8.75 9600 Pattern 20th Apr 2018 9.74 10500 Inverted hammer 20th Apr sell nifty Source - Bloomberg Technical Analysis: When to Buy/Sell Fundamental Analysis: Why to Buy/Sell Nifty outlook – Possibility of Symmetrical Triangle NSE NIFTY [N59901]10592.35, -2.12% Price Lnr IRIS 5 11150 11100 11050 11000 10950 10900 10850 10800 10750 10700 10650 10592.3510600 10550 10509.50 7 10500 HIGHER LOW 10450 10400 10350 10300 10250 10200 10141.55 10150 6 HIGHER LOW 10100 10050 10000 9950 9900 Source : www.SpiderSoftwareIndia.Com 9850 17:O N D 18:J F M A M J Wkl Source - Spider Software Pvt LTD Question & Answer Queries should be specific to stock that are in FNO segment. 11 By referring to any particular sector, Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. Such representations are not indicative of future results. 12 Thank You 13.
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