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)

Date of Vix High

Vix High

(Nifty

bottom)

Nifty

levels

Reversal pattern

Formed

Date of Reversal

pattern in NiftyComments

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)

Date of Vix HighVix Low (

nifty Top)Nifty levels

Reversal pattern

Formed

Date of Reversal

pattern in NiftyComments

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

23rd Jun 2017 8.75 9600Failed to form any

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

17:O N D 18:J F M A M J

Lnr IRIS

Source : www.SpiderSoftwareIndia.Com 9850

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10592.35

Price

NSE NIFTY [N59901]10592.35, -2.12%

Wkl

5

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10141.55

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10509.50

HIGHER LOW

HIGHER LOW

Source - Spider Software Pvt LTD

Question & Answer

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