Updates posted on our Twitter handle look simple but carry tremendous information. Disseminated pieces of information can help you understand the market status to the fullest.
Here is how to read it.
What is Current State?
At any point in time, NIFTY is expected to take swings that do not impact Options writers (big players) adversely. When in “Normal State”, it means NIFTY is stable and currently expected to move towards the extreme. When in an “extreme state,” major players’ positions are likely to be jeopardized. As a result, they would like to return it to its normal state (i.e., bring the current market price to the fair price or the fair price to the current market price).
What is Extreme Finder?
The extreme finder is the price projection system that finds sweet spots where the price will halt for a pullback or a reversal. Crossing these points during day trades is difficult and likely serves as an adjustment point for options traders. The exception is when there is breaking news or an event.
(S) Price: Short side extreme point, also referred to as the support level.
(R) Price: Extreme point on the long side, also referred to as Resistance level.
(FP) Price: Fair price range that acts are fall back price range from extremes. Also acts as a breakout and direction identifier. In the bearish market, prices mostly remain below the upper point of the FP range, and vice-versa.
Repeated moves above and below the FP range are regarded as indicators of a battle between bulls and bears.
Extremes are dynamic: You will notice that the extremes and fair price range are both dynamic and update throughout the day.This is because the big players are continuously adding and removing positions, which impacts the extremes and FP range.
How are the extremes identified?
Extreme prices, also referred to as S and R i.e., support and resistance, are calculated using derivatives data analytics with the help of proprietary method.
How to read S, FP, and R in Extreme Finder?
S – Support (lower side price where big players’ Options writing position is in danger)
R – Resistance (higher side price where big players’ Options writing position is in danger)
FP – Fair price (state where big players’ Options writing position is safe).
What is the current impact and magnitude of the SGX NIFTY report?
It is the type of impact that SGX NIFTY is expected to have over NIFTY. It can be Positive (bullish), Negative (bearish), or Neutral (no impact). In the event of Neutral impact, NIFTY is expected to disconnect from the impact of global markets.
Magnitude is the scale of impact.
Putting all the information together, if the SGX NIFTY impact is positive, it is recommended to wait for the price to move above the fair price value, and vice-versa. Price above FP is considered good for bullish side trades, and price below FP is considered favourable for bearish side trades.
In the case of a neutral SGX NIFTY, any side, i.e., above or below the FP, can be considered for trading.
Extreme levels are used for adjusting or managing any open trades.
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