Nifty continuing it's bull run but with signs of exhaustion

On Friday 12th June Nifty broke upside from a consolidation zone with a gap up opening and later forming strong green candles both on the price and the MHAF charts. This move also triggered a fresh buy signal, however, we did not reverse our short biased position on that instant because our predetermined reversal point was calculated at 24042. Since then we have been waiting for that reversal point to breach which happened on yesterday 17th June. Yesterday Nifty started with a strong opening and held that bullishness throughout the day. It not only crossed the high of 15th June (24011) but also managed to cross the previous swing high formed on 26th May at 24090.

Because Nifty closed for the session at 24085 which was above our targeted reversal point, we had to close the long futures position with a Rs. 80,600 loss and open fresh long futures in Nifty futures at 24045 (we got a favorable entry because the trade was taken about an hour before the session closing). Simultaneously we created a hedged position to reduce the overall position delta by shorting June 24100 call options. Here we slightly deviated from our set strategy which dictated us to open double the quantity of our standard lot size (260). Instead of shorting 520 qty 24100 CE, we shorted 780 qty. This is because it was already 17th day of the month with only 8 trading session remaining for this series, the time value of the 24100 CE was not enough to secure a wider break even points on both the sides. If we had to short our standard 520 qty, the downside BE was supposed to be at 23788 which seemed very close, considering the fact that Nifty has already moved a lot to the upside and a quick correction may easily force it to breach that downside BE.

We wanted a more comfortable position with further BE points so that we never will have to enter the 3rd leg (short bias again) of the basket trades in this June series. According to the table below, our current position is safe as long as the current month expiry happens exactly between 23448 and 24752, both of which are far away from the current Nifty level.

Our spreadsheet to calculate the triggers and gauging the overall Nifty bias is confirming the bullishness explained above. The buy trigger at 23349.49 on 12th June is so far yielding a nice hypothetical profit with the trailing stop loss gradually moved during the last 4 trading sessions. As on Thursday 18th June market opening, the SL is sitting at 23749.25 and a reversal sell trigger potentially placed at 23640.73.

Cheers and happy trading.