Nifty Lunar cycle with Open Interest profile – Options Trading
Mar 11, 2024
Options Trading requires understanding of price action, Open interest profile and also Time
Lunar cycle or Moon phases provide predictive ability and we have been using it to forecast the possible trend of the index – Nifty.
Let us see combination of Lunar cycle along with Open interest profile
Nifty Lunar cycle daily chart
Nifty Open interest profile
Nifty first chart is showing Lunar cycle – both Full moon (Pournima pink highlight) and No Moon (Amavasya blue highlight).
We can see that since the low formed at 18838 levels in month of October 2023, prices have been forming a low and reversing up on every lunar cycle. The same can be clearly seen that after Full moon and no moon prices rallied for atleast 2 to 3 days.
However, post the top formed in the month of January 2024, we can see that prices enter into 2 to 3 days of sideways action after each of the Lunar cycle. 10th March was again an Amavasya and looking at the relationship of Nifty with Lunar cycle lately it seems that we can start seeing sideways action for 2 to 3 days until 14th march.
It is interesting to see correlation of stock market to Lunar cycles which is working very well. Do note that change in relationship of Nifty to moon cycles will be an indication of change in medium term trend i.e. if prices form a top instead of a low on Lunar cycle day we can expect negative reversal.
Options trading becomes very easy if one can identify the possibility of start of a trend or sideways action. Now that time is suggesting sideways action we can apply Open Interest profile to see call and put sellers activity and understand big players position.
Open Interest profile – As shown on above chart, the left side green highlight is suggesting change in Call open interest and right side shows put open interest. We can see sharp rise in 22500 call side open interest which make it difficult for prices to rise above this level. Break above 22520 – 22550 is required for confirmation of a positive trend. On downside 22k is where highest put open interest is going to act as support.
Options Strategy – By combining Open interest profile along with Lunar cycle we can form short strangle strategy for far away strikes to ride for next two to three days of sideways action on index. Expected range 22276 – 22550 and trend can start on break of this range.
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