In this blog, I will share my trade plan for LT, with Price Action and Option interest analysis.
I have used a Narrow Range Trading Strategy. It is a breakout the based method which assumes that the price of security trends up or down after a brief consolidation in a narrow range.
As per LT's weekly chart on 08-Jan-2022, I noticed that the previous week's range was 64. It was the least as compared to the last three weeks. So, the latest week is the narrow range.
I have placed alerts at 2058 and 2122 to understand the price action on a daily time frame. A weekly close below 2058 will confirm a bearish breakdown. Like-wise a breakout above 2122 will confirm a bullish breakout. Volumes play a critical role in a confirmed breakout or breakdown.
A weekly close below 2058 will confirm a bear flag formation and it can go down till 1955 which a 0.618 Fibonacci support
OI Analysis:
As per OI data on 08-01-2022, the maximum open interest (OI) on the Put side is at a 2000 strike price with 939 contracts. This will act as strong support for Jan 2022 series. Likewise call writing is seen at strike prices 2100 (OI: 2870) and 2120 (OI: 2189). This will act as strong resistance for Jan 2022 series.
Price Action Analysis:
The encircled price pattern is a shooting star, which indicates a possible down trend in the coming days provided the next one-day candle closes below 2072 which is the previous day's low.
So, if one hour candle closes below this level, we can initiate a short trade and if one hour candle closes above 2120 we can initiate long trade with proper Stop loss and risk-reward of a minimum of 1:2 in either case.
I hope you enjoyed reading my blog, thanks for your valuable time.