This was October 26th when news hit of the CEO being removed. My thesis was simple: Tata IS the Indian stock market, so where they go, the stock market will follow. Bold huh.

A few days later a SIZE bearish option play hit and I knew I was in good company.

By Nov 4th my first swing short price targets had been hit:  TTM hit 1st PT of $38 -6%, INDL -10% EPI -4% and the INDY -2%. And this on an equity basis (I trade mostly options). By Nov 14th, TTM -13.5% and INDY -7.5% (on equity basis). 

This trade thesis was clearly working but I didn’t want to overstay my welcome. I was actually thinking the stock, and the market of India, would bounce about now, given it is at the 61.8% Fib retracement level. Then I read this yesterday and have decided to hedge a little but hold short:

Modi’s “Demonetization” Turned into a Mess

“Lines formed at banks, with people waiting for days, only to find the bank ran out of smaller bills. Those without bank accounts had no way to make routine transactions. Already impoverished people had to spend their work time waiting to exchange their money. New bills intended to replace the old ones were scarce.”

Some People Died! And with them the prospects of a a GDP contraction

“Analysts are already saying the sudden contraction will hurt economic growth. Economists at Ambit Capital cut their 2017 GDP growth estimate almost in half, from 6.8% to 3.5%. They think the effects will last into 2018, too.

In short, I’m staying short. There is a gap to fill around $30 for TTM and support for INDY around $25.

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Thanks for reading and Happy Trading,

Samantha LaDuc

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