Monday, February 28, 2011

Update for 28th February 2011

    Markets Waiting for Direction from the Budget !

  • Here is a quote from the last post : "The immediate minor resistances above the market are at the 5350, 5400 and 5450 levels. The lower minor supports are at 5225, 5175 and 5125."
  • Last Friday's trading range was confined to the first levels of support and resistance given in the above quote.
  • After the Thursday's derivative expiry lead free fall, Nifty futures opened higher on Friday. 
  • The futures contracts tried to test the previous day's close immediately after the open. It then tried to test the resistances above.
  • As expected, Nifty futures reversed from the reference level of 5350 and moved towards the lower reference level of 5225.
  • It seems that many market participants are waiting to take a view on the market after the presentation of the union budget on 28the Feb.
  • Therefore, some short covering came in to market which caused the market to recover and close at almost exactly at the opening levels. 

   Nifty Futures - Intra-day Chart

       Nifty Futures  - Daily Chart 

Friday, February 25, 2011

Update for 25th February 2011

   Market Breaks the Trading Range and Dives !

  • This blog had been warning that the upward momentum is waning and market is finding it very tough to break out above the supply zone between 5550 and 5600. It was also indicated that if the market is unable to move upwards, it will certainly test the lower supports and even break the lower supports. 
  • The last post even said that though the Put writers may try to defend the 5400 level, it was too early to decide that the expiry may happen above the 5400 level, because of the rising crude oil prices.
  • It was also indicated that the break from the trading range may happen in one of the last three days of the week. The only question which was left at the time writing that post was whether the Put writers would be able to defend the5400 level till the close of expiry.
  • Since now we know that the Put sellers were unable to defend the 5400 level, let's examine what happened actually in Thursday's trading.
     Nifty Futures - Intra-day Chart 

Thursday, February 24, 2011

Update for 24th February 2011

  The Derivative Expiry is Here !

  • Following the negative cues from the international markets due to the Arab world unrest and the galloping crude oil prices,  Nifty futures opened slightly lower on Wednesday.
  • We had indicated in the last post that Nifty future is trading in the no-man's-land and a failure to test the upper resistances may force it to test the lower supports.
  • It was also indicated that the open interest data of February series Nifty options is placed in such a manner that the preferred expiry area as far as the options writers are concerned is between the 5400 and 5500 strikes.
  • And it seems that the trading range of Wednesday has remained inside( or rather kept ) the indicated preferred range of the options sellers. However, it is too early to say that the expiry may happen in the the 5400 - 5500 range due to the worsening macro-economic factors due to the rising crude prices.
   Nifty Futures - Intra-day Chart    

      Nifty Futures  - Daily Chart 

Wednesday, February 23, 2011

Update for 23rd February 2011

 Nifty is Still in the No Man's land ?

  • Nifty futures opened lower on Tuesday due to the all round losses in Asian markets on the back of the rising crude prices . 
  • Nifty contracts recorded an intraday low of 4456 in the morning session before trying to test the previous day's last traded price / closing price. 
  • However, this test ended at 5520 thereby leaving a subtle gap between Tuesday's high and Monday's last traded price / closing price. 
  • These subtle gaps, especially when such gaps occur near the top of intermediate rallies, may indicate weakness on the following days. ( However, such gaps might not have much effects in a sideways moving market. )
  • Nifty futures recorded a fresh intraday low of 5428 in the afternoon session before recovering to close at 5476. 
   Nifty Futures - Intra-day Chart   

      Nifty Futures  - Daily Chart 

Tuesday, February 22, 2011

Update for 22nd February 2011

 Yet Another Rally and What Now ?

  • This update includes only the bare essentials due to some constraints. Readers are requested to kindly bear with the short update.
  • Yet, this author is inclined to repeat some quotes from the previous post. " ....the market is still in the bullish area of the charts and some of the upward momentum might still be out there. Therefore, it seems that if the market is able to hold the 5400 level, it may recover and try to test the resistances above before deciding about the future direction by the time of budget."
  • And this is exactly what happened on Monday's trading.
  • Since this author was away from the trading action today, due to some personal exigencies, he is refraining from making any further market commentary in this update. However, all usual charts and data are still here. 
  • However, here is an unavoidable comment. Although the union budget might become a non-event from the market's point  of view, it might still attract some avoidable event risk. Therefore, traders are advised to keep only very light positions,  preferably of the long option type. The increase in the India VIX also points in to the direction of the market's self adjustment to face the perceived event risk associated with the budget. The increase in implied volatility ( IV ) as indicated by the India VIX may affect the profitability of any such long option positions negatively, if no significant movements happens in the market after the budget.
   Nifty Futures - Intra-day Chart   

Saturday, February 19, 2011

Update for 21st February 2011

 Nifty Futures Again at the Crossroads !

  • Let's start this update with some performance data. The buy signal indicated by the Momentum Signal at the Nifty level of 5455 on 14th Feb. resulted in to a maximum favourable excursion ( MFE ) of 134 points. Or in other words, the trade would have lead to to a profit of 100 to 150 points, depending up on the entry and exit opportunities.
  • Now here are two quotes from the previous two updates which dealt with the resistance above and the market situation.
  • "If  Nifty future breaks above the high ( 5505 ) and reaches the next higher resistance area ( 5550 to 5600 ), it may attract profit booking and even some shorts." ( Update dated 17th Feb. )
  • "The market is due for a small correction, as it does not usually make gains continuously for more than six or seven days. ...The kind of one way movements being seen at present  can also turn a small reversal in to a  severe one." ( Edited quote from the Update dated 18th Feb. )
  • It seems that no more explanation is required to understand the market action of Friday, as the reasons behind the sell off is all in the above two quotes.
  • On Friday, markets opened higher and immediately went up, forcing even the last of the bears to cover up, and upon reaching the top end of the already indicated resistance, the sell off started. 

  Nifty Futures - Intra-day Chart  

     Nifty Futures  - Daily Chart 

Friday, February 18, 2011

Update for 18th February 2011

 A Day of Gains and Now What ?

  • On Thursday, Nifty futures opened exactly at the same level where it closed on the previous day.
  • The futures contract sold off from the open to test the low of the previous day on light volumes.
  • The light selling probe ended at 5460, which was just above the previous day's low and also the reference level of 5450.
  • The recovery from the low of 5460 was also on very light volumes. The market seemed to be completely dried up of volumes in the morning session.
  • The recovery still continued very tentatively  towards the two day highs. Once the Nifty contracts broke the two day high, volumes came back to the market.
  • The futures closed the the day's high of 5550 for the day.
  Nifty Futures - Intra-day Chart  

Thursday, February 17, 2011

Update for 17th February 2011

 A Day of Sideways Trading, Now What ?

  • Nifty futures opened slightly higher at 5481 on Wednesday. 
  • Wednesday's trading was of the sideways nature with some moderate gains at the end.
  • The trading range for the day became narrower and was confined between the close of 14the Feb. and the high of the previous day.
  • The technical position of the market did not undergo any change on Wednesday.
  Nifty Futures - Intra-day Chart    

      Nifty Futures  - Daily Chart


Wednesday, February 16, 2011

Update for 16th February 2011

 Markets Still at the Cross Roads !

  • Tuesday's trading action was very simple. Nifty futures opened flat at 5456. Trading remained in the narrow trading range between 5420 and 5460 of the late session of the previous day for a short time.
  • Nifty futures tested the low of the trading range and reached 5397 in the morning session.
  • The Nifty contracts recovered fast and recorded the then day's high at 5490. Later on, trading remained mostly above the previous day's high of 5467.
  • In the last half an hour of trading saw some profit booking and Nifty futures corrected to close on 5476 with a gain some 20 points for the day.
  • Trading on Tuesday was mainly centered around the reference level of  4450.
   Nifty Futures - Intra-day Chart   

     Nifty Futures  - Daily Chart 

Tuesday, February 15, 2011

Update for 15th February 2011

Is This Still a Bounce or a Reversal ?

  • Nifty Future opened some 30 points higher on Monday, following the positive bounce on Friday.
  • The day's low remained at 5336, leaving a small gap of 6 points between the  trading ranges of Friday and Monday.
  • Nifty futures rallied above the minor resistance level of 5350 and rallied strongly for the entire trading session.
  • Though the 4400 - 4410 level was expected to be a minor resistances, being the intersection point of the falling trend line applicable to the last leg of the fall, the Nifty contracts didn't encounter any resistance at the level.
  • Nifty futures spent some time trading in a range between 5420 and 5440 before rallying to a high of 5468 before closing for the day at 5455.
    Nifty Futures - Intra-day Chart  

    Nifty Futures  - Daily Chart 

Monday, February 14, 2011

Update for 14th February 2011

A Dead Cat Bounce or a Reversal ?

  • Last Friday, Nifty futures opened slightly higher at 5241 and immediately sold off to the previous day's close of 5225.
  • The Nifty contracts spent some time between 5225 and 5240 before breaking the reference level of 5225.
  • Nifty futures sold off to record a new swing low of 5175 in the morning session. However, it seemed that the volumes near the new low were drying up after some time.
  • Therefore, the Nifty contracts tried to recover. The recovery almost continued till the end of the day so that the Nifty contracts closed above the previous day's trading range at 5313.  
    Nifty Futures - Intra-day Chart  

Friday, February 11, 2011

Update for 11th February 2011

    Some Stocks Recover, But No Signs of any Reversal ?

  • Nifty futures opened lower at 5250 on Thursday. 
  • Most of the day's trading in the Nifty contract was confined in a trading range consisting of the reference / support of 5225 and the previous day's ( Wednesday's ) last traded price 5285.
  • Many highly oversold shares recovered some of their losses on Thusday.
  • However, the  previous day's rescuers of the market, in the form of the Nifty heavy weights like Infosys, Reliance, SBI etc, mostly fell on Thursday.
  • Advance declines data still  favored the negative side.
  • No capitulation of the heavy weights has happened yet. ( At this point no one knows whether a capitulation involving the index blue chips will occur or not ! )  
   Nifty Futures - Intra-day Chart 

Thursday, February 10, 2011

Update for 10th February 2011

   The Day of Capitulation Over ? 

  • Nifty futures opened flat on Wednesday and for most of the morning session, the futures contract tried to recover.
  • However, the Nifty contracts kept on trading  flat on the back of some strength seen in some of the index heavy weights. All attempts to trade higher ended below the previously indicated minor resistance of 5350.
  • However, the so called popular trading shares or midcaps kept on falling heavily, even in the morning session. 
  • Nifty futures also joined the capitulation of the midcaps in the afternoon session. Nifty contracts fell to the lower minor support of 5225. However, Nifty futures recovered from the low to close at 5284 for the day.
  Nifty Futures - Intra-day Chart 

Wednesday, February 9, 2011

Update for 9th February 2011

  Another Day of Losses, What Now ?

  • The last post's title itself said that some upsides may be expected for the simple reason that no follow up selling in the Nifty futures was seen on Monday  following the bearish engulfing candle of Friday.
  • However, in hindsight, it seems that the sellers were just waiting for some upticks to restart their liquidation and they restarted the selling in the absence of any uptick on Tuesday.
  • Therefore, not only that the expected positive move didn't take place, but instead, markets resumed the downtrend belying all expectations. The best lesson from this episode is that any kind of analysis can fail in the market and therefore, it is better to stop trying to call the lows. 
  • Some lower than expected results declared by some of the popular trading midcaps also didn't help at all for a recovery.
  • For the first time after the down trend started, some fundamental analysts have started to talk about the possible earnings growth downgrades at the index levels. It always happens this way. First, the market falls. The downgrades come later. Actual lower profit / growth reflects later on. Market goes further down. More earnings downgrades follow. Markets starts the recovery while the downgrades continue  unabated. Finally the upgrades start. By this time markets might have gone up considerably. More upgrades follow. Markets peak and analysts will continue with their upgrades. And the story comes to a full circle. It's just like the case of a dog chasing it's own tail !
  • Nifty futures opened flat at 5411 and tried to move upwards but the attempt failed at the 5420 levels which was the high point of Monday's initial narrow trading range. 
  • However, when the upward movement started to fail, another bout of selling started as is usual these days.  Nifty futures sold off to the widely known six month low and support of 5340 - 5350 levels and traded around the levels for some time.
  • All efforts at recoveries from the said support  were also sold in to, resulting in to a break of the support in the last hour of trading. Nifty futures closed at 5320 for the day after recording a low of 5304.
 Nifty Futures - Intra-day Chart  

Tuesday, February 8, 2011

Update for 8th February 2011

 Another Inside Day Candle, Some Upside in Sight ?

  • Nifty futures opened slightly higher at 5400 on Monday.
  • After testing the previous day's last traded price of 5382 in the morning session, Nifty futures was stuck in a very narrow and flat trading range between 5390 and 5410, till around the 2.00 PM mark.
  • Traders may note that the top end of this tight trading range remained just below  or around the contract's previously recorded swing lows of 5411, 5422 and 5425.
  • An upward breakout in the afternoon session above the then day's high saw the Nifty contracts reaching a high of 5445. This high was just below the reference level of 5450.
  • However, a correction from this minor resistance level attracted a sudden bout of selling, especially once the contract broke below the morning session's high of 5420. Nifty futures fell steeply and recorded the day's low of  5370. 
  • Nifty futures recovered from the lows at the fag end of the day and closed at 5405.
 Nifty Futures - Intra-day Chart     

Monday, February 7, 2011

Update for 7th February 2011

  Another Day of Losses, But What Now ?

  • Last Thursday, Nifty Futures bounced back after making  losses in five out of the six previous trading sessions and closed very near to  the resistance at 5550.
  • It seemed that some more upside might be forthcoming on Friday on the back of the previous day's momentum.
  • On Friday, markets opened slightly lower, but tried to continue with the upward movement in the morning session.
  • After hovering between 5540 and 5510 for an hour or so, Nifty futures broke above the resistance level of 5550.
  • However, the breakout lacked follow up buying and it turned out to be a real bull trap.
  • Once Nifty futures broke below the 5550 level again, all round selling started and the contract reached the lower reference level of 5450.  
  • Another bout of selling in the last hour of trading saw the Nifty contracts recording a new swing low of 5356, which almost coincided with the already indicated minor support between 5340 and 5350.
  • Nifty futures closed for the week at 5382.
 Nifty Futures - Intra-day Chart     

Friday, February 4, 2011

Update for 4th February 2011

 At Last the Bounce Happens, But What Now ?

  • Nifty futures opened on Thursday exactly where it closed on Wednesday.
  • After the open at 5432, the Nifty futures contracts traded between 5425 and the reference level of  5450 for a short time.
  • But once the Nifty contracts crossed the reference level of 5450 on the third test, the contracts rallied strongly towards the previous day's high of 5510.
  • But the previous day's high was only a minor obstacle in the path of the Nifty contracts as it rallied further for a test of 5450. 
  • The Nifty contracts traded in a tight range between the previous day's high and the day's high of 5545 for the rest of the day and finally closed at 5539.
Nifty Futures - Intra-day Chart    

Thursday, February 3, 2011

Update for 3rd February 2011

Nifty Future Goes Nowhere !

  • Following the cues from the overnight rally on Wall Street and the resultant gains in the Asian markets, Nifty futures opened higher at 5491 on Wednesday.
  • Therefore, the expected opportunity for a quick contra-trend long trade didn't materialise at all on Wednesday.
  • Whenever the market opens away from the previous day's close and in the absence any significant price moving reasons, markets ( read traders ) have a tendency to test the the previous close.
  • As such,  Nifty futures sold off from the higher open and recorded an intra-day low coinciding with indicated support / reference level at 5450. 
  • Following five day's continuous losses, Nifty future was expected to close in the positive territory on Wednesday.
  • It seemed that Nifty future may close above the 5475 levels till around 2.30 PM.
  • However, the ghosts of the 2G scandal again visited the Dalal Street in the form of news reports of arrests made in the case.
  • The hopes of a respectable close after five days of continuous losses were taken away  by the ghosts and skeletons from the cupboards as the markets again sold off in the last hour of trading.
  • However, Nifty futures still closed with some meager gains, not belying all the hopes of a positive close.

Nifty Futures - Intra-day Chart   

Wednesday, February 2, 2011

Update for 2nd February 2011

    Nifty Futures Approaching the Interim Support of 5350 !

  • Following the intra-day bounce on Monday, Nifty futures opened slightly higher at 5542 on Tuesday.
  • However, sellers emerged right from the opening bell and the selling  lead to the Nifty futures falling to the previous day's lows in the morning session.
  • The losses were widespread and some of the better stocks too joined the bear bandwagon on Tuesday possibly indicating institutional selling.
  • Nifty Futures kept on trading around the 5450 reference area for some time in the middle session, but another bout of selling in the afternoon session lead to a new daily low and a close near the low.

Nifty Futures - Intra-day Chart  

  • Nifty and the major indices have lost continuously for the past five trading sessions by now.
  • Even if the market is poised to go down further, markets do not fall continuously for more than five to six days in normal cases.
  • As such, it seems that the market is poised for a bounce and a positive close, at least for a single trading day.

Tuesday, February 1, 2011

Update for 1st February 2011

    Nifty Futures Bounces from Lows, But What Now ?

  • The sell signal indicated by the Momentum Signal at 5630 in the current month Nifty futures on last Thursday has lead to a favourable excursion of 190 points or profits.
  • As indicated in the previous post, Nifty futures bounced from the 5450 minor support area.
  • In tandem with the SGX Nifty contracts, Nifty futures opened lower on Monday with a gap.
  • A large gap like 60 points from the last traded price may force the market to recover and fill the gap.
  • Therefore, some bouts of short covering occurred during the day. 
  • The last two day's intra-day recoveries have almost the same highs at 5545.
  • The level of 5550 was the starting point for the upward breakout towards the all time highs in September.
Nifty Futures - Intra-day Chart 

  • Therefore, the level of 5550 may become a reference level for the purpose of intra-day analysis and trading.
  • The higher resistance above 5550 is at 5630 coinciding with the 200 DMA.