Update for 26th November 2010

 Scam and the Derivative Expiry Lead to Another Sell Off !!!

In the last update for the just ended trading day, based on the then positive overseas cues and the option open interest positions, we had indicated that Nifty future may try to trade towards the 5900 strike and close near or around that strike. However, it was not to be. The November series Nifty futures expired exactly a strike lower at 5800, even though it seemed till 3.00 PM that the expiry could be at the higher indicated strike at 5900.  

Now a few words on the just concluded derivative expiry. It is so difficult  to believe that the market is not managed on the derivative expiry after observing the strange movements which starts at 3.00 PM and which literally forced the Nifty index to close exactly at a round option strike price. In a normal market situation how much probability is there that the half an hour average of an index ends up within less than 0.25 paise of a round option strike at 5800 ? And that too after the index falling 20 points below the round figure and then rising exactly 40 points to end up at 20 points higher than the strike at 5820. This author drops off the subject with a comment : '"Yeah, strange things happen !!! " 

Nifty Futures - Intra-day Line Chart  

Update for 25th November 2010

Another Scam and Another Sell Off !!!

In the last update it was written that the below normal Put Call Ratio ( PCR ), new call writing and overnight losses in the western market may hinder the Nifty futures' second great escape before the expiry on Thursday. It was also indicated to traders that the reference levels for intra-day real time technical analysis of Nifty futures are at 6000, 5965, 5940, 5875, 5860 and 5820. 

This seems to be a season of scams. And it seems that there is no lack of negative news for the market to sell off day by day. On Tuesday, it was the Korean war clouds. And on Wednesday, it was a turn of corruption and alleged loan scams. There were some unconfirmed news reports over the weekend about some shortages in some of the older annuity schemes of LIC and of some kind of investigation on against investment professionals of LIC. However, it was never felt that the issue might lead to a sudden sell-off of the financials as happened on Wednesday.

Irrespective of the news, a trader following the earlier reference levels could have traded  very profitably on Wednesday. The intra-day market action of Nifty futures is captured by the following chart with the earlier mentioned reference levels.

Nifty Futures - Intra-day Line Chart