The Ultimate Momentum Signal

Friday, June 17, 2011

Update for 17th June 2011

Nifty Futures Supported by the 5400 Strike ?

The interest hike by the RBI was more or less on the expected lines and was already discounted by the market. Hence the absence of any severe reaction to the news. However, as envisaged in the previous post, temporary spikes after a lower open happened post the news event. As the event is over, market may go back to it's own low volume listless trading mode, which makes all kinds of analysis much more difficult. As of now, it seems that the Nifty future is supported by the huge open interest of Put options at the 5400 strike. Though the overall PCR of June series declined on Thursday, it is still above the unitary value and is still away from the very low values associated with very bearish scenarios.

Nifty Futures - Intra-day Chart

Nifty Futures - Daily Chart

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Thursday, June 16, 2011

Update for 16th June 2011

Market Bracing Up for the Rate Hike !

On the penultimate day of trading before the expected interest rate hike by the RBI, the interest sensitive stocks sold off and the indices closed at a two week low.
The weakness in the market heavy weight stock Reliance is also adding to the woes of the market.
It seems that a 25 basis point hike by the RBI is already discounted by the market.
Any tougher than expected talk by the RBI together with the expected 25 basis point or an unexpected 50 basis point hike can lead to sell off in the market.
Even otherwise, market has been lacking both volumes and trading interest for some time and therefore a break form the present trading range can be expected.
Overnight losses in the international markets may also add to the negative momentum.
However, a lower open and no hike or the expected 25 basis point hike together with some mild talk or an indication of the end of the hike cycle by the RBI may lead to a temporary short covering rally as well.
The immediate lower support for the market is at the 5300 to 5350 levels coinciding with the rising long term lower boundary of the trading channel. ( Please see the Nifty Index weekly chart below. ) Though Nifty index has a minor support at the previous swing low of 5175 - 5225 area, the break of the long term support line at the former level may lead to a deep sell off as well.