Thursday, April 30, 2009

Hedging headaches… Options strategy 3

Frankly I lost heavily in Jan 08. It was one of those times when the circumstances perhaps conspired against me and million of other retail investors and we held on to our hopes (read futures) – at every stage daring them to go further down, at every downturn we hoped that the markets will recover. That was the time when I did not study stocks and futures and was there because there was perhaps – everyone else doing it. What a crash it was – it was a Tasmania that took along with it millions of dreams. Where did we go wrong? We went wrong in trying to fight the tidal wave that was of a far superior creation than what our thoughts will be. And we were not hedged. Thinking back today I want to roll back the clock that never will and here I am with the most costly lesson of my entire life. Hedging Futures.

Figure 1It is very easy to say – remain hedged – but what the hell is it? Is is selling a future for one month and buying for the other? No one told me but I sure want to teach that anyone who now plays by the rules should have a fair chance to survive it. I can promise you that if you play this strategy by the rules the chances of making money will actually go through the roof. Remember however that there is no magic portion that will make you money – there are pitfalls and if you have an understanding then making money is the next step. Those who know the basics please bear me out as I will go step by step and that may be painfully slow for some of us.  

Before I start I let us understand some things. If I buy a option then there the option is priced on some formula and we in India follow the pricing based on Black-Scholes model. You can do a google for that term but beyond this I do not need to explain this term. There after coming to the price of the option - it has some points that I intend explaining. Let me take for example today the Nifty closed at 3470. The 3400 call option costs me Rs 220/-. Let us now break it down. Ideally the 3400 option today should have been Rs 70/-, but it is not so as there is a premium demanded on the option. The premium demanded is = 3470 – 3400 = 70. 220 – 70 = 150. Since the Nifty is traded in lots of 50 – the money that is demanded for the premium is Rs 150 X 50 = 7500/-. Remember that this is the money I am betting to loose for taking or let us say hedging a position. WOW –Figure 2 that’s a lot of money! wait till you hear me out. Now in this example I am talking about market at 3470 and the call priced 220. If I pick up the call for strike 3500 then the present price is Rs 160/- and for the strike 3600 the price is 113/-. Now if I pick a out of money call then the price is pure premium and infact if the market was to end even a point below the strike you get nothing. If it is one point above Strike Price then you get back Rs 1/- X 50 (one lot) and so  on. So whether you understand it or no – YOU WILL USE ONLY in money call/put for hedging and nothing else.

Now I am paying in this case Rs 150/- as a premium because there are 30+ days to expiry. As the expiry comes closer – the premium will decay. The decay goes something like this. So If we have the market ending the month at exactly the same place as it is today then no one can take the real value from you – and the premium will decay to near worthless. If you have understood this then we will now workout our strategy wherein we risk the premium only for hedging.

Now have your mind clear whether we are likely to trend up or trend down. This strategy works best in trending markets. Let us say I am bearish about the markets (like I am now a days) I would like to sell a nifty future. So I sell May Nifty future Figure 3for Rs 3470 (Present market Price) and to hedge I buy one IN MONEY CALL (strike price 3400) for Rs 220/-.

Let us now see what happens in all the three scenarios – Markets falling (as I expected),  Markets remaining range bound (Aka ending at the same point) and markets rising (What I did not expect).

  • First Scenario: Markets falls – Let us assume the market falls by 100 points Nifty.
      • Market at 3370.
      • Future falls 100 points – I get 100 X 50 = Rs 5,000/- credit in my account.
      • The option priced at Rs 110/- - option looses Rs 5,500/-
    • Market falls another 100 points
      • Market at 3270
      • Future falls 100 points – I get 100 X 50 = 5,000/- (Plus 5,000/-) a total of 10,000/- in my account.
      • Option priced now at Rs 40/- - option looses 180 points = 180 X 50 = 9,000/- ( Real gain starts now) gain = 10,000/-(gained over two days) + 40 X 50 (Option is still worth 40 Points) = 2,000/- minus 9,000/- a total gain of Rs 3,000/-
    • Beyond this point I will gain almost a 50 Rupees for every point of drop in Nifty. So max gains – take an example of the month of April where the markets moved 900 points – gains will be 900 X 50 = 45,000 minus 11,000/- (Price of the option) = 34,000/-. So gains are unlimited.
  • Second Scenario: Month expires at 3470 -
    • As the time passes by and we come closer to the end of the month – the decay of the option premium will set in and real value cannot go anywhere whereas the decay will eat the 150 point premium we had given that is a max loss of Rs 7,500/-
  • Third Scenario: Markets Rise – Let us assume 100 points.
      • Market at 3570.
      • Future rises by 100 points – my account debited by 100 X 50 = Rs 5,000/-
      • Option priced 310 (rises by 90 points) so I am plus 4,500/- in options
      • Total loss Rs 500/-
    • Market Rise another 400 points
      • Markets at 3970
      • Future rises by 400 points – my account debited by 400 X 400 = Rs 20,000/-
      • Option priced 650 (rises by 340 points) so I am plus by Rs 17,000/-
    • In all the max I will loose is the premium I paid for the Call that is Rs 7,500/-

Actually a lot of people would be sh*t scared seeing the 7,500/- figure I am showing as a loss. Remember that it is the maximum in the worst possible case  wherein either the market has run away 900 points against you or you wait with the markets not moving anywhere for 30 odd days. Remember that there are ways and means to still keep the losses in a check. So before I come to the solutions and discuss the solutions I will like to present some more problems that you should keep in mind. Problems and how to over come them. Please remember that these are suggestions and there you can be more creative than possibly I can ever be.

First is that we have seen that the premium of the options is more if the time to expiry is more. The premium is not a sine or a cosine curve like it is represented on the chart. However there are some thing you can definitely keep in mind.

  • The premium is very high when you take the next month or the following months options so I advice stick to the near month for options.
  • The premium gets lowered the deeper IN MONEY the option is. For the above example had I bought 3300 call – on the face of it it would have seemed expensive but if I take out the pure premium – the premium would have been less and so for 3200 strike will be even lesser and so on. Real example the 3300 call is at 280 so premium is 3470 minus 3300 = 170. 280 minus 170 = 110. So just 110 points premium against 150 point premium of 3400 call.
  • The out of money option is pure premium and that is a sure loss. The loss will build up till the option comes in money and tries to beat the loss for point per point.
    • An example market at 3370 – I sell future. I buy a call of 3600 strike for 110 points. Market go against me – rises by 100 points – I loose 5,000/- and call rises by 35 odd points – yes it is around 30% of move but as the option is not is money – It will not move close to point for point loss I will make in Futures.
  • The deep in money and out of money options tend to become illiquid. Except for Nifty and a handful of stocks – this statement is true so you will have to take the route to exercise the option if you are deep in money for such stock options hedges.
  • The premium drops to low in the last few days (10 odd) to expiry and for a very small premium you can take good positions. The premium in last 10 days to nifty dropped to 40 points. – That is a risk of 2,000/- for hedging a position.
  • As far as the futures are concerned the money comes in or goes out everyday so have adequate margin available if the markets are to go against you. For options the money is paid initially only.

Now for some clarification. Even if the markets go against you or your taken position – how many days will you take to realise your mistake? One/Two or Three days? well there would be negligible money lost to the decay factor of the option if you do decide to call quits soon enough. If you do come in this situation. Come out of the market and decide another entry point. Finally I will suggest you one thing – when you do come out - come out of both the positions. If you close one position and leave the other open then the game is as good or bad as playing unhedged. Mind you – in unpredictable times you will never come out of the markets with a headache if you follow this principle and that is what I can promise. Secondly there is nothing really in the markets that will give you returns like a Future will do in the markets.


Tuesday, April 28, 2009

Battle continues… Update for 29 Apr 09

Daily 28 Apr 09So today had turned out to be another day when the bears could pull the markets lower than the 200 EMA. It (200 EMA) always holds a lot of relevance for the markets but to fight it around this as a pivot is indeed interesting. Infact I will go a a bit further and say that perhaps the high achieved on 15th Apr of 3498 too has become a resistance to beat. Now whether 200 EMA is playing the spoil sport or 3498 – the fact remains that we may have topped out for the short term and this should become our levels to watch out for – for all those who intend to play the range. We closed at 3362 that is 62 points above the present middle of Bollinger bands.

As far as the Global cues are concerned we did not have too good a cues from there too and that may be a reason among others to make us close red. Asia was all red but not as bad as us. Nikkei ended 2.67% in red, Hang Seng 1.92% in red and Strait Times 0.56% in red. Europe too traded red for most of the time finally ending – not at the lowest levels – but still well in red. FTSE was down 1.69%, DAX down 1.85% and CAC down 1.66%. US opened red and almost immediately climbed to the safety of neutral line. The problem is that it continues to play dangerously close to the flat line and is not showing the conviction to remain green. We are still short of mid session so there is still time before we see where the markets finally end there.

The candle was dark and that comes after a Doji (not a perfect one though) Only thing is that it lends support to the fact that we were perhaps near the top for the present run up and any further run up will have to necessary see bulls support at the present or lower levels. We are below the 200 EMA and the 20 EMA trails at 3279 – well within the reach of the bears if they do desire.  We are already below the 5 EMA and if 20 EMA is violated then the bears will scream victory. The volumes are once again on a decline – so that is one point for the bulls that bears do not have enough volumes to crack the markets. The bears on the other hand say that these volumes were enough to crack nifty 100 odd points and the thrust will be when it will be. ADX is bullish but with each passing day the bulls show signs of tiredness. MACD turns bearish after today’s black candle. Slow Stochastics say bear by a point. Means that the %D line has crossed over %K line by a point. RSI though bullish is looking down. The good thing – there is no indicator in the overbought territory – the bad sign – there is no indicator in the oversold zone too. So expect the down run to continue till the indicators turn oversold and bulls get some better support. 

Seeing the options data – the moment the markets show a chance going down there is a spate of put build up. To my mind this is one of the reasons that there is such a resistance to fall lower. All the puts this month are likely to go down the drain. Hopefully there will be a lesson there and the carry forward of positions will be more intelligent. Apart from the Options, the uncertainty of election results and weak global cues are countering the build up of positions on the down side. So though there seems to be a strong possibility of us going lower – there is a bright chance that we settle down in a range at these levels – if we do not go down. The chances of us going to higher levels – though can never be ruled out – seems painfully difficult at the moment.

Hey before I go any further – remember the Options strategy no 2? Well congratulations for 8.9% return this month precisely. No more no less. I am a day early – but I am sure the markets are not running up to eat your positions tomorrow.

The options pain that I had mentioned in the last post giving indications of ending the month around 3200 levels now give the nadir at 3300 levels so that should be the nearest to the closing tomorrow. please do look at the options pain and the call put ratio charts.

I will move on to the Pivot data now: -

R3 3591 
R2 3514
R1 3438
Pivot 3394
S1 3318
S2 3274 
S3 3198 
Projected High Range 3416 to 3476
Projected Low Range 3465 to 3405
Fib Projected High 3503
Fib Projected Low 3318

I wish you all the luck for tomorrow…Put call ratio 28th AprOption pain 28 Apr


Monday, April 27, 2009

Blog update…

Due to unforeseen circumstances I will not be able to update the Blog for Monday and Tuesday. I am really sorry.


Friday, April 24, 2009

200 DMA with the bulls… Update for 24 Apr 09

So the Dip Dop Continues with the bulls gaining upper hand in the last round. The candle yesterday was nice and white.  It was achieved with bad results from Reliance – but classified better than expected. Day 23 Apr 09All said and done the bulls put up quite a show on an otherwise unexpected way. The market opened flat and tested the crucial spot nifty level of 3300, never dared to test the S1 and bounced back never to look back again. It breached – the 200 DMA – and that has taken six trading sessions for the bulls to do that. Look at the chart for the day – it broke above pivot and got good support from it – running up after the half time. R2 was on the higher end and was tested but could not be sustained. The chart that you see is the 3 min chart so mind you the high point registered is not the one actually achieved. See how the Pivot point was tested before the markets surged up.

As to the global cues for today – the Europe was not good. It closed in red with FTSE closing 0.31% in red, DAX closing 1.22% and CAC closing 0.55% in red. US opened flat –went red for the majority of the time and then recovering close to the market closing to end in green. Dow was up 0.89%, Nasdaq was 0.37% green and S&P was 0.99% green. GM has planned to shout down 13 assembly plants for upto 11 weeks and that is likely to disrupt lives of almost 24,000 workers. In Asia  Nikkei has opened and opened red – now recovered to go green – but only 0.5 points or 0.01%. Strait Times too opened red and trying to recover.

Daily 23 Apr 09 On the charts though the pattern is a bullish engulfing pattern. It gets beaten by being a perfect pattern as the opening was a point higher than yesterday’s closing by just one point. Like I said we have broken above the 200 EMA along with 5 EMA and the volumes were almost a replica of what we had day before. Also we are on to making higher top with higher bottom.

Options pain 23 Apr 09

The candle has also engulfed last three days of bearish candles too. ADX remains bullish still and so does MACD even though the divergence is a mere a few points. The RSI too is bullish and is going back to its home for couple of days now – overbought zone. Slow Stochastic too has turned bullish and comfortably where it can show a run up for a few days.

put call ratio 23 Apr 09

The option pain is almost the same option Put / Call ratio has improved in favour of the calls by a bit. But the ratio is still not enough for the markets to take a fall.

Let us see the pivot data now –

R3 3568 against 3506
R2 3519 against 3447
R1 3471 against 3388
Pivot 3390 against 3342
S1 3342 against 3283
S2 3261 against 3237
S3 3213 against 3178
Projected High Range 3431 to 3495
Projected Low Range 3382 to 3318
Fib Projected High 3474
Fib Projected Low 3274

Frankly there is nothing against the markets to go higher now. It would be interesting to note the closing of the indices this month. The closing has been advanced by a day for the markets from 30 Apr to 29 Apr. So let us brace up. Four trading days left including today.



Thursday, April 23, 2009

Some win some loose… Update for 23 Apr 09

The markets are slipping – one dot at a time. Call it beginning for another huge fall or consolidation or what ever else – the fact would remain that the markets are slipping. What else is happening that the indicators that were overbought are now retracing – shall we call it a smart move by the bulls to consolidate for another rally – or shall we say that the bears are savouring every moment of bull hunting? Daily 22 Apr 09 The answer to this will provide direction to which way we go here on. Another thing that has happened yesterday is that we have slipped below the 5 EMA – well to some this is indication to finally leave the long bullish positions to something more bearish perhaps. I also feel that the reliance results today are going to be a major input – albeit after the market hours to give direction to the markets. A direction is what is needed. Everything is pitched upon them. I now feel that even though this may eventually turn out to be a bear market suckers rally – there seems to be a good chance that we see 3800/4000 levels on nifty before we fall down. The kind of euphoria and the following this rally wanted does not seem to have materialised, for example my milk man is still not suggesting any stocks and neither is my ‘sabji walla’, ‘shopkeeper’ and all... The fall can come only after we have everyone bullish about us – India. In any case short term bullish scenario after we correct a bit more perhaps is the most likely course at the moment. So brace up yourself for another good upswing AFTER WE CORRECT SOME MORE.

The global cues were – let us say mixed at the best. Start with Europe – FTSE closed 1.08% in green, DAX up 2.06% and CAC 1.72%. Most of the real gains in the European markets were near the closing times. The US markets opened flat – went green and nose dived nearing close. DOW down 1.04%, S&P down 0.77% and Nasdaq – the only one in green there at +0.14%. Asia at the moment is red with Nikkei down 0.68% and Strait Times down 0.24%. Well we have to wait for our opening too.

The candles have left the upper Bollinger band and now trailing below the 200 and 5 EMA. Mind you there was an attempt to go and breach the 200 EMA yesterday too. The 200 EMA is now at 3394 – a point worth of drop. Next important level – if we do go lower will be around 20 EMA to 3206 perhaps. The volumes are dropping slowly with every fall – does this indicate that participation during the rise was good and now as we go down the build up of long in stock and futures is less and there is a general consensus for markets to be lower for picking season to start? The ADX is still bullish for whatever it is worth but with bears sneaking on to the bulls. MACD divergence – though still bullish – seems to be the last of this session if we close red or flat. The red line is very likely to cross over lower for a bearish beginning. RSI looks down. Slow stochastic do not show that we have still reached the oversold zone – so as per them we can still go down for some time before we decide upon recovering.

Option Pain 22 Apr 09 put call ratio 22 Apr 09 Okay I will take a little more time explaining options data. See the first put/call ratio chart? We are reaching from put call ratio of about 2.2+ to the present 1.64. What that effectively means that the resistance for the markets to go down to the lower levels is becoming weaker with each passing day and if this continues then we may see a more powerful fall in coming days. See the second chart? the Options pain – as per the present options pain chart the markets should end this month close to 3200 mark. Okay I will put in a word of clarification here. These charts do move with them markets and they project the investor mood. But also understand that no one thing can give you right solutions. Technicals alone is worthless. Options data alone is worthless and so would be some other standalone system. So it is a culmination of so many things some of which are subjective and others objective – so after reading all this I would prefer you to form your own opinion as to where we are going.

Let us see the pivot data now – has been a long writeup already.

R3 3506 against 3519
R2 3447 against 3467
R1 3388 against 3416
Pivot 3342 against 3362
S1 3283 against 3311
S2 3237 against 3257
S3 3178 against 3206
Projected High Range 3365 to 3418
Projected Low Range 3384 to 3331
Fib Projected High 3429
Fib Projected Low 3267Day 22 Apr 09

  Okay – fairly often I am asked as to how the resistances and supports matter – well no one can really tell you – there are so many ways to calculate these levels that any sane person will get crazy seeing the calculations and the data part – but all the same they do have meaning and earlier I used to post the last days relative trading on 3 min line chart with the resistance and the supports plotted. Well I am doing so again so please see – observe and learn – the entire idea of my blog is not to spoon feed but to learn and teach with so much data in platter before you. The decisions are yours after you go through it.

Before I end. I am on to a new dream – and will post on it one of the days next week perhaps. Only that before I thought it out I never imagined what colossal work it will turn out to be. But the challenge is mine and do not miss it – I intend the effort I am putting in to be worthwhile.



Wednesday, April 22, 2009

Another round… and the match is a draw Update for 22 Apr 09

So another day passed by and bears tried hard but the resilience of the bulls proved too much for the markets ending it just 12 points in red. The 200 EMA remains there steady and tall – not taken down decisively be either bulls or bears. The markets hovering so close to the levels that they have not been able to influence the 200 EMA by even one point and it still holds at 3395. I am not a cricket fan but looking at the markets – what better Adrenalin gushing matches can you hope for than seeing the bulls and bears battle it off – other than the cheer girls factor perhaps. It has everything – suspense, romance, mystery, deception, love… just name it. Except for the 25 basis point cut in repo, reverse repo, – that too was below the markets expectations – there was not anything great about the day – I mean there was not good news really. Infact though the markets seems to be a draw – I would give full marks to the bulls for holding out in an otherwise a killing situation in view of the global cues.

Today there are a spate of results that are to be declared and that coupled with the global cues should ideally dictate the trend in the markets. Well the markets still are overbought and Global weak cues could not trigger a sell off – what are we really waiting for? Technically it has been fairly long that we have been in these overbought territories. I however feel the moot question is – Are you bullish? when a majority of people turn bullish – it is then that the markets will sway and show the true colours.Markets

dailyThe Global cues have turned good once again and I think that we are not the only ones who are confused as to which way to go. There are whole bunch of others taking one step back one day and one step forward the other day. Get this fact right that the recession in not ending now or here. I would like to clarify my stand: What is recession? though there are different explanation bit here and there – but perhaps the one agreed is that when we have the GDP growth falling for 3 straight quarters. Well so far so good.  Now the growth comes to such low levels that relatively there is growth – but mind you it cannot go to the old levels for whatever reasons. It is this that has to be seen in the present scenario. There is no way the the developed world is going back to what they enjoyed a year back in a hurry. The second is the markets are only a function of Technicals, Fundamentals and the existing market sentiments. As of now the Technicals and Fundamentals are weak and only the hope and sentiments are taking the markets up – how long is subjective as there is no measure of this one factor.The global cues that were totally bearish have mellowed down a bit with Europe closing flat – FTSE down just 0.09%, DAX down 0.34% and CAC down 0.15%. US opened flat / weak but then steadily climbed on to end almost at their highest levels. Dow was up 1.63%, Nasdaq up 2.22% and S&P up 2.13%. This tried to encourage the Asia to trade green but at the moment the picture is not rosy – with Nikkei in green just 0.16% and dipping, Strait Times red at 1.13%.

On the charts we are no longer trailing the upper Bollinger bands and are a few points below the 200 EMA. This was a second doji – two on consecutive days so beware is all I can afford to say. Volumes were bit more than yesterday and stood at 141% of 50 day average. ADX though still bullish shows bulls loosing ground and bears raising heads. MACD divergence is still bullish but divergence has reduced considerably. RSI at 63 – just out of the overbought zone at 70 and bullish so far. Only Slow Stochastic are bearish and below the 50 mark that is used by some traders to trade on the negative side.

Let us see the Pivot data for today:

R3 3519 against 3543
R2 3467 against 3487
R1 3416 against 3432
Pivot 3362 against 3385
S1 3311 against 3330
S2 3257 against 3283
S3 3206 against 3228
Projected High Range 3389 to 3442
Projected Low Range 3386 to 3333
Fib Projected High 3442
Fib Projected Low 3280

Sorry there are no Options data charts today. Another day on the tender-hooks?

Best of luck


Tuesday, April 21, 2009

200 DMA won by the bears?.. Update for 21 Apr 09

So it did turn out to be a day of fight between the bulls and bears. The volatility coupled with somewhat predictability of the topsy turvy day with negative bias may have been a great opportunity for those who wanted to take sides. Ofcourse no one saw so many things coming straight at their face. The TCS results, Bonus announcement and Axis bank results. Well even if we were to continue with the recession – still all said and done the country is showing resilience to the happenings in US and Europe. We may (may) come out of this somewhat less bruised than that has been expected. Good for the economy – good for the country. Well we have the rest of the results also to come up till we make up our mind on that and ofcourse the elections – with time approaching near the results the volatility might increase. Two another events – RBI has lowered the growth earnings and we may have a word on the rate cuts. However in face of the global picture we may not have too much to do. So let us begin --

The global cues till we were trading and the end of Asia was well cautious. It was after the Europe opened and more importantly perhaps when the US gave the direction that the Europe too stumbled. FTSE closed down 2.49%, DAX down 4.07% and CAC down 3.96%. In US the financials were dumped like hot bricks and that led to the fall – Dow finally closed down 3.56%, Nasdaq down 3.88% and S&P down 4.28%. Ofcourse with such a performance the Asia was supposed to open down but unfortunately there is not even an iota of an attempt to recover by any of the indices open at this time – Nikkei is down 3.35%, Hang Seng down 3.67% and Strait Times down 3.06%. So our streak of six weeks of winnings is taking a breather??Daily 20 Apr 09

Coming down to the charts the tapering off the high that we saw is now a reality and the fight for the 200 DMA atleast for the time being seems to be won by the bears. Bulls could make the markets close above the 200 EMA only on 15 Apr – so shall we say that the bear market continues and we get once again into a range bound markets? Well we will have to wait and watch. Like i said earlier there are indicators saying that we will reach the mid of the Bollinger bands during this fall and thereafter we would be able to take a call whether there is any other downside to it or no. The volumes were lower than the average we have been having for the past few days and it stood at just 139% of the 50 day average instead of almost 20% volumes we were running. As far as the ADX is concerned after al fairly long time the –DI line is trying to look up and +DI is looking as if it wants to break below the 20 mark line. MACD divergence has further reduced but technically it is still in bullish territory. RSI has still not moved much trailing the overbought territory or a few points here or there and that is not good news. Slow Stochastic are bearish and almost at the 50 point marker. They should ideally reach 20 or around that figure before the upswing starts again. TRIX too seems to be tapering off the upward stance it had taken for some time now.

Okay here is what I feel – we should go to minimum 38.2% retracement that is at 3135 in the days to come. However the kind of hype built up of buy on dips will make the markets make half hearted attempts to recover. How successful they will be will depend upon the FII and DII money flow as the retail seems to have sold yesterday – as the FII and DII data seems to be showing cash inflow only. They bought a shade less than 500 Cr (both FIIs and DIIs).

Let us see the Pivot data for today:

R3 3543 against 3619
R2 3487 against 3540
R1 3432 against 3462
Pivot 3385 against 3410
S1 3330 against 3332
S2 3283 against 3280
S3 3228 against 3202
Projected High Range 3409 to 3460
Projected Low Range 3422 to 3371
Fib Projected High 3468
Fib Projected Low 3311

So let’s rock? Oh wait the options data …

pain 20 Apr put call 20 Apr


Monday, April 20, 2009

The battle of Bulls and Bears… Update for 20 Apr 09

So we have the stage set and ready for the bulls and bears battle for 200 DMA. Interesting! we have the bulls that have show resilience and strength for past so many days on one hand and the bears who are perhaps feeding the bulls to slaughter them one of these days. Who wins will dictate the markets in terms of whether we see the continuation of the bear markets that have a hold on us for almost a year plus or we see the sunshine for the times to come. Frankly the news still does not really side the bulls – but then what the heck – there are manipulators to take care of that. Hell of hype built up as if we are out of the woods and again on our way to touch the skies. Atleast one can do is give me a break – I have almost stopped switching on the idiot box for the fear of being sucked into their hype. In any case we are making a small curve where the trajectory of recovery seems to have petered out – perhaps for the time being atleast – but all the same don’t know really what next week will bring. So the question I ask you – are you convinced that we are going up? – if the answer is yes and you are the part of the majority then the shock therapy is just around the corner. But all the same I still feel that not everyone is convinced. So after a minor correction – we might still have some upswing. What I see the markets to do? Go down to 3050 go up to max of 3800 and the perhaps see sub 3000 levels.

Aah! I do get carried away whether I like it or no. Well let me start as always with the Global cues. After the wonderful run we have had it is time the markets world over take a cautious breather. Daily 17 Apr 09Infact one can distinctively see the markets looking over each other’s shoulder to see who goes where now. Asia was all green with Nikkei up 1.74%, Hang Seng up 0.12% and Strait Times up 0.25%. Europe started off flat with negative bias but went on to close healthy green – FTSE up 0.98%, DAX up 1.46% and CAC up 1.77%. US started flat and closed – well almost flat with DOW up 0.07%, Nasdaq up 0.16% and S&P up 0.5%. There are earnings on the way that should ideally dictate the way we choose beyond this point of time. The Asia has opened moderately down in red in the morning. Nikkei is 0.47% down and Strait Times as of my writing is 1.08% in red.

Like I had written the battle lines have been drawn at 200 EMA and it runs at 3395. If we do not close above it as it seems as of now then expect the bear run to keep – well running. The volumes were somewhat less yesterday relatively dropping from 207% 50 day average to 161% of 50 day average. On ADX though the +DI has been looking down the markets kept rising and the ADX strength indicator also showed gain in strength. The –DI remains very low – The ADX overall still is bullish. MACD is bullish with lesser divergence. RSI is bullish but in overbought area. Slow Stochastic is the first indicator to turn bearish while being still in overbought territory. Well the TRIX still looks up but is loosing confidence.

Pivot data for the day is as under: -

R3 3619
R2 3540
R1 3462
Pivot 3410
S1 3332
S2 3280
S3 3202
Projected High Range 3436 to 3501
Projected Low Range 3476 to 3411
Fib Projected High 3524
Fib Projected Low 3323


Let us look at the options data --- the put call ratio has improved a bit as there has been a small call built up put ratio 17 Apr 09













 option pain 17 Apr 09


Saturday, April 18, 2009

Options Lesson No 2….

Since the time I have started studying options I have become more and more impressed at them as investment tools of all seasons. Today I will discuss a strategy that I hope to put forward in layman’s words so that everyone understands it and can successfully implement it as far as possible.

The strategy is named Vertical Option Spread. Let us see who would like to use this strategy – It will be used by anyone who has had a loosing streak – anyone who takes whatever position and the market seems to be poised against him/her. Next is when can we use this strategy? Well this can be used when we are trending up, trending down or not trending. I am sure that you would have got it right. well it is true that you can use this strategy in – well almost all situations. The point still remains that you have to make sane decisions based on – let us say technicals. How much effort do I have to put in to make it work? Well if you are a habitual trader then you will be surprised how little time you have to put in. You have to study entry points then put in money and then wait for the eggs to hatch and that is about all. Then what is the catch? Well the catch is that firstly the gains are – depending upon strategy just about 8% to 15% and they are capped. Means that you will not make more than this in the best case scenario. Any other catch? well your losses are also capped at some points above the gains – but the good thing is that chances of your loosing are – let us say 20% or 25% of the times. Each strategy to give you money would take one expiry. So let us say we used this strategy and worked on the probabilities – then we have a good chance to get somewhere near 50-60% returns annually. Now if you are convinced that you need to know it then please continue reading ahead…

Strategy: What I will do is that I will now explain the strategy first and then see the other aspects. The strategy says – decide what side do you see the market going? Use technicals/your gut or anything. Then if you are bullish then sell a out of money put and buy a put one stop lower, on the other hand if you are bearish then sell out of money call and buy one call one stop higher.

Explanation: What we are doing effectively is that we are selling an out of money put/call and earning the difference of premium between the put/call sold and put/call bought. Let us see with and example:-

  • Market was at 3490 and I am convinced in my mind for what ever reason that the market will not go above 3500. So I sold the 3500 call at 102.1 and bought a 3600 call at 59 at the same time.
  • Now the three scenarios that come to play.
    • First scenario is that the markets will end the below 3500 (even a rupee) then what I earned out of selling the call is mine (102.1 X 50 = 5105) and I loose the 3600 call as worthless (59 X 50 = 2950). So my profit is 2155 minus the brokerage 215 = Rs 1940/-
    • Second scenario is that the market will end between 3500 and 3600 then my 3600 call will be nil and I will pay out the difference between the market closing and 3500. Let us assume that the market closed at 3599 then I loose 99 X 50 = 4950/- but remember I sold the 3500 call for 5105 and bought the 3600  call for 2950 – so I am carrying a profit of 1940/-. So the loss will be 4950 minus 1940 that is 3010/-
    • The third scenario is that the market will end up above 3600. In that case I will pay the same that I paid in the worst case of the scenario above. Let us take an example. Let us assume the market ends at 3700 then for the call I sold I pay out 3700 minus 3500 = 200 X 50 = 10,000/- . Now my 3600 call will be worth minimum 100 so I get 5,000/- and also add what I earned initially between selling and buying call = 1940/- So total loss is 10,000/- - (5,000/- + 1940) = 3,060/-

If you have seen and understood the above then it is time that we see how I can lower the margin of losses. Firstly and foremost –  if the call comes in money – square off your positions without thinking the loss in that case will always be less than 3,060/- Secondly if the market goes your way and tanks let us say 500 points – and technicals turn oversold – do this exercise for the puts also. In this case chances are very bright that you will see the market ending in-between somewhere and you will carry home money both ways. In the worst case the market can violate only one position and you will carry home nothing or a very small loss.

When would I use it? when the markets are overbought I will do this for calls and when oversold I will do this for Puts. In trending markets I will do this once or twice only. In range bond markets I will do this each time the markets touch either extreme of Bollinger bands (The markets do this exercise two to three times in a month)

It is time to see the returns now. My total investment for the positions is 24,000/- (calculated using ICICI direct) and max profit is 1940/- so in percentage terms as I said earlier it is just 8.08%. Not bad for a month. Nine winning months and three partially loosing months will give almost 50% return.

My last request – I too have been impatient – I too lost money due to greed and I am talking about a lot of money by my standards. I feel it is best that we keep our urge to trade as a compulsion everyday under check and we will go a long long way making money. If you like this do leave a comment. I have done away with the ratings of my articles on my blog so that is the only way I will know. It will just make me share such strategies over weekends in future.


Thursday, April 16, 2009

Buy on dips anyone? Update for 17 Apr 09

The life has turned topsy Turvy – the same people who were bearish to the hilt and were doing the bear dance had become bulls somewhere along the line. The markets too danced to their tunes and was running up like an untamed bull on a rampage. The markets went along from crossing 5 EMA all the way up to crossing the 200 EMA. What a run up it has been – but why ? the only thing that comes to my mind is not people thinking that we are out of the woods – but the fact that there was just too much negativity around. It happens this way. When there seems to be no way we can see the markets go up – we do go up and vice versa. Please do understand that even if people are seeing the light at the end of the tunnel – I remain bearish still. It will take the elections and the aftermath along with some results showing a turnaround that I will change my mind. The fact of the matter at the end of the day is – that if we all agree that the division of the bull market and the bear market is the 200 EMA then we have actually failed to sustain above it. Once again we may now get into a sideward movement after falling a wee bit and then continue our journey downwards. We do not have to touch our erstwhile lows and it would be not possible at this point to say anything for sure but one thing is certain – if we do have a little bit of good news pouring in from anywhere then we are going to touch a high of around 3800 and that should for the time being be the max upswing to what started during the beginning of the month. The money is there are it will flow – like life itself if stagnant - the money catches rust so at the end of the day it has to continue moving. Well that is enough of babbling for a day. Let us talk technicals.Daily 16 Apr 09

Well on the global cues the topping out of the markets seems to be around – fresh highs are not being made and good so – like I say in every other post – we need a breather. The markets have perhaps become cautious. The bears are cautious as every time they have tried to hammer the markets they have been slaughtered. The bulls are cautious as higher volumes are now not giving the kind of rewards the bulls expected perhaps and they can face turned tables looking in their face. The only things perhaps that will work in the favour of the bulls is that though the nifty has broken the 200 EMA to the down side – most of the index stocks are still well above 200 EMA and reaching those levels will give them support. Second is the Puts build up is excessive and at each level when we breach to go lower there will be squaring off of puts and that will lend support to the markets again. Asia was what we all saw. Nikkei up 0.14% and Hang Seng down 0.55% and Strait Times down 0.75%. The Europe has still not closed . Europe opened flat with positive bias – went to the flat line and then climbed up – it was only with the US opening flat that the Europe came off the lows somewhat – now FTSE being 1.71% in green, Dax 1.62% in green and CAC 1.52% in green. It would be interesting to see the Europe end. US is mixed in the beginning of the session – DOW down just 0.05%, Nasdaq up 0.52% and S&P 0.06% in red. It is a long way to go for the closing but is JPMorgan results are any yardstick to go with – they having declared better than expected results of 2.14 $ billion  then we may see green yet. Mind you the results have not been really reflecting showing in the market trends as the anticipations and the future guidance has been playing major role in the same.

Coming to Pure technicals I have observed something that should ideally dictate the markets over the next few sessions. The fall of 114 odd points on nifty has not really moved the indicators out from the overbought zone. That means a lot – earlier on march 30th when we had a single black candle of somewhat the same dimensions – all the indicators had moved out of the overbought zone and we saw the recovery the next day onwards. It would be interesting to see how it all shapes up. We ended just toucing the 5 EMA and those who deal with the markets daily will see this as short – short position opportunity – so that is another thing to keep in mind. The middle of bollinger bands is 3050 and one can expect this as a target. This is target on three accounts , Bollinger Band mid point, 50% retracement by Fibonacci if we do fall then we will meet 20 EMA around at those levels. The volumes were same as day before – 207% of last 50 day average. Another way to perhaps look at this is that two times the volumes could crack the markets just 110 odd points. Take your pick. ADX had been bullish but showing a divergence to trend (explained by jaggu) MACD is bullish but like I said earlier – the divergence is reducing every passing day. RSI is just a dip below the 70 point at 68.91 and just out of the  overbought zone. Slow Stochastic has the %K that is the red line below the %D line (blue line) that gives signs of bearish behaviour but both the lines are still overbought so expect some correction to come. Well the TRIX is still looking up. Well that is all to the candles.

The pivot data is as under: -

R3 3668
R2 3568
R1 3468
Pivot 3411
S1 3311
S2 3254
S3 3154
Projected High Range 3440 to 3518
Projected Low Range 3503 to 3425
Fib Projected High 3553
Fib Projected Low 3311

Notice resistance higher are just about 55 points and support down 100 points at every level.

Okay another red herring – the call writers were the one in the dock when the markets started climbing – now the opposite may be about to happen – see the option pain and the call put ratios…option pain 16 Apr 09 Put call ratio 16 Apr 09


Tuesday, April 14, 2009

Hi… Here’s the update for 15th Apr 09

News has started dropping in that is not good – I am talking about the news basically from the US and Europe. The result season coupled with elections will be a heady mix here too. The markets have lost their momentum somehow… or they seem to be deciding which way to go here on. So much water has flown the other way that I doubt every word I write about the markets. Neverthless there has to be a point where in there is some sanity restored and the reality kicks in the face of the markets to wake up – well until then rock on.daily 11 Apr 09

So considering everything we will stick to the facts and emotionless reading of the markets – technically so as to say. Well the global cues continue to be mixed. The markets are perhaps looking for leadership as to which path to take than anything else. The wait and watch kind of situation. Asia was – well judge for yourself – Nikkei down 0.92%, Hang Seng a good 4.55% in green and Strait Times 1.08% in green. The Europe was all green FTSE started red went green and fell back to the flat line closing 0.13% in green. Dax made a similar pattern but managed to close 1.47% in green and CAC was 0.88% in green. US had started week and tried to recover but was not successful. Now by the mid session it is looking down and show no good signs of good health. DOW is down 1.41%, Nasdaq down 1.27% and S&P down 1.3%. The markets are just in mid session but all the same chances of recovery seems bleak.

Our small weeks with so many holidays are about to finish and we will have consistency in trading with five days a week back. Frankly these short weeks were supposed to lead to give a breather to the markets run up but that has not happened. The second point is that the 200 EMA that hold tall at 3395 has not fallen even after second consecutive day of being violated. The doji was somehow negated so we will look forward to some more signal before the verdict on bulls and bears is out. Looking at the charts the candle’s body remained within the Doji’s upper limit and that is not too good. Second point that I have already discussed is that the market did not end above the 200 EMA. Infact with yesterdays close the 200 EMA has inched up to 3406. The volumes  were wee bit lower but still clocked 171% of last 50 day average and are hell of a lot in this day and time. ADX continues to show strength of the bulls. MACD divergence is bullish without doubt but it seems that the divergence is not really growing. RSI has been too long in the overbought zone. Slow Stochastics have too been in overbought for pretty long now – well that is all that there is to the markets. Now the point is where do we go from here? The technicals are pointing to overbought overbought and overbought – also a lot of otherwise bulls are extremely cautious as the run up has beaten expectations. Well so be careful and that is what it all leads too. The market has perhaps swallowed more than it can chew. It has to breathe for some time to go further up.

The pivot data is as under: -

R3 3500 against 3495
R2 3460 against 3444
R1 3421 against 3393
Pivot 3377 against 3350
S1 3338 against 3299
S2 3294 against 3256
S3 3255 against 3205
Projected High Range 3399to 3441
Projected Low Range 3393 to 3351
Fib Projected High 3439
Fib Projected Low 3311

Best of luck for Wednesday and do read the options strategy that I gave in the last post.


Monday, April 13, 2009

A options strategy for those who dare…

Okay guys and gals here goes the story. They say that buying stocks is the trend of the yesteryears. If you are in markets then you have to be in futures and options. I agree and disagree at the same breath. Well the reasoning is very simple. Yes you do make tons of money but then you also loose tons of money. If you are not purely mechanical (I am having a lot of difficulty issue in this respect) then it is very easy to come out of the fight not only bruised but with nothing in the pockets. Infact so much so that at the end of the day you can be without a penny – all the hard saving gone down the drain. But if you are those mechanical types who do not believe in hunches/TA or fundamental analysis then you will make pure sweet green bucks by playing in futures and options. I will throw open a options strategy today (as a study example) with reasoning the whole way through at every little step – so if you are a brave heart and do wanna have some fun – read on and jump in. Please do understand the profits are yours and so are the losses – for me it will remain a study only.

In the first step we will choose a underlying stock or index. So here it goes. (The excel sheet with all data is attached)

  1. I opened the page of NSE-India and scanned through the beta values of the Nifty stocks there. Then I saw and set aside only the stock whose Beta value was more than 1. (You can reach the NSE- Site referred too by Clicking Me) The result was a list of 21 stocks who seem to move with or more than Nifty.
  2. Then I went to the option chain page in NSE and tried to gauge the liquidity of the options of the above 21 scrips. With this step I was left with eight stock options that I consider were liquid enough for us to take positions.
  3. Then I went on to see the Average True range of the six stocks I have short listed.
  4. After that I jotted down the present price of the stock and saw what the ATR meant in terms of percentage of move relative to the stock.
  5. After this I again go back to the options chain and see the listing of the options (call/puts). I compare this with the spacing of options. Here surprisingly there was no in money put available for Tata steel.
  6. Next step was to pick up any one of these stocks and concentrate on them for buying a strategy. I will give example with one only and that is Reliance.
  7. Next was a pain staking step where I calculated the premium, the cost I will pay for the strategy etc.

Well this is pretty much end of the statistics that I want and now what I do next is really what my mind would say so. Ofcourse I do also have a look at the rest of the technicals. What I really expect at this moment is a 50% retracement to the present run up but all the same will want the positions to be well hedged. So keeping the positions I would go in for some straddle / strangle that likely to give me good gains. Remember also that we are in the middle of the month and the decay will kick in fast and hard.

Now again not too much reasoning I can give as to why I have taken the positions but I chose Apr 1740 call and Apr 1800 Put. Firstly the premium is pretty much the minimum and I might have loved to go to 1830 put but the position is illiquid so premium is very high.

Now the brasstracks: -

  • For these positions I will have to pay a total of Rs 54,705/-
  • the strategy pays off below the Rs 1,651/- or above Rs 1,895/-
  • Maximum loss (cost call plus cost put minus 60 multiplied by 300) that is equivalent to 36,705/- and maximum gains unlimited.
  • Days to expiry… 12 trading says.
  • So basically this strategy is trying to make use of directional volatility of more than 122 Rs in any one direction.

With the increase in lot size in most cases the investment has considerably increased. The best for anyone with less than this amount is Nifty.

Do post your comments so that we all can learn and improve upon such investment ideas. The options file that I have been talking about is uploaded to skydrive – please click the link to download it. Options Excel file


Friday, April 10, 2009

A copy book Doji…. Update for 13 Apr 09

April the 13th… sorry seems to have mixed up with Friday the 13th. Well they sound the same to me atleast. I will ofcourse bore you somewhat with why I was not available for the last few days to give updates. Well in army we have this team called Gradation and Examination Board that comes every six months and roger's’ us/the flying base checking it for standardisation and the gradation of pilots. Well it goes like this whether you understand or not – the visit is a whirlwind of activity. Tests, both flying and of ground subjects, poking in every little corner to see the op efficiency of the base and all. Well now fortunately I was not appearing for any upgradation – but unfortunately was coordinating the visit so the stuff like who flies with whom and when, lectures and tests and that is what kept me busy for last four days or so. It was bad enough that I used to reach home around midnight and on my feet early morning. Infact it is after they left that I had a good eight hour straight sleep, one movie with my kids “tasveer”, Mc Donald's, two-three hours at XBox and only then here I am – ready to face the world. Okay now – the 200 EMA – that people say is really important to name the trend – bearish or bullish for nifty is around the corner at 3395. The markets did make a half hearted attempt to break that but was not successful as everyone of you would have seen. The result has been a perfect doji. Well now Doji is a reversal signal but I would like to wait for the reversal signal to be substantiated by some fall in the markets I am saying again at the cost of repetition that confirmation of this reversal signal is important before we see the market going down.. Well the markets have been going on and on and even the best of the bulls that I know now agree that there has to be a breather as the markets have not really consolidated in a worthwhile manner for a long time now.Daily 09 Apr 09

On the global cues front – our long weekend perhaps played out more than the pure global cues for our markets to make a Doji. Nikkei was up 0.32%, Hang Seng was up 2.95% and Strait Times too closed green. Europe opened green but was definitely close to the flat line till US gave it thumbs up and it went of to touch new highs. FTSE closed 1.48% higher and DAX was up 3.06%. CAC too ended 1.82% higher. In US A better-than-expected earnings preannouncement from Wells Fargo sent the financial sector surging 15.5%, which induced buying in the broader market and helped the Dow move back above 8,000. Dow ended 3.14% up, Nasdaq 3.89% up and S&P 500 3.81%. It is these global cues that can help our indices retain some shine even after a Doji.

Next coming to the candlesticks. I have already told you about the Doji formation and that too just after touching the 200 EMA. All the same if we break 3400 then we are off to 3600/3800 I suppose. The volumes are fairly high with the volumes being 150% of 50 day average.This jump in the volumes has been there since the middle of the run up we are seeing now. The participation has increased and the retail too seems to be jumping on now. Always the last to enter and last to leave. ADX remains bullish and does not waver a wee bit from climbing up. MACD diversion has increased and remains bullish. The RSI however is in the bullish but overbought zone so that is one cause of concern and the second is that once again though the Slow Stochastic is bullish – the oscillator is in overbought zone. The TRIX is merrily looking up so there seems to be still some force of upswing left. Incidentally, if we cross the 200 EMA then it would be a first on Nifty after this bear run began. Instead of the 3 month chart that I used to post earlier I am posting a 6 month chart so that a broader outlook of the trend can be obtained. With this I am convinced that we are moving from sell on rise to buy on dips even though the fundamentals are not supporting it.

I would not put across the options data. See the put build up. the Put build up is too strong and that implies that everytime the market tries to go down – there will be puts that will be sold and that will support the markets to go down. Also now that more and more people have started giving higher targets – there will be option pain 09 Apr 09more call build up than put build up with the markets going higher. put call ratioThis ratio has to drastically undergo a change and only then we will see the markets either stabilising or falling. This can take upto about two weeks more in my mind. Mind you the markets are closed on Tuesday also so keep your back safe. Also now that we had a Doji – please refer to my last blog and you will find the Fibonacci retracement levels. I expect atleast a 50% retracement before the markets continue further up.

Let us see the pivot data for Monday

R3 3495
R2 3444
R1 3393
Pivot 3350
S1 3299
S2 3256
S3 3205
Projected High Range 3371to 33033418
Projected Low Range 3383 to 3336
Fib Projected High 3426
Fib Projected Low 3281

Best of luck for monday and I will surely be writing an article on options strategy for the coming week.


Sunday, April 5, 2009

Who’s fooling whom?… Update for 06 Apr 09

image So much debate is going on about this rally that we have had for past two / three weeks or so – I do not know whether it is warranted or no – I will not be able to answer this question to anyone’s satisfaction and I am sure neither will anyone else will be. I believe that the markets are ruled by some principles that are not perfect – but still maintains in those parameters. The First is that there is some relationship to the technicals and very often so we see supports/resistances and the markets behaving themselves. If not so then the markets are moving on some fundamentals – the ones that are presently in vogue or with a degree of projected fundamentals. Once again the markets do respect fundamental and if not immediately – then over a period of time they are playing in the gambit of news that shake or break the fundamentals. The last one is when both technicals and the fundamentals breakdown and do not five any indication and the markets are like wild bulls or bears out on a rampage. This too happens and the philosophy behind such events are when there is desperation in the markets and wild manipulations. After all it is the game being played by some unseen hands – there is news that is and there is news that is created to suite the views of such manipulators. I do dare to say that this rally of past few weeks has been guided by the last of the three reasons that are there. I will not try to see why it really happened but see now the question that now springs to mind – what now? I feel that the markets are overbought from a reasonably long period of time and will sooner than later react to selling pressure. As I had said – we have broken out of the earlier range – it is reasonable that we assume a change in trading range that we have been seeing for past few months. There is a equally strong view point that is not so loud at the moment but says that this is another one of those bear rallies. Take your pick. Now if we were to correct then I have laid before you the Fabonicci levels that are likely to be touched – just one thing – I have not worked these levels on figures but by drawing them on charts so the figures may be plus minus 10/15 odd points here or there. Let us say we were to correct tomorrow then the first level to watch out for will be 38.2% retracement that stands at  2971 on nifty – the next should be 50% retracement that stands at 2893 and finally 61.8% retracement that is at 2819 on nifty. I believe the rate at which we have rallied should make us see the 50% and may be 61.8% retracements at 2893 and 2819 respectively soon. If however we continue to go up then it is anybody’s guess as the figures will change again and I will try to keep you posted.daily 02 Apr 09

The global cues seems to be positive on account of the G20 summit that is being praised by many as a step in the right direction. The problem with such summits are that many a times when we see the nations coming down to brass-tacks and implementing the same – it either takes a lot of time or never comes about. Another thing that comes to mind is that the data that is coming out of US is still not encouraging at all. All t he same the Asia was about flat with some positive cues – Nikkei closing 0.34% in green and Hang Seng closing 0.16% in green and Strait times closing 0.97% up. The markets in Asia traded otherwise in green with one odd dip to the red. Europe was apprehensive of the rally going forward so closed mixed with FTSE down 2.31%, Dax up 0.07% and CAC down 1.11%. The US started the session with a doubt and then ended finally in green doubtlessly. Dow closed up 0.5%, Nasdaq up 1.2% and S&P up 0.97%.

The candles saw another big white candle and has touched the upper Bollinger band again – it has not violated the upper Bollinger band this time however. We are way above the 100 EMA and that should now give us support on our way down – if it does not turn out to be a free fall. Volumes were 150% of last 50 day average. Both the FII and DII had bought net 691 Cr and 254 Cr worth on the markets and that would be one reason – for the volumes. The MACD is bullish and the divergence is good. The RSI is in the overbought state so even if someone tell you to buy golden stocks – tread with caution. Slow stochastic has turned bullish and has come out of the overbought zone. (iCharts and my other software are in conflict as far as the Slow Stochastic are concerned so take what I say seeing iCharts with a pinch of salt – the software says that Slow Stochastic is overbought) The ADX has turned bullish again – so here it is all for you.option pain 02 Apr

Seeing the options data there seems to be no call build up – only increase in the puts. Please do take a look at the options pain. 

Let us see the pivot data: -

R3 3395
R2 3333
R1 3272
Pivot 3166
S1 3105
S2 2999
S3 2938
Projected High Range 3219 to 3303
Projected Low Range 3153 to 3069
Fib Projected High 3273
Fib Projected Low 3015

call put ratio 02 AprI think that would be it for today – hope to see you making money on the markets. The mantra as of now by the idiot box at the moment is buy on the dips – well I would not comment on it…


Wednesday, April 1, 2009

Double guessing markets… Update for 02 Apr 09

I don’t know what is happening in the markets and there is no use double guessing where the markets are off too. I also do not know who is fooling whom. Let us see the small table I prepared below: -






25 Mar 348.65 8.92
26 Mar 1290.74 -461.87
27 Mar 80.43 42.98
30 Mar -452.32 -49.38
31 Mar -583.65 1039.07
01 Apr 173.75 11.6

I really do not know what to make out of this data – it seems that they are as confused as we are. FIIs buy DIIs sell, DIIs buy FIIs sell. When both buy the figures show caution – the volumes are low. There was a theory that the run up that was there on 31st was due to the mutual funds trying to improve NAV of their funds – a fully plausible explanation. The only problem that I am having is that the technicals too are getting somewhat confused with no clear cut indications any more. The technical possibility of the markets going down remains but then the fact remains that we are not doing so. And the facts is only the markets and nothing else really – are we just trying to justify what the market is doing rather than purely trying to read the technicals? Well there has to be the element of “human factor” that cannot ignore what is happening around. I try to read the markets and then try to correlate – when I cannot I get confused. Bloody old computer I have there perhaps. The fact remains that the variables are just too many. Okay – let me do it once yet again.  daily 01 Apr 09

The global cues… Asia was mixed with a positive bias. Nikkei was up 2.99%, Hang Seng down 0.42% and Strait Times up in green 0.13%. The Europe has done what most of the markets have been doing – spend the majority of the time in red and then close to the closing – jump into green with vengeance. FTSE closed up 0.75% and DAX was up 1.13% and CAC up 1.15%. US started the day in red but by the mid session now it is well into green – Dow is up 1.49%, Nasdaq is up 1.03% and S&P up 1.24% and I am not taking sides or giving ideas as to where it might end. Yahoo says that the bank data is lifting the wall street. It says that the home sales data and the factory data says that the slump could be moderating.

The candle yesterday was trying to break the influence of the black candle yesterday but could not pierce the range in a worth while manner. If however we take both the candles as one (can do so as the bodies are not really over lapping) then it just about pierce the black candle. This may give strength to the markets. All the same we still remain trapped in the range – which we have been seeing for some time now. The volume has been 127% of the last 50 day average. We are no longer trailing the upper edge of the Bollinger band. 5EMA still remains over the 100 EMA and so does 20 EMA trail above the 50 EMA. ADX is not showing strength still. The MACD bullish divergence remains somewhat the same as before. The slow stochastic are now reaching the 50 marker with the red line below the blue line and that remains bearish. RSI is looking up and bullish and once again entering the overbought zone. It will be interesting how long we remain overbought.

Let us have a look at the options data – it has turned interesting and you can download the chart and compare with the charts I have posted in past. Option pain 01 Apr 09















Put call ratio 01 Apr

I will call it off today without the Pivot data. This week is only one more trading day that is tomorrow – see what happens and who carries on the position over the long weekend. Best of luck…