Friday, August 7, 2009

Update for 07 Aug 09…

image Firstly allow me to apologise for not updating the blog yesterday. Night flying coupled with a killing schedule in the past few days was the culprit. It was a bad day for the markets – but frankly it was not unexpected – after there has been a non stop rally for some time now and there has to be some consolidation. If we do not go into a free fall then this might turn out to be the right dosage of the medicine required by the markets to perform even better in the coming days. Add to it that this is not a local phenomenon – it is global in scale.

The Global cues that panned out and are out there at the moment are really not as encouraging as they should be. Even it is not all honky dory in our home front – all the same – Daily 06 Aug 09the markets did what they assumed to be the best – if there is a fall one day – take positions to make use of the rise the next day – only that it may not happen so in the coming few days. Take Europe for example. They were trying to reach out for new heights a day after a poor show. FTSE opened green and went on to touch new heights. It was only US that dampened their spirits and finally they did end in green after paring some of their losses. FTSE was up 0.93%, DAX was up 0.32% and CAC was up 0.56%. US had a second day in the red with the fall being more broader than the day before with DOW down 0.27%, Nasdaq down 1% and S&P down 0.56%. Ofcourse the least expected out of this US closing is that Asia too dips red and that is what there is to see at the moment. Nikkei is down 0.55% and Strait Times is down 0.72%.

On the charts the Bearish Harami did play out – not the next day as expected but the day after. In the candles you can under some conditions add and subtract the real bodies and that being so – we are can count on this to be the beginning of a downturn. How long it lasts – where it goes – is for other to guess – I will stick too – that if we have other indicators giving a sell then it is time to sit on sidelines with money ready rather than all invested. On the Jul 29th the 15 EMA line was tested by the candles and you can take it that yesterday was the second time it has happened. If we do not fall now then the next time would be the last time the line should be tested. We are close to the middle of the Bollinger Bands so some more down time is left before the support is taken around 4446 levels. The volumes were average (103% of last 50 day average). ADX is still bullish but the ADX line per-se is at 17 and may be pointing towards a change in trend. MACD is still bullish but divergence has reduced a lot since last few days. RSI is bullish with the RSI at 57 and SMA (25) at 54.75. A crossover down will give a sell signal. TRIX still looks up and Slow Stochastic generates a sell signal.

As far as the options data is concerned the open interest remains leading at  4700 call so it will remain a major resistance for a crossover this month or till the options trend changes. Please find the open interest attached as a jpg file. With this also consider that the put call ratio is very near to 1 at 1.1 (up from 1.05 a day before) I still feel that the options will not play an important role in markets except defining the range as 4700 on the up side and 4300 on the bottom with minor support at 4500.Options data 06 AUG

To summarise the Global cues are negative and weak. It is likely that Europe will get slaughtered for standing against the trend yesterday. Candles have Harami confirmed as bearish. ADX weak but bullish so far, Slow Stochastic bearish and rest all bullish. Options are not likely to play a major part except providing support at 4300 and 4500 levels and major resistance at 4700 level. For the day – sell below 4636 and buy if the markets go above this level. Ideal strategy is to go short with a stoploss of 4722 and those holding long should not keep it if closing likely to be below 4611.

Indicator Bullish/Bearish Sell/Buy Signal Nifty level at signal Points gained/lost since (4585) Remarks
Harami Bearish sell / 04 Aug 4681 + 95 Not waited for confirmation
ADX Bullish (weak) buy / 14 Jul 4111 + 474  
MACD Bullish (becoming weak) buy / 16 Jul 4231 + 354  
RSI Bullish buy / 16 jul 4231 + 354  
Slow Stochastic Bearish Sell / 05 Aug 4694 + 109  

Seeing the above table either I will sit on sidelines or go short as majority is turning the tables for the bulls. Cheers to the Bears.