Sunday, August 15, 2010

Update for 16th Aug 10…

A new week – a new battle to be fought and won… Uh!! To be lost perhaps. It has been a mixed week – with good news (SBI results and TISCO) at the domestic front being set aside – or let us say not being fully factored considering the US economy assessment of the Feds and IIP on the home front and the spiking inflation. Nifty inched up a bare 0.2% – and the BSE virtually remained flat for the week.

Now leave this aside for the moment and ask me where I see the markets in the coming few days? – Down I would say or in the best case scenario – confused. The IT, Pharma and Metal indices were the major losers and the Reality,Banking and Auto the winner of the week gone by.

image The markets are still trailing the bands that I drew out a couple of days back and till the time they are decisively broken – the range bound markets can continue to play out – up one day and down the other. Okay so where do we stand now? Bullish on a few counts and bearish on the other counts. Take the candle for example – the white candle has pierced the previous black candle on closing basis (two thirds into its body) so seems that the bulls are catching up and do not want to give in so easily. But on the other hand it could violate the upper Bollinger band nor could it touch the trailing down PSAR – so it is bearish on these counts. Two additional bullish indications are – the candle low bounced off the middle Bollinger band and the 3 (EMA) bounced off 15 (EMA). Well the volumes were 117% of last 50 Day average. So far so good. Now if I was to draw trend lines – the I would show the upper and the lower one. The upper one stops the advance of our markets around 5525 (Nifty) and low around a shade more than 4925. Coming to the other indicator that I use. The ADX is showing a non trending momentum so do not expect it to go anywhere fast. Infact there is a divergence made by the Nifty and this indicator. I told you last time – Didn't I?MACD is bearish and RSI is in a trend up. MACD is in a downtrend – but decided to turn before going overbought – With all this read the market as you would like to – the fact remains that we are in the middle like suckers – waiting again for a direction to emerge.

Well the options data – before I pen off. 5600 calls added 5.1 lacs in open interest to reach above the magical figure of 105.94 lacs, 5500 call added 3.42 lacs to reach open interest of 80 lacs. As far as the Puts are concerned – 5300 puts stand at 124.79 lacs and 5400 puts stand at 95 lacs – infact the 5500 puts aslo added 11.39 lacs in open interest to reach 45 lacs. So the juice in this – options dictate the broad range of 5600 to 5300 and a tight range of 5400 to 5600 this expiry.

What would I do? well I would short the market around 5500-25 and then give another 25 odd points for the market to play out – wait for a correction and sit tight on the short. What else can you do – well sell 5600 Calls as we cross 5500 and sit tight..

I would also take the opportunity to welcome all those who have come back to the blog. Veer you had asked me the question about Vega – please give me a day will give you as you would like it to be on your table.


Monday, August 9, 2010

Update for 10 Aug 10…

The day was not unexpected. The bullishness was indicated in measure and it just showed out. My point is that enjoy till the time the bullishness remains in the system. imageThere are slowly small but certain negative divergences building up. The problem with these  negative divergences are only that they take their own sweet time to play out – so enjoy sunshine till it is there – thereafter we will review the situation again. This bullishness is not a local phenomenon here – in way or the other – the entire world is participating. Lower than 10 k in DOW seems to be a remote possibility – it would require a major trigger to initiate it to those levels. imageThere are rantings here, there are rantings there – so far just whispers – but worth giving a ear and keeping on ones toes. I have heard that the DIIs in the long run are in a better position to make money – and heard that they are selling. Anyone can help me there?  On the other hand the FIIs are continuing their buying – hope it does not come to it that they decide to exit – for whatever reasons. The other thing is that with every day of consolidation the channel moves and gives a more space for the market to move on the upside – capping the lower levels. imageNow it is not everyday that the bands are violated – so play the band. The only problem that I see is that ideally I had a feeling that the markets should have touched and started trailing the upper Bollinger Bands – that it did not do – so trend is definitely up but remain on the ball. There is a blog that I have been following and I recommend that anyone who is seriously attempting or wants to follow waves – waves pattern, pivots in its purity can visit him. mind you Illango – the master there is worth his weight in gold.

  Coming to my crystal gazing – gazing at the candles. The Nifty gained whatever it gained on average volumes. 104% of the average to be precise. The candle closed above the highest that we achieved day before and the body encompasses the black candles of last two days. So take this too as a bullish signal. As per the 315 the Buy and hold longs continues. RSI too remains with bullish. ADX is a worry for me. It is here that I see the negative divergence and it is here that I see that the present upswing is without the strength that should have been ideally associated with this kind of sustained upmove. The MACD too is confused and not really giving the kind of signal that I could or should have. It is still bearish. Slow Stochastic is kissing overbought zone every now and then. Seeing them separately – they have maneuvering space to let the upswing dance around for some more time.

Before i pen off – the options data. There has been an addition of 7 lacs + Puts at strike points of 5300 and 5400 levels. We might have a condition where the 5400 now gives support. on the upside 5400 calls have unwinded 86 thousand and there is a build up at 5500 and 5700 levels by 2 lacs+ positions. So basically the options are giving space to the markets to move up and closing the downside as the markets move up. Mind you there is still time to expiry and options are fluid – all the same so far this is what it is. It can also so happen that the hedging is also going on.

So all in all enjoy the upswing as long it lasts. Best of luck for the day to come.


Saturday, August 7, 2010

Update for 09 Aug 10

image I have had a long break and will now again make a sincere effort to start and be regular on the blog once again. The markets once again are in a state of flux and moving just to sort out the trader. I am confident and do maintain that India is a wonderful investing opportunity and those who invest here as investors for the next 10 odd years (I repeat ‘INVESTORS’) – they are likely to reap phenomenal benefits in the years to come. The snapshot that I have posted to the left is trend channel that we are into and as long as the basic channel is not broken on the downside – apart from some corrections – the uptrend is intact. Infact if one would have noticed – there had been a talk of correction for a very long time – and now that we are so near the top of the channel – there is a talk of continued uptrend. Like I said the uptrend on a longer term perspective is unquestionable but on the short term – a small correction is very much in offing. Now whether it happens today or after a few days – it will be known in coming weeks (if not next week itself). My only hope is that we all should be on the right side of the market when this happens.

The last trading day of the week ended with DOW down 0.20%, Nasdaq down 0.20% and S&P down 0.37%. Europe fared even worse with FTSE down 0.62%, Dax down 1.17% and CAC down 1.28%. Asia was mixed with Nikkei down 0.12%, Hang Seng up 0.59% and Strait Times down 0.39%. It may not exactly give strength for us to open on Monday – may be another flattish opening.

option pain 06 AugNow that we have this basic in our minds – let us see what the technical's tell us. Firstly the FIIs have been buying for some time now – and I only hope that they do not decide to pull out some profits.

Let us see the option data. Put Call Ratio 06 AugFirstly the put build up is huge and may prevent a real fall that so many are expecting – but then unwinding can take place pretty fast. The levels at which the put build up is there is 81 lacs at 5400 level and 99.72 lacs at 5300 levels. So support at 5300 should be good. As far as the call build up is concerned – the call build up is 86 lacs at 5600 levels and 75 lacs at 5500 levels. So the market perhaps is laying down a range 5300 to 5600. It is perhaps too early to see option pain – but all the same the worst would be market ending at 5400 level as per option pain.

Let start no with the charts, ADX is saying that we are not trending – so to take a particular directional call may not be a very good idea, however if at all the signals ae indicating long as far as we remain above 5414. The PSAR too is indicating long as of now – but I would like to rub in we are at the upper end of the channel and a correction can be in the offing. RSI is bullish, ADX is bearish indicating a weak trend. MACD is bearish – but just so. Slow Stochastics are overbought. imageBollinger bands have contracted and the candles are trailing upper Bollinger bands – so chances are the markets will first correct to middle Bollinger bands to 5318. The volumes in Nifty Futures have been 116% the average. Interestingly the IFCI fell on 5% + on 249% of average volumes – if it does not bounce back on Monday then we may see lower levels.

So now to summarise – the medium to long term trend remains up – but for the immediate future there may be some downside – and infact that can be healthy for the markets to continue upwards. The low level that can be expected are 4925 levels. Best of luck for Monday…