Update for 31 Jul 09…

We have ended the July expiry and will be ending the month too today and the undercurrent against a majority of expectations remains to be buyout and going forward leaving scores of bears on the wrong side. Yesterdays run up just short of the day end did more than just giving a white candle – it showed that the bulls still rule the roost so as to say. However if the FIIs and the DII activity data (provisional) is to be believed then one can see that the DIIs for the past few days are as convinced as many others that the time is ripe for a correction for whatever it is worth. With each passing day it has become more and more difficult to take positions as the trend has reached a time where it can break out either side – bullish or bearish – but in the same breath let me also add that there is nothing that indicates that the bullish run up is over so far. With the expiry behind us – the markets will take a stance that will show out in next few days. Once the trend is certain then we will take positions. But till then it is always good to see others – making money perhaps some time and loosing other times.

The Global cues are rocking to say the least. Asia yesterday was green with Nikkei 0.51%, Hang Seng up 0.49% and Strait Times up 1.23%. Europe opened flat to negative and then started climbing – never to look back. It finally ended at extremely good levels. The reasons were two fold. Firstly the results have been good there for past few days and secondly the US played its part. FTSE was up 1.85%, DAX up 1.71% and CAC was up 2.08%. US too opened green and then went on to touch the best levels for the year before sobering down a bit before closing. Green neverthless. Dow was up 0.92%, Nasdaq up 0.84% and S&P up 1.19%. The reason for this performance was better than expected earnings, lack of negative head lines. Ofcourse the Asia is likely to open green after all this. Nikkei has started the session 1.07% up.

The technicals that I follow are like this… Candle is white and the highest day before was 4574 and the highest yesterday was 4571. So practically the top has not been taken out. The body of the candle however engulfs the day before’s black candle and that by itself is bullish. We are still nowhere the top edge of the Bollinger bands and it may be a while reaching there if at all. 3 EMA is above the 15 EMA and ideally according to this would be to hold longs. The volumes were 97% of last 50 day average. Now here is a surprise. ADX line has gone down instead of going up. The +DI has also dropped down. ADX is bullish but loosing strength all the same. ADX is at 17 and that is extremely trendless. The MACD is bullish but the divergence has reduced a bit. RSI is bullish and rocking. Slow Stochastic shows overbought and bearish so that is the lone indicator that I follow generating a sell.

Here is the new months option data to start with. For the month of Aug the call build up of 4700 has the maximum open interest. (29.5 million), Then we have build up in 4000 puts, 4500 puts and 4400 puts (21.7, 20.9 and 18.9 million respectively) Finally we have an open interest of 18.7 million in 4500 call. Over all as seen from the put call ratio chart posted above the put build up is slightly more and that will in no way dictate the direction as of now. The levels to watch out for are 4700 and 4500 on the upside and the 4000, 4500 and 4400 on the downside. reliance – that is in a bearish trend on charts has extremely high call build up as seen in the chart and as far as ICICI bank is concerned the call put build up is almost the same with slight favour of calls.

So all in all we to summarise the Global cues are good and rocking. The candles showed a break in upswing might now resume the upswing and are bullish with exception of ADX (weak and trendless) and Stochastic (overbought and bearish) The option data is yet to build up to a level where there will be too much to read into it. Ideal strategy is to hold long with stoploss of 4475 and if short do not hold above above 4585 at closing.

Best of luck to everyone. If some one is interested in option data please do post a comment and will try to post it.