Monday, August 29, 2011

EOD Analysis for 29th August 2011 and Outlook for 30th August 2011

We had a gap-up opening and a rapid fire upside largely triggered by short-covering on Banknifty and Nifty. As expected, India VIX shaved off more than 25% during the trading day today. However, it is still above the 25 mark and for markets to remain calm, it needs to go down below 23 which should happen by next Monday. Banks led from front for the recovery and Reliance / LnT did their bit as well gaining over 4% today. The volumes were actually healthy in the second half of the day. In the first half, the OI in Nifty futures was around 25 mill which went upto 27 million in the second half with the rise.

One should note that this rise is purely on account of short covering rather than fresh buying. Markets are not yet out of the woods and some more headwinds are expected as we proceed through this week. With just 3 trading days this week, safe to assume that 1 round of sell-off would come through for liquidity requirements. Expect rangebound trades until 22nd September and then the real march upwards until Diwali. As of now, safe to assume that the broad range is 4675 to 5092 for current series. However, when the 'Lows' of the candlesticks start going above 5092, then major upsides will come through.

Again, the term real march is also illusory. The downward trending line from the highs of 6339-6181-5944-5740 when extended all the way down cuts the price axis at 5400 levels. It will be a herculean task to cross that line. [For the high to occur in 2011, the challenge was to cross over 5532 by mid-September and 5944 by mid-October and no close below 5092; all these conditions have been violated]

We can see a technical pullback on Banknifty towards 10k levels and on Nifty upto 5200 levels but after that, one will have to take into account the headwinds from global markets. ONGC is showing too much weakness now and a close below 270 will bring a further 5% to 6% fall on this counter. Sun Pharma has started showing some signs of weakness despite such a strong performance on all major counters today.

The technical pullback on Banknifty may take a little longer as the rise in Banknifty today has been accompanied with fresh shorts entering the system. Towards the last hour of the day, there was hardly any premium on Banknifty shorts or fresh long build up being witnessed. With a little more consolidation or 1 more round of shorts, the much awaited recovery on our bourses may come through. One main reason why I am drawing this inference is from the behavior of Deeply ITM Options

The 5200 PE was going at 300 @ Nifty spot of 4920 levels [whilst this has been a noisy reflector for July/Sugust series, it still pays to keep a close eye on this one; this indicates high possibility of a relief rally]

The 4800 CE was going at 220 levels @ Nifty spot of 4920-25 i.e. an intrinsic value of 125 plus time value of  almost 100 points [giving a hint of 1 more round of correction / profit booking; the case gets even stronger with the way premium rich Puts sold on Friday were crushed today] Expect the Puts and Calls of 48/49 strikes to be crushed similarly during the 3 trading sessions this week by about 50-80 points with upward and downward gyrations.

1 comment:

animoitra2011 said...

I think we are going to have a corrective day tomorrow to continue this up movement.