Tuesday, August 30, 2011

EOD Analysis for 30th August 2011 and Outlook for 2nd September 2011

Nifty opened on a good note today and the OI in Nifty futures was around 27 mill throughout the day. VIX is at 25 levels now. Banknifty and RIL led from the front for the upsides. Still safe to assume that these upsides have been triggered by short-covering rather than fresh buying. [The Nifty futures OI was almost 39 million on expiry so it is very much probable that a high number of shorts entered the system on August expiry and the day after that]

Some profit booking can be expected on Friday as well for liquidity constraints. The broad range has been specified already in yesterday's posts. The bullish stance only gets vindicated after 5092 is taken out on EOD basis. With 2 days of holidays, some selling was expected but that was not to be. The rise from 4720 to 5k levels again has been very rapid but such sharp rises and falls are always followed by some flat sessions. 25% of the fall from 5740 to 4720 was retraced in 2 days. A further upward march can happen but expect 1 round of retest of 4800-4850 levels with strong hands shaking out the weak hands before moving further. \

Vindication of this point comes from the way closer strike ITM Puts like 5100 PE were behaving; in the first round of crossing over 5k levels, the 5100 Put Premium was around 160-165 levels; in the 2nd round of crossing over 5k levels, the premiums rose to 175-180 levels [VIX dropped so logically the price should have come down or at least stayed the same. Whether it was a Demand-Supply equation or smart money getting into Puts can only be gauged by Friday and Monday's price action]

For now, having seen the 5k levels is a psychological boost for a lot of traders and investors. One needs to see how this sustains as we move through the month.

For more details, please have a look at the EW counts for the best possible count and alternate count on Raghuji's blog. Overall, things remain unchanged and I expect a lot of options premiums to be sucked out during the next 5 to 8 trading sessions.


John said...
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reachnagraj / theknight16 said...

Please note the amendment - Shorts should be opened as close to 5100 as possible and that too with a hedge