Thursday, September 22, 2011

EOD Analysis for 22nd September 2011 and Outlook for 23rd September 2011

A furious gap-down to open the session and no signs of relief at all since open today. Vix spooked up to almost 35 and Banknifty, Automotive and other interest rate sensitives like IDFC, IFCI all took steep cuts. Banknifty gave up all the gains of the last couple of sessions. Safe to assume that any further upside will be capped at 5225 levels max. The normal trend of OI in Nifty futures increasing with the falls resumed and the OI was consistently around the 30 million mark during the day. There seems to be a lot of margin calls being triggered all over the bourses as global indices also took steep cuts, yet there was a fall in price of Gold, Crude, Silver, Platinum etc [partially can be explained by the rise in Dollar Index]

A technical pull-back of 80-100 points due to short-covering may be seen and we may end the week within 4911-4944 levels as the floor for now. The pull-back will only be technical in nature [read short-covering] and as mentioned earlier, the threat of retesting 4800 levels is very real. Most probably, Nifty may take support in the 4800-4944 zone a couple of times; a break down of this zone will immediately bring the next support zone to 4693-4720 levels. Time to keep the shopping bag ready for some units of index to be bought as it is near certain from a market perspective that the next major destination for Nifty is 4350-4450 where there will be a lot of buying opportunities. Here one can deploy about 15% of investment capital with a 3 year horizon.

As far as trading is concerned, one should wait for the markets to show some signs of pull-back; and then short from the highs. Now the sell levels are 5170-5125-5092-5032 [and the resistances as well]
I wouldn't recommend a buy [and this has nothing to do with my personal position getting stopped out today]
The furious fall cannot go on relentlessly [just as the rally couldn't go through relentlessly] and there will be pauses in between. The VIX is indicating excessive fear and hence I do expect some pullback to take place. Upside for Banknifty is now capped at 9750-9800 levels and one can use this level to go short via a 3 months forward contract for a target of 8800 minimum [should come through latest by 20th November - IMHO; gained confidence on this basis some homework done on time analysis and would strictly encourage taking the  appropriate hedges]


animoitra2011 said...

So Nagraj ji you were right that downmove may start on 22 sept.Now how far can it go dn.Still holding some 4800 sept pe bought @lower price.I think mkt is over sold in daily but it may remain oversold also.Whats ur view ?Regds. dn.Still holding some 4800 sept pe bought @lower price.I think mkt is over sold in daily but it may remain oversold also.Whats ur view ?Regds.

reachnagraj / theknight16 said...

Dear Aniji
I won't be in a position to comment vis a vis your Sep PE position. It all depends on how the margin calls pan out on global bourses. a lot of hedge funds and ETFs that were over-leveraged are getting royally chopped out and so are the redemption pressures from a lot of mango people in Europe and US.

The broader perspective is Nifty has to take out 5025 asap for any upside i.e. it has to tick over 4950-4960 levels within first 90 minutes tomorrow! If that does not come through, there may be a systemic crash to 4840-4880 levels tomorrow itself where some short-covering can come in.

For the record, I always insist on switching over to next series options by the 15th of the current series and no more than 30% of trading capital to be deployed on options.

As Harshal bhai indicated that 2011 is a critical bear year. 4450 is destination for Nifty but whether that happens in 2011 or early 2012 remains to be seen. There are a lot of shorts in the system pending to be covered for Sep series.

animoitra2011 said...

Thanks Nagi ji.Can you pl explain the time price charts little vividly.Like what are the implication of the colours there and etc.Regds.arts little vividly.Like what are the implication of the colours there and etc.Regds.