Friday, October 14, 2011

EOD Analysis for 14th October and Outlook for 15th October 2011

Nifty opened on a soft note today and played in a pretty narrow range through out the day. OI in Nifty futures was hovering around the 25 million mark and VIX has cooled a lot to sub 27 levels. Banknifty managed to retest the 9650 levels and at one stage almost looked set to cross over the 9700 mark on spot price. Premiums have returned to the Nifty futures significantly compared to yesterday and this is the 3rd consecutive closing above 5032. Out of the crucial resistances, 5125 has been retested twice now expecting a retest of 5150-5177-5196 if Dow continues the happy Friday and sad Monday phenomenon.

Volumes are still a concern and hence upside looks limited unless a good number of fresh longs enter the system. Bulls have achieved a lot this week and retained the crucial levels of 5032 and 5092. Now the litmus test is to generate a close above 5150 levels that will open Nifty for another 144 points to the upside filling in that last pending gap towards 5328 levels. Weakness can only be confirmed with a close below 4980 on Nifty and 9500 on Banknifty. A close below 4980 will open Nifty for a retest of 4880 and a close below 4880 will open Nifty for a retest of critical levels 4663-4693-4720. For now, most falls should be bought into and to the extent 4800-4840 hold for next week, bounces can be expected.

There is nothing great on the bourses happening and would like to remind all reading this that from 26th August '11, all that Nifty has done is to gyrate between a range of 4720 and 5170 odd levels. A retest of 4550 is very much on the cards but that should happen around November [I keep on harping on this point as a lot of traders have the tendency to go on shorting blindly or worse - just keep on loading Puts only to see premiums erode away]

Dow must be watched very carefully today as the crucial technical condition of 2 consecutive closes above 11450 has been met with and hence Dow is open for a retest of 11875 odd levels and should that happen, some more upside may be visible on global indices. Markets are not out of the woods and the Fixed Income markets have shown the zignals clearly - yields on all 'perceived risk-free' instruments have been on the rise [higher yield implies market expectations of risks and lower bond prices]

Yet another example of power of charts - my lovely spiderman had explained the significance of 2700 levels on Infy and importance of 235 on DLF spot a couple of days ago. Now all that one needed to take for a 2nd confirmation was to observe how the options and volumes in these counters were moving along with 30 minute/60 minute candle confirmations on the spot prices.

Infosys when it managed to retain a 60 minute candle with low greater than 2700 today, it raced all the way towards 2750 on spot [just fell short of it for a few points] It would be prudent to see what happened with all the aggressive Put Writing that took place this week for INFY 2600/2700 - writers ran for cover to lock in the gains and Put prices dropped [also a lot of Stop Losses were triggered for those who were long on these Puts] Now, one should remember that INFY has just given 1 close above 2700; if it manages to post another close above 2700 levels, it may retest 2800-2825 levels on spot price before turning south

For DLF - it was a systematic FnO game on the 220 Put and 240 call. The close over 235 did bring in some upside but all that has happened so far is that the Puts were crushed yesterday and the Calls were crushed today. So first thing one has to do when a stock is on the verge of a breakout or break down, identify the crucial levels [harshal bhai will explain this on his blog page today] and then look at a slightly ATM/OTM Put and Call behaviour of the stock. Trendlines, Momentum, EW probable paths and the behaviour of options can give a very probabilistic case of where a counter is headed.

Global market updates will be provided tomorrow. Hope all of you enjoyed the profits and for a change, we are not in a position to say that this week. With the EoH (Edge of Hedge), most of us escaped with minor losses but this corrective of corrective did try our patience and anticipation of price action on Nifty this week.
We hope and pray that you continue to make profits and hopefully, we should be able to turnaround our current positions next week in good fashion. Enjoy the weekend and I hope to meet some of you online on Skype tomorrow for QOji's session.


Suraj said...

Dear Sir,
I have a query regarding precious metals. Hope you respond to it.

I am holding physical gold and silver bought @ rs 22000 and rs60000 a few months back.

I am listening voices of silver going down in the range of 40k and gold to 22k. What should I do? Sell these step by step or in one go or I should hold it.

I may tell you that I am not leveraged but can not afford to lose in medium to long run. Also equity market is becoming attractive and I have no fresh capital to invest.
One thing I have noticed that precious metals and Global markets are behaving directly propotional.I am fearing that when equity is at bottom, these metals will fare no better, hence at that time it would not be possible to sell gold and silver and buy equity.

Please guide as I am not able to decide what to do.
Thanks in anticipation

October 14, 2011 1:57 AM

reachnagraj / theknight16 said...

Dear Suraj
Gold and Silver both are at a risk of some price corrections right now, especially silver. Depending on the volumes you hold, it may be prudent to book some profits on at least 50% of the holdings and trail the remaining positions.

As I always mention that I do not track Gold and Silver on MCX but on Comex and looking for Gold to cool down to USD 1450-1550 levels in 6 to 8 weeks and silver to USD 25-28 levels. The impact on Indian prices will subsequently depend on the Rollar exchange rates. It is better to consult an expert but some profits should be booked now IMHO

Suraj said...

Dear Sir,

Thanks for your guidance. I am obliged.


Gomzi said...

Nagi bro,

Harshal was saying there is a google group where all boarders are there. Could you please send an invite to me? My id is

I sent an PM to you on mmb but guess you were not to be seen there.