Monday, October 24, 2011

EOD Analysis for 24th October and Outlook for 25th October 2011

A positive start to the day and OI in Nifty futures opened at 28 million and as we approached the European session open, the OI had surged to 34 million [a tendency seen as we inch closer to expiry]. Markets are not out of the woods but something to cheer from Europe may lift the mood along with the festive cheer on Indian bourses. On the downside, the real risk comes with a close below 5032 and complete weakness with a close below 4880. Banknifty did extend the gains today at the back of a strong Euro and the longs extended towards 9850 on spot but there is a lot of profit booking seen beyond 9750-9800 levels and absolutely no signs of fresh supply coming through - 2 consecutive closes above 9750 and BNF opens for a retest of the 10k zone.

Infosys as advised last week did manage to inch towards the 2775 mark [although we did not take a long position ourselves in this nor encouraged longs - we have been constantly advising to avoid shorting this counter due to the technical setup on the charts] Weakness in INFY will only be confirmed with a close below 2650.

5032-5092 levels yet again managed to keep Nifty afloat and the behaviour of Nifty tomorrow may depend a lot on how Dow features tonight. If Dow manages to extend its gains from Friday, there may be some more steam left in bulls and may make one attempt to close over 5150 levels; a close above 5150 opens Nifty for a retest of the upward gap towards 5177-5328 levels. BNF is still well over 9500 so it may try once again to cross over 9750-9850 levels where IMHO, no fresh supply can be seen but a lot of profit booking. On the downside, if Dow lives to its tradition of sad Mondays, then we may see weakness continuing on Nifty but since 5032 has held firm for 9 trading sessions in a row now, the downside risk may be limited to 4980 for now but as always - difficult to tame expiry.

Looking at the way longs desperately rolled over today [short roll-overs would have decreased the premium on Nifty futures whereas long roll-overs IMHO has the tendency to increase cost of carry, thereby restoring a lot of premium on Nifty futures] we may just be in for a surprise because despite such steep cuts from the highs of the day on BNF and NF, the VIX dropped! [this is a cruel joke on Indian bourses in my personal opinion]

Crucial levels remain unchanged as given on Friday and over the weekend. Wishing all of you a very prosperous year along with the festive cheers

4 comments:

Suraj said...

Perhaps you missed it.
Dear Nagraj Sir,
Excellent post.
It seems from your post that all asset prices are increasing but eventually will crash soon.

In this regard and to my last query and your reply to it, at what price range($)I should sell or start selling physical gold(100gms, cp rs22000, cmp rs26500) and silver(8 kg,cp rs60,000, cmp53000). Is there a fair chance of silver reaching my cost price before going down. and any further opinion in this regard.

A few days back You had advised me to sell 50% and it is at the back of mind.
Although I am not leveraged but also I do not have any spare cash to buy stocks or bullions when the crash happens at present.

Sorry if I am bothering you.

Regard
Suraj

reachnagraj / theknight16 said...

Dear Suraj
I am not a CFA to be able to make a firm recommendation of any form. For precious metals, the Stop Loss generally recommended is 1% to 1.5%of Cost Price and that has clearly not been obeyed in the case here;

Silver, a high beta metal is on a downward trajectory and the only way some hope can be revived is the USD-INR relationship as silver will go well below USD 30 and perhaps below USD 25 a piece as well within the next 6 to 8 weeks.

Gold, whilst on its way down, in case of panic on the streets may just make one poke towards USD 1700 levels and I still maintain that USD 1625 to USD 1750 are all sell levels for gold and to exit with profit. Ultimately it is your own money and you are the best judge on how to deploy it and perhaps maybe better to consult a CFA for advice. All that I can say is a bird in hand is worth 2 in the bush - good luck

Suraj said...

Dear Nagraj Sir,

Thank you very much. You are right that I was not able to make concrete decision. Actually watching business channels do influence retailor's mind. Hence there is indecisivness. But now I will start selling.

Again Thanks for your guidance.

Regards
Suraj

Suraj said...

Dear Nagraj Sir,

By the way I think you are better than CFA's. Happy Dhanteras.

Regards
Suraj