Wednesday, December 7, 2011

EOD Analysis for 7th December 2011 and Outlook for 8th December 2011

Some positive global cues and Nifty raced to gain a pretty good sum of points from the opening bell itself. There are 2 perplexing points to ponder about in the options data today - despite a positive session, VIX spooked up a  bit minutes though Nifty was just hovering around the 5080-5085 levels and by EOD zoomed past 26.46. OI was healthy as the opening reflected a shade above 25 million and went to 27 million towards the last hour.  This is the 3rd consecutive close above 5032 level and if this holds out tomorrow as well on closing basis, then safe to assume that downside is limited to 4980 odd levels till the end of this week.

[Once again, similar to March and June series, seems like most of the action takes place in the first and last hour with flat sessions in between keeping both bulls and bears guessing; broader markets and VIX need to be factored and as far as the Options Data is concerned, there is noise; Calls are seeing lots of OI being added and there are 2 interpretations - 1: Call Writers are running for cover OR 2: Genuine build up of Calls anticipating some further upside. I am confused and am looking for hints from seniors for interpreting this paradox]

All critical levels remain unchanged from Monday's outlook. The premium on Nifty futures gained pretty good traction. Euro-Dollar above 1.34 will keep BNF breathing a bit easy for now and it just seems like markets are trying to discount a dovish RBI stance in advance which is not a good sign. Caution is advised as the EOD bars for Nifty, BNF and CNXIT all 3 showed a Bearish Tweezer Harami Cross on Monday.

The gap to the downside is still not filled and IMHO, this will be filled prior to 20th December and then the prop-up will commence [It may happen from current levels also but then it remains to be seen whether the price will break out of the downward sloping channel we have been trading in from 5th Nov '10] It is very clear that if we get 2 consecutive closes above 5250-5300 now on a weekly basis, safe to assume that the next leg up on Nifty has indeed commenced. [for longer term]

Even if one is optimistic about the correction being over [My personal vote is the correction is still pending but regardless of that bias, have to respect the levels reflected on the ticker], a back test of 4944-4994 is very much on the cards if not a back-test of 4911. As mentioned earlier, weakness on Nifty can only be confirmed after a close below 4880 whilst strength can only be confirmed after 2 consecutive closes in/above the 5092-5125 levels [for short-term]. Till these 2 Support / Resistance bands hold out, range-bound trades will continue.

No comments: