Friday, July 8, 2011

EOD Analysis for 8th July 2011 and Outlook for 11th July 2011

With such a massive run up, the bulls did need a break; they already surprised a lot of people by taking out the 5690 level yesterday and with OI of 25 million right through the day in Nifty futures, it held out pretty well until the last 30 minutes;

However, one must note that this is the 7th consecutive day that 5608 held firm and this is a positive sign; I would expect 5608 to hold firm on Monday EOD as well and possibly break on Tuesday

On the other hand, all though SBI moved up, Banknifty is struggling to take out the 11400-450 zone convincingly but is also holding out the 11250 levels pretty well so far. As expected, the 5408 level seems to be a firm bottom for July series; the expected rough ride to the down side did not come through and remains to be seen how things pan out next week.

If the markets are indeed strong as shown this week, then the downside may be restricted to the 5480-5532 zone only . The sustained move above 5690 on EOD basis needs more volumes not just in stock specific futures but Nifty and Banknifty futures as well [coupled with of course a lot of buying in the cash markets]

The bull story will only be bolstered with 2 consecutive closes above 5740 levels and in case this happens, Nifty will witness a gush of demand-supply and can retest the 5890-5944 levels but the ballpark OI in Nifty Futures must be approximately as follows

For Upside
Sustaining Levels-------------------Nifty Futures OI (July + August Series)
5690-5740                                     28 million
5740-5780                                     30 million
5800-5840                                     32 million
5840-5890                                     35 milion
5890-5944                                     39 million
[The approximate values may be compensated for by buying in stock futures and cash to some extent only]

For the downside, OI of 25-28 million is sufficient to retest the 5500-5532 zone

Recommended strategy for Nifty as well as Banknifty - Sell on Rise

For Nifty Futures
If markets show weakness, then one should short in the 5690-5740 zone if it comes about (the weakness can be gauged by the OI as illustrated above) or below 5608 only; the fact that Nifty is maintaining 5608-5655 zone is hinting at caution for shorting outright; for those with margin for more lots should stagger the shorts across levels

For Banknifty Futures
If markets show weakness, the 11250-11350 zone will break down or else there may be one more attempt at 11400-450 zone and that is the level to open 1 tranche of shorts. The next shorting level is below 11250

With the results season out, there may be some sudden fluctuations on either sides so positions should be hedged appropriately; For options, one should not put more than 25% to 30% trading capital

Best bets continue to remain 5500 and 5600 PEs [5500 / 5600 PEs gained over 40% in trade today; recommendation given yesterday]; the buying levels for the Puts can be derived from the levels given above

Wishing all of you a good weekend and a profitable week ahead and thank you for taking the time out to visit my blog

Thursday, July 7, 2011

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

Remarkable performance by bulls towards the end of the day; The OI in Nifty futures was just 23 million when the session opened; however, in the afternoon, there was a first gush of 1 million OI increase within 5 minutes and then within the subsequent 20 minutes there was another 1 million OI increase in Nifty futures


After that, even with Nifty crossing 5705 on spot, there was no significant change in OI; this is the 6th consecutive close above 5608 and significant number of closes above 5408 and 5532; this is a positive sign for the medium term; 5608 should hold firm until Monday EOD now making it 8 closes above 5608 and then possibly reverse from there


As mentioned yesterday as well, for sustained move above 5690 on EOD basis, the OI needs to be around 27-28 million for Nifty futures and today's move has shown that if indeed bulls decide to take things forward, getting 2 to 2.5 million additional OI for volumes may not be a challenge


Outlook still remains the same that Nifty may try for 5744 as the intraday high and witness some profit booking tomorrow. However, 2 consecutive closes above 5740 will pave the way for another 144-216 points on the upside and Nifty may challenge 5890-5944 levels next week. 


Banknifty may try once more to crossover 11500-11600 with broader market participation


Sell on rise will still be the preferred strategy (short term) but now the shorting levels would be 5744 for 1 tranche and 5788 or below 5690 for 2nd tranche on Nifty


Banknifty shorting levels are 11450 for 1 tranche and 11550 or below 11400 for 2nd tranche


Test of 5500-5532 levels is bound to happen in July series itself; but shorts should be opened at appropriate levels so as to avoid blocking too much funds for MTM margin; Tomorrow is last day of trading week so buying options should be avoided. 20% to 25% trading capital should be kept aside for taking options on Monday / Tuesday; 5500/5600 PEs remain best bets 


[The EOD above 5690 which I had pegged with just 1% probability has become a reality today; as I had mentioned that would force me to change the outlook, I have done so because the trend cannot be bucked]


Still happy to see 5408 being maintained and if it stays firm until 10th August 2011, then the June visit to 5196 can be considered as retest of 5177 complete and we should look for new highs on Nifty in Oct-Nov post monsoon session

Wednesday, July 6, 2011

EOD Analysis for 6th July 2011 and Outlook for 7th July 2011

Volumes still remain a major concern for Nifty; despite some movements on both ends, Nifty futures OI were pretty constant throughout the day and at same levels as yesterday.


Banknifty was expected to get some fresh supply towards 11450-11500 levels before falling; rather what happened was a fall from 11,425 levels itself all the way down to 11,260 levels with some upside coming later


Nifty gave EOD above 5608 as expected; This is the 5th consecutive day Nifty has given close above 5608; I expect this to be breached tomorrow; however, if 5608 is not breached at EOD tomorrow, I expect 5608 to remain stable till the end of this week and the fall may commence on Monday 2nd half or Tuesday


I am certain of Nifty testing 5500-5532 zone in July series itself; I was expecting it this week itself; with 2 more trading sessions to go, remains to be seen how things pan out; winning strategy will be Sell on Rise; 


Recommendation for Nifty Futures : Shorting levels are 5655-5690 for 1 tranche (if not opened already) and below 5608 for the next tranche


Recommendation for Banknifty Futures: 1 tranche in the 11350-425 zone and next tranche below 11250


With 2 more trading sessions for this week, one should not invest more than 20% to 25% of trading capital in Puts - best bet still remains 5500 PE within 50 rupees as buying price for a target of 80 to 100 rupees within next 5 to 8 trading sessions


Nifty may try for 5655-5690 once aided by possibly some longs but there will also be a lot of shorts in the system the moment Nifty crosses 5655 on spot value and a lot of shorts expected in Banknifty in the 11350-11425 zone now


For a sustained move above 5690 on EOD basis, the OI in Nifty must rise to 27-28 million at least rather than current levels of 23 million

Tuesday, July 5, 2011

EOD Analysis for 5th July 2011 and Outlook for 6th July 2011

The weakness in markets is clearly evident with low volumes. However, we must also note that today is the 4th consecutive day that 5608 held out which was not expected on EOD levels; While we have a lot of intermediate support and resistance points, 5408, 5532, 5608, 5690 are very crucial levels for Nifty

Intermediate Support / Resistance points are 5440-5480; 5540-5580; 5640;

5608 should hold out tomorrow and the expected downside may come only in second half of Thursday session

5408 seems to have established itself as the bottom for now; I would again repeat, if we don't close below 5408 before 10th August 2011, then we can consider the revisit to 5177 to be over in June series when Nifty kissed the sub 5200 levels for sometime and a new high is poised to come in within 162 days from the day Nifty hit 5196

Moving forward, I expect a relatively flat session tomorrow with negative bias; Banknifty showed some strength in the last hour; expecting 1 visit to 11450-500 zone before collapsing below 11250 now

For Nifty, outlook is straightforward based on volumes
If markets are indeed strong, Nifty won't go below 5532 on EOD basis
If markets are indeed weak, Nifty won't go above 5690 on EOD basis

Risk Reward Ratio is in favour of 'Sell on Rise'; One note that readers should take into account that even on EOD, the session despite being flat saw an increase in Put prices rather than Call Prices....

International News that Can Impact Markets
Greece Crisis News
ECB Interest Rates
Non Farm Payrolls from US

Monday, July 4, 2011

EOD Analysis for 4th July 2011 and Outlook for 5th July 2011

Nifty opened on a strong note yet again but started crumbling as the day progressed. The OI in the opening part of the day for Nifty futures stood at 21.8 million and after a brief correction, there were some gains on Nifty again with rise in OI by 1 million and another 1 million added in OI by EOD

This is the 3rd consecutive close for Nifty above 5608; the upside or downside is getting limited due to lack of volumes. Banknifty managed to stay rangebound, go towards 11400 but could not sustain due to lack of volumes.

Way Forward
Since we had 3 consecutive closes above 5608 and 5th July marks the turning point for the next move down, we can expect profit booking to start from tomorrow; however, 5608 is an important level and if Nifty closes above 5608 by EOD tomorrow as well, 5608+ levels will be maintained on EOD basis until Wednesday evening as well and then on Thu and Fri we can expect the correction [Probability = 10% for continued closes above 5608]

As mentioned earlier, I still stick with the forecast that Nifty will start a rough ride downwards from tomorrow until Friday and retest the 5408-5440 levels and Banknifty will retest the 10660 crucial support level. Please note that the markets are neither in strength nor weakness mode at this time. 5408 remains a firm bottom for the next 2 to 3 weeks and traders should not rush to go for OTM Put options

Preferred strategy is to short via futures on rise and hedge with an appropriate call. The overall outlook for July series still remains unchanged. I will be forced to change forecasts only if we get 2 consecutive closes above 5740 or a close below 5408; else the trading range for Nifty on EOD basis remains 5408 to 5690 for July series as of now.