EOD Analysis for 9th September 2011 and Outlook for 12th September 2011

Nifty was on a precarious note as we did have 2 consecutive closes above 5092 and the possibility of testing 5177-5225 was on the cards. However, I had also indicated that Friday factor may bring about profit booking. the adjusted close stands at 5059. Banknifty took some very steep cuts today and RIL did not support as well. The close below 5092 levels has ascertained that we are going to have a minimum retest of 4940 levels and ideally, we are going to retest the 4800 levels in the next 8 to 13 trading sessions [95% probability]

Should we jump on to shorts straight away - no not yet. 5168 - 5044 level drop was significant and we may see a relief retracement of this which still keeps probability of testing 5100-5110 levels open. If we get a close above  5092 on Monday / Tuesday, Nifty may just make 1 valiant attempt to take out 5177-5196 levels before heading down. Shorts should be opened close to 5100-5110 levels on Monday with a hedge of a Long position in the next series option. 20 point stop loss applies to the losing leg and trail the winning leg

On the downside, a second close below 5092 will confirm the downtrend with second confirmation coming with a close below 5035-5040 levels. This close will usher a minimum downside of 4940 and a high probable trade setup for retest of 4800 levels. Don't just short blindly but rather short in a staggered manner. As of now, safe to assume that upside is capped at 5225 levels and some short covering may come in at 4940 levels

With or without RBI stimulus, banks are all set to be belted by FIIs. Keep an eye on Banknifty. Upside is capped at 10100 levels for now and for RIL, upside is capped at 890 levels. At these levels shorts are very safe. A close below 9500 on Banknifty and a close below 825 on RIL will provide a very high confirmation signal for retesting 4800 levels. Hope all of you enjoyed the profits on the upside as well as the downside.

Global Markets Update will be uploaded tomorrow. Enjoy your weekend and thanks once again for visiting this blog and providing valuable feedback from time to time.

EOD Analysis for 8th September 2011 and Outlook for 9th September 2011

Nifty opened on a muted noted and was just drifting around aimlessly till Europe opened. As indicated yesterday, some upside was very much on the cards and once shorts started entering the system, the eventual upside came in. This is the 2nd consecutive close above 5092 and we had 2 retests of the 5150 levels. If the OI in Nifty futures stays like this only around 29.6 million on the upside movement of Nifty, we are still open for a retest of the 5177-5225 zone.

Banknifty did not participate as well as it did in the last session on the upside. However, it is already hovering around the 9900 mark and if global cues remain positive, it may finish the technical pullback to 10k levels or perhaps, a little more as well. On the other hand, as I mentioned yesterday, this entire upside over the last 5 trading sessions have taken place due to a technical pullback and relief short-covering. Don't go by analysts who say that there will be fresh supply on Banknifty beyond 10k-10100 levels etc. Profit booking will begin if and when we start hitting 10k levels on BNF now.

A close above 5177 will almost with certainty invite a retest of 5348, filling up all the gap-downs. There is nothing really to cheer about what is happening on the bourses. Nifty is still very much vulnerable to a retest of 4800 level within the next 13 to 21 trading sessions.

On stock specific action, Sun Pharma showed a high of 505 on spot price but this is the 3rd consecutive close below 500 level. Remains a prime shorting candidate as far as institutional investors are concerned. Base metals are slowly giving up on their gains.

The Rollar rates are temporarily sprucing up IT but it won't sustain for long. Gold prices are still high and continue to take support in the 1750-1800 zone for the very short term. These 2 factors are enough to trigger a sell at any point of time on the equity side of the markets. Too many global news events lined up but this may add some confusion in the direction of asset classes in the short term.

The outlook continues to remain bearish for equities but shorts should be opened from suitable resistance points or after a confirmation of breaking down a channel. Gold may soar and make a counter-trend rally but even for medium term USD 1450-1500 will remain an interim support. With risk of hyper-inflation looming around, there might a temporary boom on commodities.

The initial part of Buy on Dips on Nifty is done for this series. The mantra to trading success will now be 'Sell on Rise'. For tomorrow, there is absolutely no reason to initiate a fresh BUY; 5177-5225 remains the preferred shorting zone and one can continue with this short for a target of 100-150 points on the downside. Alternatively, if the close happens to be below 5092 on EOD tomorrow, it is a clear signal that the relief rally is over.

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

Nifty did show some strength today and the volumes were very good with OI in Nifty futures clocking 28.5 to 29.1 million throughout the day. Banknifty gained on the back of a good short-covering rally in Europe and as expected, gained over 200 points from the lows of this week. Some profit booking can be seen but if the cues remain good, the technical pull-back on Banknifty may go all the way to 10k levels but one must remember that this is just a technical pull-back.

The 5150 zone was briefly touched upon but there is still some more steam to retest 5177-5200 levels. One close above 5092 was needed to retest the 5150 levels. We closed over 5092 but also retested the 5150 levels. If the longs do decide to go on and Banknifty completes the technical pullback with Reliance and LnT supporting, it would a welcome relief rally for bulls. On the other hand, with just 2 more days to go, if profit booking starts coming in and we close below 5092 tomorrow, then more shorts will enter the system. This will imply a retest of 4950-5000 levels on Nifty and 9500-9600 levels on Banknifty.

For this week, the downside maybe limited to just 4950 levels and the upside for now seems to be capped at 5225 levels as an intra-day high. However, if we get a close above 5177, then we can expect all the gaps to be filled and some fresh longs taking us all the way to 5348 before Nifty decides to turn back. At all times, we need to remember that this upside is just a relief rally and the risk of retesting 4800 is very much on the cards within this series. VIX did cool down a bit but it is still hovering around 28 levels; unless VIX drops to sub-25 levels, choppy conditions will prevail.

There is no point in taking a fresh long position at this stage. Those who have been holding longs should just trail the position and we are slowly drifting into Sell on Rise territory. Hedging is very critical and one could either short an option of the same direction or use a little more margin and take an opposite position in the next series futures. 20 point stop loss to be strictly adhered to and then trail the winning leg.

On stock specific action, Sun Pharma has given 2 consecutive closes below 500 now. The retest of 450 is almost certain on this counter. Sesa Goa has so far shown a resilient pullback from 200 levels but is a counter vulnerable to retest 200 levels yet again [Whilst there are rumours about some bad news on Sun Pharma and Sesa Goa - it hardly matters; the weakness is there on the charts and regardless of what happens vis a vis patents and rights with Sun Pharma and mining issues, Cairn deal with Sesa Goa, the stock price will fluctuate solely on demand-supply and charts; charts are weak.....]

Automotive sector has started seeing some profit booking. Safe to ignore the news around fertilizer stocks like Chambal et al as the pullback is done and hardly any more steam left. Better to play with liquid counters and whilst ONGC showed some strength today, it will go down to 250 levels soon. [I normally don't recommend shorts on this counter as the lot size is 4000 and if the moves are caught well, fine but otherwise, it is a dangerous futures counter. 1 point move triggers a gain or loss of 4000 so better to play this via equity. for taking a hedged position, one needs a margin of 1 lakh to take positions like Long current series/Short next series or vice versa. Surprising that NSE and SEBI hasn't taken note of such discrepancies yet]

The reason why I am highlighting this is because I received a couple of mails from followers of this blog asking for a second opinion on playing this counter. If price is a barometer, then M&M has a lot size of 500 and that means logically, ONGC should have a lot size of 750 to 1000 IDFC should have a lot size of 1000 to 1250 only. Trading with a couple of counters is no doubt good but the pros and cons of picking up a counter, margin requirements etc need to be examined as well. So my suggestion is to stick to the top counters where the lot sizes are smaller, cost of carry, margin requirements are lower.

Gold prices are cooling off slightly and Dow futures for now are trading positive. FTSE may show strength upto 5325 levels before reversing the gains in the next 5 to 8 trading sessions. Hope all of you are taking advantage of both this blog and Raghuji's EW counts as well. Should there be any doubt regarding a position, please feel free to drop in a comment and ask. Depending on schedule will try to answer the same. Just ensure that when you take a position, it is hedged to protect your margins. If the losses are taken care of, the profits will follow in a trending market.

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

Nifty was in subdued territory from opening bell and VIX shot upto 30 levels today on opening itself and only cooled down to 28 after entering positive territory in the last 2 hours. The volumes were high with Nifty futures clocking an OI of 29.2 million to 29.8 million throughout the day. The 4940-4960 zone provided support for the second time today but the way it is being pounded is not a healthy sign at all. A very strong round of short-covering finally managed to get some premium on Nifty futures.

Unless 5092 is taken out on EOD basis, interim rises are attracting shorts. Some buying is coming in at 4940-4960 levels but it is only a matter of time before this level gives way. Automotive segments surprisingly are showing some signs of a pullback with Tata Motors, Maruti, M&M all seeing some buying [or perhaps short covering in futures]. Sun Pharma is turning out to be a laggard now and the close below 500 is a bad omen. 2 consecutive closes below 500 and the counter can go all the way back to retest 450 on spot price. ONGC showed some pullback but interim rises in ONGC are also shorting opportunities. For some more time, 250 may provide interim support [courtesy the scheduled FPO] but it is only a matter of time that this counter goes down big time. 

The crucial levels for this week remain as follows

For Downside: 4950 - 4880 - 4840
For Upside: 5020 - 5092 - 5120 - 5177

Unless Nifty gets a close above 5092, weakness will continue but most falls should be ideally arrested within the 4940-4960 zone for this week. [2 times it has supported already so that should be kept as an alerting point]

On the Upside, a close above 5092 will bring a retest of 5140 and 2 consecutive closes above 5092 will open Nifty for retest of 5177-5225 and if this zone is crossed over with volume and momentum, all gaps upto 5348 may be filled before Nifty resumes a downward journey.

On the Downside, a close below 4940 will make Nifty vulnerable to a retest of 4800 and 2 consecutive closes below 4940 will bring a retest of 4720 within 5 to 8 trading sessions from 2nd close below 4940.

For tomorrow 5110-5150 may provide the Sell Zone but this is not the time to create fresh Long Positions. Those with Long Positions should trail the existing position rather than create a fresh long position. Shorts should be hedged with a Short Put of near strike or an opposite position with the next series Nifty future. 

Panic in the market is visible with the high gold price. Nifty is due for some correction and retest 4800; the longer it takes to have this correction, the greater will be the impact of ensuing fall. Stay hedged with a position and trail the winning leg. Risk reward ratio is slowly tilting in favor of shorts but shorts should use appropriate levels before hitting the Sell button.

EOD Analysis For 5th September and Outlook For 6th September

Nifty opened with  a gap-down courtesy weak global cues and went back to test the support of 4950-4960 zone as expected. However, with OI of over 28.6 million in Nifty Futures, the falls were quickly bought into which represented a gain of more than 60 odd points which is indeed remarkable. VIX shot up today and crossed over 27 yet again. Banknifty took steep cuts and so did some of the major counters like Reliance.

Short covering was seen in Banknifty that helped the rise but the rise could not be sustained for long. What is critical though is that the Nifty is still maintaining the psychological figure of 5k levels on closing basis. Banknifty is marginally above 9600 levels and can do another 150-200 points to the upside from here and if Reliance, LnT support then we should be able to see 5100+ levels on Nifty within a couple of trading sessions.

The crucial levels for this week remain as follows

For Downside: 4950 - 4880 - 4840
For Upside: 5020 - 5092 - 5120 - 5177

Unless Nifty gets a close above 5092, weakness will continue but most falls should be ideally arrested within the 4940-4960 zone for this week.

On the Upside, a close above 5092 will bring a retest of 5140 and 2 consecutive closes above 5092 will open Nifty for retest of 5177-5225 and if this zone is crossed over with volume and momentum, all gaps upto 5348 may be filled before Nifty resumes a downward journey.

On the Downside, a close below 4940 will make Nifty vulnerable to a retest of 4800 and 2 consecutive closes below 4940 will bring a retest of 4720 within 5 to 8 trading sessions from 2nd close below 4940.

Still difficult to recommend a Long / Short without a hedge. Long Positions in Nifty should be hedged with a Short Call and vice versa for Shorts i.e. Short Position should be hedged with Short Put. The covered Call/Put option is being suggested to protect the risk of losing time value in the options premium. Strict Stop Loss of 20 points to be applied to the losing leg and continue with the winning leg via Trailing Stop Losses.

For tomorrow, 4950-4960 zone will be the Buy Zone and 5092-5110 will be the Sell Zone on Nifty spot.
Hedge For Long will be Short 5000 CE 1:1 ratio and Hedge For Short will be Short 5100 PE 1:1 ratio

Gold prices are still high and may retest highs created in 1912 zone before correcting. Silver spot tried a crossover of 43.3 but has not been able to hold on to it. If crisis like situation prevails, this divergence between Silver and Gold price will continue. A close above 1912 on Comex gold will usher 2000 on spot price but eventual target of gold is 1450-1500 on spot price and this is a counter-trend rally led by fear.

Corrective counter-trend rallies do have a tendency to register new highs and in such cases, the ensuing correction is even more sharp. Rise in silver can be used to short outright via 3 month forward contracts. For Gold, better not to trade for sometime as the risks are tremendous on either side.