Muted start to the session and volumes in Nifty futures remained pretty much the same as Friday. Banknifty was up for most of the morning session whilst RIL, CIL, Tata Steel etc saw profit booking/corrections. LnT staged a very smart bounceback from the lows of the day. BNF gave up all its gains at close but still significantly high
VIX still below 23 levels and that still keeps bulls pretty relaxed for now
No change to outlook and critical levels.
As long as bulls manage to stay in the 5032-5092 zone on closing basis, Nifty is open for a retest of 5125-5169-5177 on the upside [though closing above 5150 seems a low probability outcome to me as of now] Below 4994 with volume and momentum, we may see a test of 4911-4944 on the downside.
A strong round of correction and profit booking is due with 4 gaps on the downside to be filled. Looking at all 4 gaps from 4550 to be filled as we move closer to 22nd Feb '12. Unless we see a strong correction in Banknifty, the falls in Nifty may be limited.
Below 4785 with volume and momentum, we may see further falls but expect 4690-4728 zone to provide a strong bounceback in case of extreme falls. Panic to enter the system only with a close below 4690 and this will invite a retest of recent lows and perhaps a new low [but that is way far from where we are right now - so let us take each day as it comes and some price manipulations expected with 2 days remaining for expiry]
Cues From SGX Nifty
[During sessions where we have expiry or holidays, price action on Nifty tends to lag SGX Nifty by a few trading sessions; even when Nifty was struggling at 4840 odd levels, SGX Nifty had shown a high of 5034 and that was achieved 6 sessions later; in the last 5 trading sessions, SGX Nifty has shown a high of 5100+ and a low of 4780 so the range for next 8 to 10 trading sessions is pretty much defined IMHO barring expiry manipulations]
Other Updates (Only for Academic Interest):
There is a lot of mumbo-jumbo circulating in the media about 'cheap and easy carry trades with EUR'; all that I can say is it is a short-term fad that can easily reverse and it just takes 1 bad day in trade to create more damage than upside. For those academically inclined, I would encourage reading 2 cases [easily available online on investopedia and HBR series]
A] HKD-Yen Carry trades on Nikkei / Hang Seng in the early 1990s The crash on Nikkei and rise on HangSeng gave a double whammy to a lot of hedge funds!
B] LTCM - A Hedge Fund that a generated 300% return for over 2 years and then went bust blowing up everything [courtesy the collapse of the Russian Rouble]
It is very unfortunate that mankind tends to have limited memories and we keep seeing the same things happening again and again with every boom and bust cycle. [It does not matter whether it is a carry trade with HKD-Yen in the 1990s or Russian Rouble-USD or EUR-USD/EUR-Yen now - the symptoms and dangers associated with such trades are the same and can result in a lot of damage overnight when things explode - and it is even more easier to explode within minutes now as the trades are leveraged upto 400 times and it just takes a 5% correction on one side to potentially blow up billions worth of equity in minutes - most recently we had the case of a 2.1 Billion Dollar worth of debacle with EUR-CHF trade by a floor trader in UBS leading to ouster of the CEO!]
VIX still below 23 levels and that still keeps bulls pretty relaxed for now
No change to outlook and critical levels.
As long as bulls manage to stay in the 5032-5092 zone on closing basis, Nifty is open for a retest of 5125-5169-5177 on the upside [though closing above 5150 seems a low probability outcome to me as of now] Below 4994 with volume and momentum, we may see a test of 4911-4944 on the downside.
A strong round of correction and profit booking is due with 4 gaps on the downside to be filled. Looking at all 4 gaps from 4550 to be filled as we move closer to 22nd Feb '12. Unless we see a strong correction in Banknifty, the falls in Nifty may be limited.
Below 4785 with volume and momentum, we may see further falls but expect 4690-4728 zone to provide a strong bounceback in case of extreme falls. Panic to enter the system only with a close below 4690 and this will invite a retest of recent lows and perhaps a new low [but that is way far from where we are right now - so let us take each day as it comes and some price manipulations expected with 2 days remaining for expiry]
Cues From SGX Nifty
[During sessions where we have expiry or holidays, price action on Nifty tends to lag SGX Nifty by a few trading sessions; even when Nifty was struggling at 4840 odd levels, SGX Nifty had shown a high of 5034 and that was achieved 6 sessions later; in the last 5 trading sessions, SGX Nifty has shown a high of 5100+ and a low of 4780 so the range for next 8 to 10 trading sessions is pretty much defined IMHO barring expiry manipulations]
Other Updates (Only for Academic Interest):
There is a lot of mumbo-jumbo circulating in the media about 'cheap and easy carry trades with EUR'; all that I can say is it is a short-term fad that can easily reverse and it just takes 1 bad day in trade to create more damage than upside. For those academically inclined, I would encourage reading 2 cases [easily available online on investopedia and HBR series]
A] HKD-Yen Carry trades on Nikkei / Hang Seng in the early 1990s The crash on Nikkei and rise on HangSeng gave a double whammy to a lot of hedge funds!
B] LTCM - A Hedge Fund that a generated 300% return for over 2 years and then went bust blowing up everything [courtesy the collapse of the Russian Rouble]
It is very unfortunate that mankind tends to have limited memories and we keep seeing the same things happening again and again with every boom and bust cycle. [It does not matter whether it is a carry trade with HKD-Yen in the 1990s or Russian Rouble-USD or EUR-USD/EUR-Yen now - the symptoms and dangers associated with such trades are the same and can result in a lot of damage overnight when things explode - and it is even more easier to explode within minutes now as the trades are leveraged upto 400 times and it just takes a 5% correction on one side to potentially blow up billions worth of equity in minutes - most recently we had the case of a 2.1 Billion Dollar worth of debacle with EUR-CHF trade by a floor trader in UBS leading to ouster of the CEO!]
No comments:
Post a Comment