Monday, January 30, 2012

EOD Analysis for 30th January 2012 and Outlook For 31st January 2012

Negative start to the day aided by global cues and the Hanging Man candle spotted on EOD Friday was vindicated today. OI in Nifty futures was pretty much the same as on Friday i.e. 26.5 odd million; VIX did spook up to 23.5 odd levels but no panic for bulls as such - just an alert. Compared to the last 3 series, it is still a good sign IMHO because we used to see OI in Nifty futures well below 25 million when new series used to begin. 1 gap-up created on Friday has been plugged [and goes without saying that we can expect today's gap-down also to be plugged within the next 5 weeks or so]

BNF as usual led the falls and other index heavy weights like LnT (all gains of Friday reversed) and the IT pack also saw profit booking. As long as bulls manage to retain 5032-5092 levels, they have a good chance of testing the UTL of the main resistance line 6338-5944-5740 now at about 5280 odd levels* [*subject to 2 consecutive closes in the 5150-5177 zone or above]. Upto 4911-4880 on the downside will just be routine profit booking if such steep cuts do come in which I guess they will as we progress through this series.

However a close below 4880 can set in a fresh round of shorts but we will see when we get there; closing above 5150 was deemed a low probability event in some of my earlier posts but then we saw 2 consecutive closes above that!

Options Data Noise???: Surprisingly even the deeply ITM Feb 5300 Put did not move with with expected delta factor of 1 and even at the lows of the day, it was hardly commanding any additional time value [around 10 points only] over its intrinsic value! IMHO, we should observe price action of this security over the next couple of sessions because such weird behaviour in options price is rare at the beginning of the series. Moreover, deeply ITM Calls like Feb 5000 still carry significant time values over intrinstic values!!

Personal Inference: The big bets still are lying on the upside for a couple of sessions OR Call Writers are setting up the stage for bulls just as they did for bears in Jan series.

Time frame, thankfully went in our favor once again with high weightage for 30th Jan! Next 2 high weightage time periods are 6th Feb to 8th Feb and 3rd week of Feb with highest weightage revolving around 22nd Feb - direction for 6th-8th to be determined later but I am personally bearish for the 22nd Feb period.

Panic will enter the system only with a close below 4690 and should that happen, at a minimum we will retest the recent lows and worst case scenario make a new low [far away from where are right now so let us take each session as it comes]

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