Tuesday, July 31, 2012

EOD Analysis For 31st July 2012 and Outlook For 1st August 2012

OI in Nifty futures little changed from previous session and remarkable drop in VIX

Today was the second consecutive close above 5169 and that implies that this rally can go upto 5348 levels
[with some pauses in between and profit booking; the rise from 5032 to 5200 was very fast and a 61.8% retracement of the same is pegged at 5135-5140 levels and Nifty bounced back smartly from the lows of today]

5250-5280-5325 are strong resistances and Nifty has an intermediate triple top as of now in the 5342-5348 zone. So one could trail longs and see how things pan out after that. The key reversal level continues to be 5169 on closing basis IMHO to switch directions as mentioned in the previous post [and most seniors in the Nifty blogosphere would tend to agree]

Looking at VIX, historical data of Aug '11, one should still be wary and very very alert in this series
[we had mentioned in the beginning of July series that the first half would be biased on the positive side and second half on the negative side. Barring the last 2 days of July, things turned on expected lines]

In Aug '11, we saw almost 5700 levels in the first week and then ended the series at 4728 on 26th Aug '11
VIX was remarkably cool in the first week of Aug '11 only to spike well above 27 by the end of the month

The upside should be enjoyed till it lasts; 1st condition for upside has been satisfied; 2nd condition for rally to pick steam is 2 consecutive closes above 5408 and that needs at least 10% to 15% volumes more

I am personally bearish for the last week of Aug '12 and 1st week of Sep '12; whenever PCR / VIX are at extremes, one should be wary but that does not justify blind shorting and lapping up of Puts. This rally is fuelled by 'hopes' of liquidity injections and can delay but not avert an eventual fall

Critical dates for Aug series are
7th Aug
22nd Aug
[give or take 2 days on either side]

Phew quite a long post but I am very busy for the next couple of months with my professional engagements and hence my posts will be sporadic. My seniors are helping readers with frequent posts and that should be sufficient

Good luck with your trades and enjoy the monsoon season

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