EOD Analysis for 15th July 2011 and Outlook for 18th July 2011

15th July 2011 represents a crucial date change in the Nifty financial calendar for 2011; taking into account the Full Moon today and the other macro-economic parameters, volatility was expected to be on the higher side; however, the activity was brief for the first hour and then some short covering after which Nifty had a pretty dull session;

I had mentioned in my post yesterday that some wild swings are expected on both sides and next week will be calmer; however as with the correction that got delayed by a week, we may be in for a couple of volatile sessions on Monday / Tuesday and then continue with more range bound sessions

Volumes were very low today and through out the day, the OI in Nifty futures was around the 24 million mark which prevents upside for sure but also limited the downside; Gold has cooled down slightly and is now quoting around 1579 dollars an ounce but still is pretty high considering that just 1 week ago, it had a range of 1485-1525 dollars an ounce; this indicates the panic amongst institutional investors and fund houses

The crucial levels still remain the same

For the Downside: 5408, 5440, 5480, 5532

For the Upside: 5580, 5608, 5655, 5690

The bull story can only progress further with 2 consecutive closes above 5740 which if it happens, will open Nifty for a retest towards 5890 levels - Probability = 1% [for 2 consecutive closes above 5740]

On the other hand, bears can rejoice only after 5408 is broken on EOD level; below 5408, we open for 5348, 5225 and 5177 - Probability = 1% [for close below 5408 on EOD basis]

Nifty is consolidating well in the 5408-5608 band and this is a good sign for the markets; I would still expect falls to be arrested within the 5480-5532 zone; there should be no reason to panic to the extent the 5408-5440 zone is intact on EOD basis; Sell on Rise still remains a preferred strategy and the volumes can be checked basis the information I had given earlier this week about Nifty OI requirements;

Banknifty is well above 11k which is a good sign; with disturbing news coming in frequently, seems difficult that Banknifty will cross the 11450 zone on EOD basis on the upside; on the downside, falls are getting arrested within the 11150 zone and the best strategy still remains 'Sell On Rise'; 11350-11425 zone is a good level to short Banknifty for July as it can assure a 100-125 point gain minimum within 3 to 4 trading days [most likely within the same day in current conditions]

From Monday, we will see higher roll-over figures for futures and those trading in Long Straddle Option Pairs should switch to August series Options from Monday; the best Straddle for August Series will be a combination of 5400 PE with 5700 CE 1:1 ratio [Stop Loss - 15 points on each leg and continue with the winning leg via TSL]

Stock Specific Recommendations will be posted over the weekend basis daily and weekly charts

Thanks for visiting the blog and sharing links with your near and dear ones; I hope you have been able to make some use of the posts and reap some profits for trading. Wishing all a very enjoyable weekend and a profitable week from Monday again

EOD Analysis for 14th July 2011 and Outlook for 15th July 2011

As expected there was too much volatility on both sides today for Nifty; Gold rallied to make another high at USD 1593 on Spot Prices today indicating the panic amongst institutional investors and fund houses. Tomorrow is a Full Moon day and volatility will continue; Banknifty surged well to cross over 11350 before closing at 11260; Nifty went all the way to 5653 before closing at almost 5600;

Volumes were low initially in Nifty futures OI at about 24 million but rose with the cross over of 5590-5600 zone to OI of 25.2 million; a lot depends on how much profit booking comes in gold overnight as the Dollar has started retracing from the lows created yesterday against CHF, JPY, CAD; Medium term traders will also be settling their leveraged positions on NSE tomorrow.

Nifty may try to retest the 5650 zone once before going down; falls are expected to be arrested in the 5480-5532 zone for this week; Recommendation for trading positions are 1 lot short as close to 11350 as possible for Banknifty (if it comes there) and 1 lot below 11250; for Nifty, 1 lot short near 5650 (if it comes there) and 1 lot below 5608; considering that it is Friday, Full Moon, one may wish to reconsider taking positions for trade tomorrow and not more than 20-25% should be invested in options

Stock specific shorts can be initiated in Sesa Goa as close to 300 as possible, LnT as close to 1830 as possible via August futures [values above correspond to spot prices]

Rather than looking at the fall as a bear attack, one should consider this as a healthy correction for the markets to the extent 5408-5440 zone is maintained on EOD basis; Monday onwards, expecting markets to be calmer as the Full Moon effects will start dilating over the weekend; some flat sessions are inevitable as option writers would like to suck options premium on both sides.

As of now, expiry target still remains 5600-5690 after testing some of the lower levels
Crucial Levels on the Downside: 5408, 5440, 5480 and 5532
Crucial Levels on the Upside: 5580, 5608, 5655, 5690

Upside cannot be sustained without volumes and the approximate values for the same were given earlier this week; for the downside, today's volume is sufficient to take markets to test the 5480-5532 zone

EOD Analysis for 13th July 2011 and Outlook for 14th July 2011

Most tend to get excited when they see a gap up and expect the gap to be filled soon with a downward move; the same holds true for the other way around too; yesterday's gap down was significant and there were many shorts left to be covered in the system as the relief news from Europe came after market hours; similarly in Dow as well, the shorts were covered and hence it was logical to see some upside today on the basis of short covering.

The volumes were not all that high in Nifty futures [July + August Series showed OI of 24 mill to 24.3 million through out the day]; allow me to repeat myself from yesterday again; on the downside, the crucial levels are 5408, 5440, 5480 and 5532 as of now; on the upside, the crucial levels are 5580, 5608, 5655, 5690; Europe is going through a sovereign debt crisis review whilst US is contemplating on debt restructuring and way forward; a lot of this news has already been discounted which is visible in the rising dollar index, fall of Euro against the US Dollar and the flight to safety once again being witnessed in the form of a mania for gold;

Whilst Dollar is still at a low compared to JPY, CAD and CHF, it is appreciating significantly against other currencies significantly [or shall we say other currencies are correcting] The Higher Dollar Index compared to the High Price of Gold shows that there is panic amongst institutional investors and fund houses at this point of time. This volatility is expected to continue in mature markets until 15th i.e. the Full Moon day and then we can expect some range bound but relatively calm sessions next week, unless there is an unexpected catastrophe

For Nifty, with the results season coming in and frequent political tensions, there can be trouble but it is far lower than what a lot of people are expecting; 5408-5608 is a good zone for Nifty to consolidate considering that we have seen sub 5400 and sub 5200 levels in February, March and June as well; It was heartening to see that Nifty was struggling to cross over 5580 in the same manner as it used to struggle to cross over 5532 in the previous 3 series; also significant is the fact that we are having a lot of sessions above the crucial levels on the downside; to the extent 5408-5440 hold on EOD basis, dips will provide buying opportunities and rises in the 5580-5608 region will present selling opportunities.

Such moves are only for risky traders; the fall from 5740 to 5496 on Nifty and 11450 to 11050 on Banknifty has already generated a lot of profitable moves along with Infosys and Tata Steel that were covered earlier. Now one should wait for the bottom to be ascertained for July series before taking fresh long positions.

2 more days of volatility expected and after that there can be more consolidation and flat range bound sessions next week; as of now, the expiry target remains in the 5600-5690 zone with a retest of lows pending; expecting the falls to be arrested within the 5480-5532 zone but no panic is required to the extent 5408 holds firm on EOD basis; the major upsides can be expected to come towards the expiry week

15th July and 23rd July are 2 crucial dates for the current series prior to expiry; 23rd being Saturday, the move corresponding to 23rd may come on 22nd or 25th

The options data has a lot of noise and the aim as usual is to milk premium from both sides; stock specific action, Nifty futures, Banknifty values and RIL / LnT hold the key; as long as they are at respectable levels, no major fall expected

Just to recap: Banknifty at 11k, RIL, LnT at respectable levels and other heavy weights corresponding with a mixed bag still keeps 5608-5655 zone a very much achievable target;

EOD Analysis for 12th July 2011 and Outlook for 13th July 2011

5608 after holding firm for 8 days, which was already longer than expected was expected to break down today; especially with all the bad global cues and Banknifty, CNXIT dropping, and none of the other heavy weights also supporting, the fall was imminent.


Now the 4 crucial points on the downside are 5408, 5440, 5480 and 5532; as mentioned yesterday, on EOD basis, 5408 may hold strong for the July series on EOD basis and should that happen, we may have some consolidation again in the 5408-5532 zone; some flat sessions in between are inevitable, courtesy manipulation to suck options premium on both sides; outlook until 15th July is flat to bearish; the more number of instances we close above 5408 and 5532, the better it is for Nifty for the last pending rally for 2011


Any major upside beyond 5608-5655 on EOD basis will probably come towards the end of the series. Infosys bad results are just an excuse as the charts had shown weakness well before the news was expected; to the extent 5408 holds good on EOD basis, there should be ideally no panic in the market; 


There are various opinions about what would happen below 5408; this is a very crucial level and a strong support level and I find it strange that a lot of people do not realize the significance of this level; one should take cues from the daily records and see how many times this level has provided support - I would go on to say that this is a God-Father Support level and whilst we have had instances of this being breached, this level has been taken out pretty quickly even after falling; on the other hand one must note that in case we have an assault on 5408 yet again, this will be a death cross for that level i.e. this is the 2nd last time this level can support Nifty for 2011; upside can come yet again if we close below 5408 and subsequently retrace back; However, one more assault on 5408 post-retracement and it will be chaos and panic on the markets and 5177-5225 can be revisited -> Probability = 1% for July series


In the current situation, a wait and watch approach is advisable; some of the beaten down heavy weights might stage a come back but if the global cues remain negative, then some more downfall may come in; to the extent 5408 holds on EOD basis, one should use dips to buy; as of now expiry target still remains 5600-5690


For those following this blog and using it as one of the guidelines, there have been ample profitable trades already; over-trading is not good and now I would encourage people to wait and watch how things pan out; once we get the bottom ascertained for July series (hopefully by 18th July) appropriate positions can be taken; From 18th, one should trade in next series options and futures as rollovers will start and whilst gains may be limited, it will save the cost of roll over on futures and prevent the time decay on current series options

EOD Analysis for 11th July 2011 and Outlook for 12th July 2011

The OI in Nifty futures were pretty much constant at 24 to 24.3 million through out the day; despite the time value, Nifty Puts gained well; Banknifty fell below 11250, tried to stage a comeback but then could not tether to 11250 for long; [but the last 1 hour garnered an additional 0.5 million OI when the fall was brought into; whether it was short-trapping or a genuine increase remains to be seen tomorrow]


5608 provided good support throughout the day except for a few ticks below 5608 which was quickly bought into; today was  the 8th consecutive day for 5608 support level; I expect this level to be breached tomorrow with possibly a visit to 5655-5690 zone once before collapsing; shorts should be opened as close to 5690 as possible and only if the volumes stay lower; the next tranche of shorts should be opened below 5608; with 5408 and 5532 both levels holding firm for a long time now since June expiry, the retest of 5408-5440 may not take place in current series;


Should 5608 stay firm on EOD tomorrow, reasonable to assume that it will provide support for another 3 to 5 days [3 days on calendar days basis and 5 days basis trading days to complete the Fibo count of 13]


The downward correction will be good for the bulls to take some rest and prepare for the marathon run up for the Diwali mahurat trading; With Infosys results due, to the extent EPS of 150 comes and guidance remains with EPS of 150 or above, some upside may be seen in Infosys and other IT counters may join the upside; if the EPS is around 146-148 zone, the downside is pretty much factored in already; the counter will become bearish with any EPS outlook below 144-145 [assuming fair PE multiple of 20 for Infosys] and this will pave the way for 2750-2800 levels


Banknifty is still struggling and may make one more attempt to regain the 11250-11350 zone before collapsing again; the expected downfall is still not coming through as not many shorts are opening up at this point of time on Nifty / Banknifty / CNXIT futures as well as major Nifty 50 counters; with results season open and the bitter experience of getting shorts chopped earlier has sent in caution


Above 5655, there may be some fresh longs and vice versa for shorts once Nifty breaches 5580 levels; sentiment is neutral to negative until 15th July and will possibly reverse after July 23rd to neutral to positive


As always, trading capital in options should be no more than 20% to 25% unless one is building a spread with long-short; For Long Straddles, a good combination can be July 5500 PE with July 5700 CE 1:1 ratio with a 15 point stop loss on each leg and trailing stop loss on the other leg;


Unless we see some major bad news striking the global equity markets, 5408 is expected to continue its firm support and unless we get a close below 5408, I would peg the July expiry target in the 5600-5690 zone as of now. [One needs to be open as bulls have already surprised the floor with a close well above 5690 once and retained the 5608 levels for 8 consecutive trading sessions]


Assuming all other heavyweights including Reliance stage a reasonably good performance, Banknifty at 11k corresponds to Nifty spot of 5600; the downfall in counters like DLF, Infosys, SBI has been more than offset by counters like Titan, LnT, TCS etc; 


For the continued bull story, volumes have to go up and 2 consecutive closes above 5740 are crucial; 2 consecutive closes above 5740 and we open for a retest of 5890-5944 -> Probability 1%


Most likely path - retest of 5480-5532 zone and a gradual pullback; while there is a lot of noise in the options data, there will be some deliberate flat sessions introduced to shave off options premium; the goal of current expiry prima facie seems to be to render maximum 5400 to 5800 CEs / PEs worthless on a NET NET basis on expiry