Month: June 2010

Good Morning all.

The market is trying to find value between 5225 and 5271 this morning.

Let’s see how this plays out.

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12.07

@ Manu,@ All,

My views on the blog are for intra-day based on market profile levels with no prejudice towards long or short before the open price.

I can take a long view one day and a short for intra next day, based on the info the market gives me.Sometimes I look at the preceding day ( days) activity to arrive at a better judgement.

Somedays I may not have a view at all.

Viren is more of a positional player nowadays and he carries his positions for weeks if not days.I’ll ask him to be clearer with his time-frame next time.

Hope I’m clear on this.

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1.42

This move above 5271 has caught me napping, to say the least.

Un-accounted would be a right word to use in my case.

I’m staying away from commenting as I am unsure at the moment.

In retrospect, 5225 seems to have been a good place to initiate longs.

I had blogged about that level in my post on Monday morning here.

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14.31

I am watching the close today and the activity between now and the close.

To me it is a normal variation day, which is a sign of continuity the next day if we hold on to the prices here. Also the open tomorrow should be about here and more.

Secondly, by moving above 5271 prices will show a rejection of lower print and get back into the bracket we have known all last week.

So let’s see where we close today and take it from there.

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14.41

A quick look at the ES futures shows them at 1039 now and close to the yearly lows at 1036 of the July contract.

In fact the yearly low was 1032.75 in the september contract which has been re-printed today.A break of that level can set it up easily for 1000 to be printed.

Quite a bit of divergence then, they at yearly lows we near yearly highs.

Either they rally or we fall.

The divergence cannot prevail.

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14.50

For more clarity on inter-market relationships check this post here and here

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Estimates for 30th June

We have begun the first twenty minutes of trade well below the 5320 level.

I had mentioned 5271-5320-5344-5367 as the levels to watch in this bracket which is emerging.

Bracket trading is good and easy provided you understand it early.

5320 still is the pivot around which the other 2 levels can be reached.

Viren feels that end of quarter window dressing is holding the market up. I also feels that sellers have not been very aggressive.

Till 5271 is held, it is ‘buy the dips’ market or ‘short the rips’ till 5367.

Two tongued language, yes, but that’s how you play the bracket–play it both sides.

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Bracket :

Today is the seventh trading day in the bracket highlighted by the yellow lines.

Within this bracket, we can see value being established sideways ( blue areas) .

The arrows also denote areas where buying/ selling has occurred.

The best way to trade these brackets is to know your levels well and be quick to take profits. Other than that, one can buy at the bottom or sell near the top with tight stops.

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14.16

For the record, the chart updated above has been invalidated.

Does make me feel stupid, when my analysis goes wrong. But I rather look stupid than lose money ( mine as well as yours).

The markets have their own flow and we have to respect that.

Consider the market movement to be like that of a river in flow. When the current is strong you might as well swim with it than against it.

Today the flow has been strong southwards.We just have to accept the message of the market and move on.

This is the intra day chart of the Nifty ( 30 min duration).

The profile is markedly absent.And the candlesticks all point down.

A perfect trend day.

These days are rare. But easiest to trade. Just hold and wait.

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Estimates for 29th June

For the record, the Vix formula outlined in my previous post failed today.

Well we did operate in the range of 5276-5380 projected by the Vix and we did close above 5300, but the final close of 5320 fell far short of the projected 5380 top of the range we wanted.

That is the first time in 4 months that we have fallen short of the mark. The previous three attempts have been +/- 10 points off the mark.

For what lies ahead, let’s look at the charts :

The chart is that of the Nifty Future ( July) for the first four days of the week.

This week the market has auctioned and tried to create value in a region not seen in this expiry. Right from the gap-up this Monday to the close today we traded in new territory for the series except for a few minutes this afternoon.

The yellow arrows show that buyers and sellers have both tried to gain the upper hand with little success. The zone remains 5297-5377 with buyers in the bottom half and sellers in the top half.

Even from today’s profile, one can see the seller appearing when buyers were not able to drive prices a lot higher than yesterday’s close.

We call such activity a bracket in Market Profile.

Brackets usually happen at the end of a trend or at the beginning of one and are very easy to trade.70 % of the time markets trade in brackets and we should get used to them. On a longer time frame this entire year so far has been a big bracket and we do not seem to be getting out of it soon.

P.S:

The trend is never your friend because history shows that we trend only 30% of the time.

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EOD Update- Nifty Expiry.

I intended to do this post in the evening, but ran into some problems with the NSE site which was flashing two different sets of Open Interest figures between 7.00 pm and 10.00 pm. The excruciating part was that there was a 20 % difference between the figures at 5300 CE, one showing covering at the 5300 strike and the other showing addition of the same amount at the strike !!

The calculations for the expiry have been done as per the formula detailed in this post here

The formula projects a range of 5276-5390 for the session.

Now comes the Open Interest part :

The reduction of 11 % in the 5300 CE and the addition of 11 % in the 5300 PE point to an expiry above 5300.

Further if you look ahead at the 5400 strike, you can see a reduction of 11 % at the 5400 put and addition of 7 % at the 5400 call.

This means that writers at these strikes are confident that the expiry will be below 5400.

So VIX is predicting that the future will expire around 5380/90 today.

Let’s see how it holds up.

We of course will be tracking the call of the VIX with Market Profile.

If there is a divergence, we will be the first to know.

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Nifty Expiry- June

A quick comment on the Nifty action of today.

I had noted the action of today to form a “p” shaped profile. We have seen earlier how a “b” shaped profile results in a stalling of an upmove. A “p” shape on the other hand can be a pre-cursor to longs unwinding in a stock or index.

Let’s have a look :

The 2 day profile shows a top heavy distribution in the shape of a “p” enough to get us profilers to think about short set-ups in the morning.

5377 will again be a point of reference to the upside. Of course, as in every close, the open needs to be monitored to ensure that the market is thinking the same!

I also ran a quick check on the open interest for June and I found something particularly interesting at the 5400 strike.

Have a look :

Notice the buying in the 5400 PE of 371000 and the selling in the 5400 CE of 350900.

Smart money was moving into short positions by the close today.

So Profile and Open Interest point to a move downwards tomorrow.

Let’s see how the day unfolds..

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EOD update 21st June

GM All.

It seems we have another quite morning on our hands in the first session today.

5266-5271 should provide initial support below which value areas will have to be watched.

Bank Nifty did not participate in the big run-up yesterday afternoon, so keep an eye on it for weakness and for short trades.

Here are the value areas :

Nifty= 5258-5226-5206

Bank Nifty = 9548-9514-9479.

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10.09

Profile chart of 30 min duration Nifty Future :

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12.45

Uploading a volume profile chart 5 min duration yesterday and today.

Notice that the ‘b’ shape of yesterday is getting filled today on the upper part.

If the auction continues down then it should fill up 5225-5238.

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3.06

Updated chart of the Nifty Future shows how value has been created in the upper part of yesterday’s profile.

The profile itself is balanced.

Also, notice that it is inside yesterday’s range entirely, also called an “Inside day” by traditional systems.

So we have to wait for cues on Monday.

I’m leaning to the short side a bit, but will take a call after the open on Monday.

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Estimates for 18th June

I had posed a question in the comments section in the morning today at about 9.45-ish, about the kind of day that awaits us.

We had a normal variation day today.

Such days are generally difficult to predict, as things can change a lot in the C, and D and E,F periods.

But I found something interesting on the charts. Have a look :

Today’s day was exactly similar to the day on Thursday.

An open above value, a move lower in the middle phase and a rip-off higher into the close…and a “b” shape again.

Those Open interest figures which I posted near the close testify to the “b” shape. Call writers were unwinding and most of it was flowing into put writing.

But there is another thing which I had mentioned on the weekend about such days.

Such days have generally a gap-up the next day and the highs of the day are made in the first ninety minutes of trade.

Again it is a general observation, not a rule written in stone, but we will put it to the test again tomorrow, like we did on friday.

Join me at the open to know…

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EOD 14th June