Month: July 2010

• Full time professional Trader– First and Foremost. All other things come next.
• Manage a Professional trading room dealing in index futures and commodities.
• Owner of a proprietary futures trading firm
• Counsellor and mentor to a few select accounts.

• Proprietary trader– Training mostly received through trading with other professionals in different exchanges
• Analyst– Not the kind you see on TV. But have spent hours testing systems, setups, indicators and strategies to have a fairly good idea on what works and what does not in different environments.
• Trainer– Have spoken to and worked with a lot of newbie traders to understand the psyche and the pitfalls

• Simple system– Over the years have found a simple way to understand the markets and buyer seller behavior.Trading is a business and has to be treated as one.
• The Teaching– No holding back. The business of trading is learnt only by sharing what you know.Give what you would like to get more of.
• Communication– In this fast moving world and an even faster market, you have to reach out quickly to get correct answers. We have the medium to get you the answers as soon as you have the question.
• Community– Trading cannot happen in a vacuum. Reach out to other opinions and ideas whilst trading your own plan.

Good morning.

We are playing that pocket of yesterday, between 5385 and 5410 again.

A break of 5385 should move it to 5355 and above 5410 can see 5445.

The value areas are 5402-5411-5420 for Nifty

For the bank Nifty these are 10169-10116-10063.

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I want to take the opportunity to clarify one aspect of the Vix formula.

In the last two expiries, the Vix formula has not come close to meeting it’s targets as we had in Feb, March, April and May.Why?

Quite simply,because the calculation is based on the VIX and the Open Interest, with the open interest being the dominant partner.The VIX is a measure of the volatility of an index or any script. Through it we can get an idea of how much our asset can move in a day or any other time-frame of our choice.The formula we have breaks down this time frame for you.Now on expiry day, when options have to be settled ( as these are European) the Open Interest can be used along with the range to get a fair idea of where we close. It will work 10/10 times, provided the Open Interest is resolved.

Today I was watching the 5400 strike all day, but showed no sign of resolution. In the end we had two winners with the PE writers as well as several CE writers ending in profit.

An expiry day has many pulls and pressures and most day traders simply take the day off. Today’s day will not be without it’s share of surprises with the 1.3 Cr of OI looming large at 5400.

The open has been kind to the buyers and a move above 5400 should setup a move for 5421 and 5435.

Watch 5385 on the downside.Refer to last night’s post.

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13.38

1.2 Cr + at 5400 July still, that means that both PE and Ce writers are expecting a finish at 5400.

Market profile tells me that 5421 is on, and depending on whether buyers hold there, a further push to 5435/5445.

Guess 5420 is the decider level…we turn back both PE/ CE guys will be happy. If we move up then CE guys cry!

Reverse applies below 5385

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3.43

Nifty moves in a range of 5382-5415 in the July future today, hugging quite close to the 5400 strike where at stake was an Open Interest of 1.2 Cr.

In the end the writers at 5400 who had written yesterday were forced to cover and a few more. Have a look at the chart :

The expiry day in the Indian markets is always a special day and tons of analysis has been done on the importance of the closing price on the activity of next month futures.

It is a commonly held belief that the expiry closing price acts as a support or resistance to next month’s price and action.

The market action in the afternoon was expiry related and put a question mark on where we close tomorrow.However we have two parameters with us -the OI/Vix and Market Profile to see where we end tomorrow.

The range for the day tomorrow based on the Vix formula we know, works out to 5452-5342 on the spot and 5445-5340 in the future. This is just a range and not targets- the nifty should trade between these ranges tomorrow, based on today’s vix.

Now let’s see what Open Interest is telling us :

GM all.

The nifty is again opened within value and range of yesterday.

The value areas are 5447-5435-5423 for the Nifty and for the Bank Nifty they are 10129-10072-10009.

In range bound markets, value areas are a definitive guide to the nimble trader.Use them.

I’m expecting one push to the 5465 region today. That will be possible only on a clean break of value high today.

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10.32

Just to add to my comment on price and derivative of price..
Most of us will look at a price chart for a signal, then look at their fav indicator for a confirmation ( newbies do it the other way around).

The way I like to do it, is to read a signal and use price itself to confirm it.

As in BN view above, it is telling me it wants to go down, but I will again wait for price itself to give me that signal.

The real action today was in the Bank Nifty index with the RBI rate decision controlling tape movement before 11.30 literally.

But first let’s have a look at the Nifty.

GM all.

The value areas for today are 5450-5439-5428 for the Nifty and for the Bank nifty they are 10064-10035-10004.

The markets have opened at 5435 within value.

We had mentioned 5423-5466 as a zone to watch (or 5408-5486) for changes in the momentum of the markets.

Quite visibly in the past two sessions the markets have chosen to rest between these two points.So we will be in for a period of some range bound moves till one of these two points is taken out.

For the past two days, the market has chosen to sell at the open and consolidate the rest of the day.Let’s see how today pans out.

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10.49

Today’s trade is different as the market waits for a news trigger.

Let’s wait for the event to get over. there will be adequate trade opportunities on the other side.

5408-5438 are very good ref points. Either side of which you can get 20 points.

Don’t push for a trade. Let the trade come to you.

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12.47

Rising interest rates pull the market up in the very short term but are the first in the process of an economic slowdown.

Infact they are an indicator to what the think tank actually feels about the economy–it is cooling off.

Next if we see falling commodity prices in the market, we have another indication that the slowdown has moved to a ‘slump’ before we get to the third critical stage which is a ‘gloom’.

http://3.bp.blogspot.com/_JyY_wsmZ5bI/S0Qvi-qBQSI/AAAAAAAAABY/a2GMQhoTmDo/s1600-h/cycle.gif

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13.31

Good Morning All.

The market’s have opened within friday’s value and have been quickly rejected near the 5466 level we have been watching.

On the lower side, 5423 is the first line of support.

As on friday, for the upward momentum to return, 5466 and then 5486 have to be taken out.

But also noted is the fact that there was no significant selling in the 5423-5430 zone.

On another note, on expiry weeks Reliance Indutries generally does well at the start of the week.

Look to buy above 1062 as a swing trade set-up.

I will put up a chart shortly.

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10.30

Expiry week :

There are normal weeks for trading and then there is an expiry week.

I have always looked at the expiry week as a “special” week to trade and have made different rules for it.

Most of you would be familiar with our expiry calculations of the Nifty based on the VIX.

In expiry weeks, I also recommend the buying of stock and index options which I would not do on any other week simply because the NSE is not very liquid in stock options despite having the Nifty which is the No 2 traded future in the world.

In expiry weeks, time premium as a factor is out of the option math, and if you are clear on the direction, it is very easy to take a leveraged call ( or put).

I have also noted the behavior of certain stocks to be a bit different in this week, irrespective of the trend they may be in.

Now there are no certainties, only probabilities for us to take our trades.

One such stock is Reliance. It is my observation that a large percentage of times, the stock does well in the first part of the expiry week.A back test has yielded good results even when the Nifty has been drifting down.

Have a look at this chart too :

We have had a market opened above range and away from value, implying the longer term participant controlling the tape for today.

Expect a large move either side today.

For the upward momentum to continue, price needs to auction above 5465 first and then 5485 on the hourly.

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10.07

The following are the value areas for today :

9994-9935-9912 price profile BN
5423-5389-5376 price profile Nifty.

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11.46

Often the market throws at us recurring patterns which look simple and symmetrical in hind-sight.

An example would be the last range between 5355-5411 which was predictable till it had to give way.

I was looking at some previous charts and found this symmetry.

I don’t want to read too much in it, but helps to keep it at the back of your mind.

Good Morning All.

The markets seemed to be coiled up again this morning.

I missed the entire day’s action yesterday, and am back just looking at my charts.

Will post some charts and analysis in a bit.

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10.16

Good Morning All.

Yesterday’s print of 5415 in the NF formed an unfair high or excess in the hourly TF.

We also saw buyers yielding to sellers at this level of 5411 which we have been talking about on this blog for several days now.

Once again our view remains that an auction above this zone puts the buyers back in control.

Yesterday was a normal day with a range extension which failed.So the tape is telling us that longer term participants are wanting to come back in, but at the moment the control remains with the short term participant.

On the downside again 5355 and 5367 EOD remain our levels to watch.

5403-5392-5382 are our values for the Nifty.

10032-10010-9989 for the banknifty.

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9.18

Sell Bank Nifty below 10030, Sl 10050, target 9990.

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9.33

Bank nifty at 10000. Book partial profit and hold bal with sl at cost.

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10.03

Yes I know it has been a minor 30 point scalp only. But what can you expect from this market which has moved in a 30 point range for the past 4 days now.

I wanted to give a sell in Nifty, but knew that yesterday’s value high at 5393 would come in the way. the low so far is 5393.2.Only a break of 5391 can take it to 5382 now.It’s overlapping values within a 5355-5411 which is a 55 point range.

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10.48

You are welcome to post anything on this blog–anything at all to help us better our trading.

The only exception I have is with blog salesmen and their ” Look at what I achieved ” statements without putting any reasoning/explanation to their achievements.

I also noticed EOD yesterday that I hadn’t responded to a few questions. Sometimes I do get absorbed in the flow of the markets. If you feel that i have skipped your question, please paste it again. I assure you that it is accidental.

———–

Good morning all.

5374 is the open of the day and if bearish views are disappointed, it has to be an understatement!

I want to turn your attention back to a previous post: http://vtrender.blogspot.com/2010/07/eod-14th-july.html.

After the high vol downmove on the 14th, we were waiting for a confirmation or follow up action, which incidentally has not happened yet.

Just to refresh it is 5367 EOD or a break of 5355-5411 either side on the hourly, which will confirm or contradict that volume.

The value areas for today are : 5391-5382-5374 for the Nifty.
And 9982-9964-9947 for the Bank nifty.

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9.20

CME-

The Nifty has started trading on the CME from today.

The link to the action is : http://www.cmegroup.com/trading/equity-index/international-index/emini-sandp-cnx-nifty-50-futures_quotes_globex.html.

We will keep an eye on the volumes to see how it will impact the action on the NSE.

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10.30

Guys, I’ve started this blog as a platform to share and communicate ideas and not as a medium to take a potshot at other people’s views and analysis directly or indirectly.

I want everybody to take a leaf out of Girish Desai’s book and VJ and Mok, Daruma amongst others who foster the development of ideas.

It is human nature to be critical of things we do not understand or agree with.

We cannot be served well in sharing negative views.Instead let’s believe in the sharing of an idea to serve us all better.

Let’s focus on the markets, discuss what we are looking at and look at making money in the markets.

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12.15

Earlier I put out an alert for a long trade at 5411.

We had held the view that a break of 5411 and an auction above it would denote continuation to the upside.

Have a look at this chart :

Some facts and some questions for you as I do a round-up of the week’s action in the Nifty as well as the US Futures the ES.

First the facts :

You and I trading between 1-40 lots of the Nifty Futures constitute only 3 % of the Volume generated at the exchange.

97 % of the volumes goes to mutual funds/DII’s, FII’s, P-notes, and institutional houses like UTI and LIC in that order. These guys have got professional knowledge,institutional analysis and uncanny execution styles.They plot every trade and scan the volume charts and the volume patterns.They don’t have magic indicators only a keen understanding of price and volume, backed with a strong knowledge of how the market operates.

Now the questions :

a)Are you as a trader aware and make use of these facts?

b)Do you spend time searching buyer/ seller patterns on a chart or is the time spent on looking at what your favorite indicator is doing on that chart?

c)Is your search for knowledge of the markets qualified as a search for knowledge of an indicator/system ( holy grail?) or that of the price-volume relationships of the markets?

There are no bulls and no bears only buyers and sellers- you have to be the right one at the right time.

Institutional level analysis should include knowing who is in control of the tape, when this control begins to change, where the volume is concentrated and where it starts thinning down.

I’ll leave you to hunt for the answers.

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Let’s focus on the charts and the message they are giving :

First a look at the ES chart which broke down yesterday

Hello all.

Apologise for the late appearance. I’m typing this out from a friend’s office, as we have a major internet outage at ours.

The value areas for today are 5399-5385-5378.

The market still is in neutral mode or “hold”.

Yesterday’s levels of 5411-5355 are still valid as the market makes up it’s mind.

Trade accordingly.

I will post updates once I’m back in my office.

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Earlier this evening I had a longish discussion with Viren on the state of our Nifty, especially after the high volume downbar visible in the afternoon.

At one point I felt that it would take out 5367, but later felt that it was a shake-out designed to catch weak hands. You can catch my real-time reaction to that move in the comments section of the last post.

Viren and I felt strongly that as long as price closed above 5367 our reference level for the Nifty as well as the US futures closed above 1083 levels, there was no need to push for any shorts.

Incidentally the US futures are currently at 1093 levels, after having bounced off 1084 which is the low thus far.

Here is the chart of the past two days of action in the Nifty Future :