Month: July 2010

It’s earning season and a lot of moves in the market will either make you a lot of money or leave you with a lot short!

It depends on how good you read the tape.

I will put up a chart of Infosys later to tell you what we thought of it prior to it’s earnings release.

For today, the market will again have to hold 5367 and 5355/ 5344.

The value areas for the Nifty are : 5387-5376-5365

For the bank nifty they are : 9783-9748-9716.

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9.26

Infosys:

Last week I did three trades on Infy. Two winners and one loser. So I was keeping a close eye on the action unfolding.

Have a look at the chart:

This is a profile chart for the past four days.

Notice the chart making ‘P’ type profiles for the past three days.

In Market profile a “p” denotes long liquidation or selling at the top.

Each of those days had sellers right at the top, so it was a simple arithmetic which said that sellers would step in at the open today.

Also notice that we are presently rotating at 2830, which is a high volume node from the 8th of July.

Also 2800-2820 as mentioned earlier was a seller zone, taken out by buyers last week.

This break has a very good chance of halting right here at 2800-2830.

10.42

If you are using an MP chart you will see the single prints in this 2800-2820 range.

These are good indicators of direction.

I still consider 2800-2830 as a ‘no trade zone’

The market has to auction above 2830 convincingly for longs.

Also note that today being a results day, better to give the market a few more points in range. We can’t be precise on a level today.

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11.35

Reliance:

We have been following reliance as well on the blog, and have noted often the presence of the seller at 1090 levels, as well as 1045 being an important ref level.

Have a look at this chart :

Notice the selling at the top of the chart.

Now see the bracket forming, two yellow lines.

I don’t want to be taking a trade at the current levels, as it gives equal chances to a move down in the bracket as well as a break-out above.

Let’s just say, if you want to be a buyer, buy only when the bracket is resolved.

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Estimates for 13th July

We will start trading on Monday with the indices at major reference levels.

I want to start with a chart of the Bank Nifty Future.

This profile chart clocked from the 21st of June shows the downtrend till the 30th of June, the balancing of the profile from the 30th of June till the 5th of July and the subsequent move thereafter.

The current chart of the last working day, shows again value being created upwards, hence the trend remains up.

I’ve also market out 9715-9756 which is a seller zone, where the buyers will be tested.9580 and 9480 would be two important supports for the market for this week.

Market profile students would have known the positioning of value downwards in the first part as sellers being strong, the balancing in the middle shows equilibrium returning and now the value areas pointing up shows buyers in control.

Classic Buyer-seller action in that chart.

The chart of the Nifty, though showing the same trend has a bit on uncertainty in the middle.

Have a look :

The two 80+ point moves up and down on the 29th & 30th and that on the 6th and 7th were noisy as participants tried to seize control, but the upward movement of value in the last two sessions is not in doubt.

But as we have been pointing out repeatedly, only a close above 5367 seals the move- up for the buyers.

5308 should emerge as an initial support for the market for the coming week.

We’ll continue to watch on Monday.

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Week-end charts

We have a Game On today between confident buyers and aggressive sellers.

Hopefully they resolve the range of the past three weeks once and for all.

The value areas for Nifty are 5339-5327-5314 and for the Bank Nifty they are 9631-9610-9581.

Value high at 5339 and the seller at 5344 if overcome can mean an auction to the 5367 zone, where a slow down can happen to decide further moves.

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9.26

I’ve taken a long at 5345 with a stop at 5327 for 5367.
July 9, 2010 9:23 AM

Bank Nifty is also a buy above balue at 9632 for a tgt of 9680. Sl 9600
July 9, 2010 9:25 AM

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11.25

Nifty at 5366. Cover 50 % and rest sl at cost.

11.34

Book 50 % profits in BN here at 9665.

Hold bal at cost.
July 9, 2010 11:33 AM

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11.43

My reasons for exit in the Bank Nifty as well before we hit our target was the fact that we hit 5367 on the Nifty.

Over the years, I’ve learn’t not to give back to the market hard-earned gains, especially at pivotal points.

Profits are always better in the hand than on the screen !

Looking further, if our cost holds, we should get to 5382 on the Nifty and 9715 on the Bank nifty.

I’ve received emails from readers that often they trade in single lots of Nifty. I would suggest 2 or 3 lots of Mini Nifty in such cases rather than one lot of Nifty.

It is also important that when a trade moves in your direction, you let it run. The second run is risk-free.

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Estimates for 9th July

Good Morning.

Some firecrackers in the US markets last night. A quick look at the charts tell me that it was high frequency trading which carried the market all the way up from 1043 to 1059.Only Buyers.

We got a gap.And we are near 5320 levels again.I posted a chart yesterday of an auction between 5272 and 5320 being important for the market today. Let’s see how it pans out.

On another note, I want to stress to my readers the importance of inter-market analysis in your study. The header of this blog mentions it as a study of market profile and inter market relationships.If you have to make serious money in this market, you have to develop the edge in identifying the movement of ‘hot money’ through other foreign markets, commodities, bonds and currencies.So far I have kept it to the US markets, but we will soon involve the rest for getting a better picture.

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14.10

I’ve stayed away from doing a lot of trading today. The gap up ensured that the market belonged only to scalpers this morning, quick to run away with a 10-15 point gain.

5339 has been the high of the day, very close to the level of 5344 we have been watching.An argument can be made for a trade both ways: a) Trend is up as long as 5225 holds or b) trend is down till 5367 is not taken out.

The fact that we have sold aggressively from these levels as also the up-down moves of over 80 points each, make this a treacherous market to trade.

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15.10

We have done intra-day trades on the blog so far.On days like today, where the market didn’t give much confidence for a trade either way, I felt the need to put a system in place which will work for us regardless of gaps, other markets etc.

So I dusted some old notes and have managed to put something together for a positional set-up based on MP levels.

I have put it across to Viren for his views and we will run the trades here live on the blog.They are basically swing trade set-ups with a stop and reverse system ensuring that we will always be in a trade.I figure that the trades will run between 2-7 days duration. Once it works with the Nifty, we’ll bring the Bank Nifty as well.

I hope to foster a better understanding of market profile through this.

Once we put up a few trades, I look forward to your comments towards the same.

I’ve found a name for it too !! A.I.A.T –always in a trade. how’s that?

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Estimates for 8th July

At the time of this post the US futures are trading near the high value node at 1043 levels.I doubt that there exists much upside for that market from here today, but the question which is open is whether it manages to close above that level.

I’m going to turn my attention to the football game coming up, and take it up tomorrow,but wanted to post this chart of the Nifty.

My interest in the ES this evening is only to know where the Nifty will open tomorrow. As mentioned we were anticipating a gap open.

The chart is that of the Nifty future for the past 5 sessions.

The yellow horizontal lines show price acceptance for these days or value being created. The move up yesterday afternoon was rejected this morning by a single print selling tail from 5289 levels to 5272. This was a zone where the auction didn’t happen the rest of the day.( second arrow).

So tomorrow can we auction above 5272 and in the 5272 to 5320 zone? If we do and stay above 5272 then I would consider that as the first step in the move to 5367.

We will also observe if the ES manages to stay above 1043.

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EOD -7th July

The markets have opened down as compared to yesterday’s close.

The little weakness was there in the charts and we made a mention of it at the close yesterday.

For today, we want to see 5270 being protected by the buyers, for the upmove to have any chance.

On the upside, resistance is again at 5317.

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10.43

As traders most of us have been brought up on a mechanical trading system which can give us automated signals to trade on.

The so called search for the “holy grail” of trading is the search for one such system which can help a trader by taking away his decision making ability!

The truth is that the best system of trading and the holy grail is within you !

Only you have to empower yourself to make the decisions for your trade, rather than your mechanical system.

The reason I like MP is that it is not a readymade system which gives signals. As a trader you have to stand up and identify the signal.There are many other systems where the trader takes precedence over the system simply because he makes the decision.

I mentioned to you yesterday that you identify your trade in the chart through price and volume and use everything else for a confirmation.Trust me you will emerge a better trader.

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11.17

This market is looking for cues to the upside from the US markets. Till the US futures trade above 1043 levels, the reversal over there is not confirmed.It can also show levels of 990 in the short term. Currently at 1020.Keep an eye on it.

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Estimates for 7th July

We are still having problems with blogger. Evidently they are undecided whether they will allow comments from all commentators or only people with a blogger account.

Hope they resolve it soon.

Viren drew my attention to a set-up he has been back testing with volume profile charts.

Have a look at this chart :

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Let’s focus on today’s profile, the extreme right on the chart.

According to Viren’s set-up, if in a trending day the point of control closes near the extreme in a volume profile chart, then there are good chances of a reversal the next day.

If you look at the profile from today, we had a strong uptrend day and the point of control is at the top end of the range.The point of control represents the best value for the day, or the level at which buyers and sellers agree on value. In a strong uptrend, this only means that there were heavy sellers in the Bank Nifty at the top today.

We’ll put it to the test tomorrow.

As with all set-ups this one has also rules, and one of the rules is that the open the next day, should be within range.

So we wait for the open tomorrow and if we get an auction below 9556, then we short for 9458.

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Bank Nifty-6th July

I’m almost certain that we will have an eventful day in the markets after three lackluster days of trading.

We have opened again within the 5231-5285 range mentioned yesterday.

The safest thing would be to wait for the range to resolve.

5253 would be the pivot around which a move to either side should materialize.

Further down 5196/ 5185 would have to be protected by the buyers.

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9.24

Buyers are showing their hand in the first 25 mins of action.

I’m buying the fut here at 5253 with a 20 point stop.Tgt 5285.

10.10

There seems to be a problem with blogger, as comments are not coming through.

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10.21

I’m beginning to look at 5320 already today. Let’s see the price-vol at 5285 first.

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10.54

Nifty is near the top end of the 5230-5285 range. The high so far has been 5275.

Suggest to book some profits here at 5273, as the auction can slow down. You can add if we take out 5288 with volumes.

Needless to say, the stop of the balance is at the pivot of the morning at cost.

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12.25

The auction has definitely slowed down in the past hour and half.

Some levels I am watching now in view of new information :

a) Auction below 5262 will be first sign that things are turning for sellers.
b) Auction below 5252 will confirm the same.
c) Auction above 5276 will mean bias moving up again.
d) Auction above 5288 means we are heading for 5320.

Trade accordingly.

Stops for morning longs can be brought to 5261.

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12.57

5285 done.

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13.12

I received an email from a reader. I’m reproducing it here :

Dear Shai,

I do not see you using macd’s and stoc’s in your charts. How can you be sure of the strength of moves without the use of these? I see every other analyst use something or the other, but on your charts I do not see anything.Can the market be traded without rsi, macd, stoc and moving averages?

Rajeev.

Dear Rajeev,

I used to use all that you mentioned, some time back.Down the road, I started exploring options for leading indicators, which would put me a bit ahead of the move to unfold.I found that only price and volume would answer my queries.

I’m not dissuading anybody from using the macd, stoc, rsi etc. They are very good confirmatory indicators.Please use them to confirm your trades.But for direction, look at price on a chart and see how it moves with volume.

For the strength of moves, it again is price only.Let’s say you use the floor pivots for your trading. If price moves from R1 to R2, would you say that the move is strong? The same can be said of S2 to S1 or pivot to R1.

I don’t use pivots, but use market generated levels to qualify my trades.If the market moves from one of my levels to the next, I gauge the strength accordingly.

Rgds,

Shai.

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14.04

Those still holding longs, suggest to book out in the 5308-5316 range.

14.40.

So we have had a good move today, about 80 points from the bottom at 5233 to 5312 so far.Does that mean that the trend has changed to up?

I’ll say No, not yet. I still want to see that close above 5367 to get us out of the woods.

For tomorrow, I think we again have a side-ways to a slightly down move. It’s important to see how sellers react then.

Sellers have kept quite near 5230 levels. I am sure they will show up again here and at 5344/ 5367 levels.

I’m signing off…see you guys later.

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Estimates for 6th July

Here are some updated charts from earlier this week.

The weekly consolidated profile is here :

The bank nifty chart:

The US futures charts :

My comments on all of these charts are documented in previous posts.

Nothing in the action on Friday on any of the posted charts changed anything with the analysis.

Looking forward to the open on Monday.

Let’s take it from there.

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Week-end charts

The trading range in the past two weeks has been 5225-5377.

Viren had mentioned in the comments today how the CE writers at 5400 and the PE writers at 5200 have been adding Open Interest.

Girish had put in a request for profile charts.

Here they are for the past two weeks, nine trading sessions :

Notice the supply coming in at levels of 5320 and 5344 and the value slowly drifting lower.

We maintain that the market needs to close above 5367 for the bias to turn upwards.

Till then every move up to 5244 will be sold into.

Here’s another look at the chart from a weekly perspective.

The value area on the right is developing and will take into account the auction tomorrow.

However the lower value created is clearly visible.

On an hourly timeframe we have been held up at 5225 where buyers have showed up.

But the charts clearly show the on an end-of-day basis there are dark clouds looming over for the bulls in the market.

If things don’t change a lot tomorrow, then next week 5225 is surely to break.

Join me then to catch the action as it happens.

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Profile charts