Month: September 2010

In the markets Buyers make money, Sellers make money–it’s the pigs who get slaughtered !

Definition of a Pig : Greedy short term player, looking for small profits with big risk and no knowledge of the markets.

At yesterday’s close we had mentioned that the buildup at 6000 CE which was around 24L was speculative and certainly not smart money.

By Afternoon the CE buildup at 6000 CE was another 22 Lakhs, and that’s where it was evident that the market would go for the kill.

…And Viren unleashed his now famous Option call.

 at around 1.40 pm. ( in the comments of the previous post)

The result- All the 22 lakhs added intraday covered  +  another 20 Lacs from yesterday evident in the final OI figure at the 6000 CE which stands at 56 Lacs now against the 76 Lacs yesterday.

To the uni-initiated, the purpose of writing a call is to gain from time decay in a side-ways market.You don’t write an option with one day to go.

There is no time factor in an option set to expire the next day…

Anyways here are the charts for October : 

With one day remaining for the September series to close, the action would be around the 6000 strike in the Nifty with a total of 1.5 Cr in Combined Open interest at stake.

I had mentioned last time when we covered the Open interest before expiry, that smart money tends to move to the next month for all hedges, a few days before expiry and any big changes in Open interest on the penultimate day or even the day of expiry has to be greedy speculative money who inevitably get slaughtered.

We saw it happen last time when the market moved around the 5500 strike killing the CE writers who had built a substantial open Interest the previous day.

Let’s look at what’s happening at 6000 strike from the past five sessions in Sept and in Oct too.

We are seeing a trend day in the Nifty turn into maybe a double distribution day later in the afternoon.

The highlight of the day so far has been the 80% rule workout in the Nifty as well as the Bank nifty.

It’s amazing to see this rule work out despite the many other obstacles in the path of chart analysis.

We are watching support to hold in the 6003-6010 zone beyond which 5995 and 5979 are known reference points.

Failure to hold 6003 will discard the double distribution theory.

We have identified 6040-6047 as the inflection point for this week beyond which 30-40 points can be made either direction.

Trade well.

I’m running late for an evening event, so I’ll post these charts only.

Nifty :

A quite day of trading turned volatile in the afternoon resulting in the Nifty giving up all of it’s gains made at the open.

We anticipated the open up, booked our overnight longs from Friday and even took a short trade to the downside.

Afterall it was a Market profile 3 I- follow up day, one whioh plays out with an 85-95% probability rate as my fellow traders in the Trading room are discovering.

Have a look at the chart :

Nifty closed up 58.75 points (0.99%) at 6018.30 whilst Nifty September Future closed at 6034.55 premium of 16.25 points.
Bank Nifty closed up 117.25 points (0.97%) at 12263.55 whilst September Future closed at 12295.65 premium of 31.1 points.

• FII bought in Cash (Net buy 1149.8 Crore)
• FII sold big in index future and stock future, bought in index option (Net sell 1046.89 Crore)
• DII sold in Cash (Net sell 879.83 Crore)
• US market ended in GREEN.
• Global cues are positive.
• SGX nifty is positive as of now.
• Most Active Nifty September Call Option: 6000 and 6100.
• Most Active Nifty September Put Options: 6000 and 5900.
• Advance Decline for the day was 938:412

NIFTY TECHNICAL
Current Spot: 6018.30
Pivot: 6000
5DEMA: 5971
10DEMA: 5897
20DEMA: 5775
50DEMA: 5604
RSI (7 days): 80.12
Supports: 5970 – 5922
Resistance: 6048 – 6077
Nifty Future VWAP: 6006
Bank Nifty Future VWAP: 12223
MP Values Futures: VAH – 6040 POC – 6031, VAL – 6000
MP Values Bank Nifty Futures: VAH – 12290, POC – 12270, VAL – 12219

I made a small analysis of Nifty data for 8 years to check which days give more positive closing and the one gving negative closing, and the result – check it for yourself.

It’s been a long day in a market which has been generous to us today.

I was going through the trades we have done in the past two weeks to iron out chinks.

One statistic which caught my attention has been the performance we churned out in the Bank Nifty.

We made a lot of heads turn, when we said that the Bank Nifty was more suited to our style of trading.You have to be quick, it’s volatile, it’s risky were some of the adjectives which were thrown

The Bank Nifty has changed a lot from the time the regulator made it into a 25 point size, bringing much needed liquidity to the index. I still remember the times when the bid-ask spread was so huge, one could drive a truck through it !

Anyways here’s the chart :

We identified this trend day early today and are pleased to see the Nifty at 6032 levels currently.

There was little doubt that once yesterday’s 5947-5976 was resolved, we would see strength above 5990 levels.

We initiated and booked some very good trades so far :

Consider these intra plays :

*Long Nifty at 5984.

*Long BN at 12170

*Long LT at 1292

*Long Axis bank at 1482

It’s always better to know the type of day unfolding if you wish to be a good intra day player.

Have a good weekend.

Heading into the open, we were very clear on what the bias of the day should be.

Yesterday after about 2 weeks and 500 points of an upmove, we had seen range extension on the downside and were willing to speculate that step 2 was done and we were in early stages of step 3.

We also had a balanced profile from 2 days back to shore up that claim.