Month: November 2010

5868 did a job today by galvanizing buyers to 5915 and providing support on the rebound from there.

5868 is also the weekly value area low and if the 80 % rule plays out it can fetch a trip to atleast 5975.

Here are the charts for today :

Nifty :

Bank Nifty :

Value was created today at 5820-5890-5904 in the Nifty.

It was 12040-12000-11880 in the Bank Nifty.

5850 should support the market on the way down tomorrow with 5810-5820 as important reference levels for tomorrow’s action on the downside. Up above it is 5930 and 5975.

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Bounce gains momentum

The bounce which was expected in the weekend posts by Shai and Girish played out and we had a move to friday highs again today.

The Vol profile chart shows a higher percentage of buyers than sellers and some initiative activity at key levels.

5804 and 5830 are important ref levels to the downside with the turn level of 5868 standing in between what could be a move to 5930 and 5975.

The Bank Nifty consolidated today below the highs of friday, but was not able to take out the early morning highs later in the day.

Support for the Bank nifty still lies at 11680 which in our book is as big as the 12460 levels of November future whose breakdown resulted in a 1000 point drop.

Like 5868 in the Nifty 11824 holds the key for further moves.

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Oversold Bounce


Summary:
1. Again as we saw on Thursday, the DEC Options data is not displaying that bearishness we have seen on the screen in the last few days. Just take 5800PE vs 5800CEs – the 5800PEs are massive 51L vs 24L 5800CEs (even after a 100% increase in 5800CE OI on Friday). 
2. 5900 seems to be balanced level with a negative bias. Given that there is only 9L difference between PE/CE, it could go either way depending on whether buyer or seller is strong
3. As of now, 5800 is the support and the 6000 is the resistanceBelow 5800 there are good supports at 5700 & 5600
4. PCR dipped on Friday from 1.32 to 1.26 – but these are still much higher numbers than what we saw in last few days of Nov expiry (around 0.97-1.08)

Nifty Futures:
2.49Cr OI down 3.87% (10L shares cut) – opportunistic short closure? But not that big OI change though

Banknifty Futures:
14L OI flat – despite the index moving almost 300 points down and 400+ points up intraday, there is no change in OI!

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Options/ futures data for 26/11

The chart which i posted in my previous post was indeed the NYMO advance-decline chart, specifically used to calculate overbought and oversold conditions on the NYSE ( New York stock exchange).

We are not trading on the NYSE, but actually the NSE and the only change in the formula has been the values of the NSE as opposed to the NYSE.More recently the NYMO was at a -80 levels on the NYSE with the futures at 1171, before a 36 point move began to 1207 there.

But make no mistake, the indicator is as powerful on the NSE as it has been on the NYSE.You can read more about the NYMO or the Mcclellan indicator here

The McClellan Oscilator is amongst the best reversal indicators in the market today as it measures extreme bullishness or bearishness in sentiment through the advance-decline ratio which in itself is the best gauge of market sentiment.It works well for all contrarians.

Here is the chart updated from the beginning of 2010.

Notice the lows of the Mcclellan marked by swing lows on the Nifty.

There are two ways to play the McClellan indicator.

The first one is to be on the lookout for extreme readings of -80 to +80 at the close of the day session. Here existing positions can be closed or new contrary positions can be initiated for a swing trade.

The second and more powerful use of the McClellan is when it sets up a divergence with price.In february of 2010 we had one such divergence which ended the correction at 4675 for a move to 5300 which came in the first week of April.The indicator hit a low of -135 on 6th feb whilst price hit 4675 on the 8th of feb.

We are at similar levels of the McClellan, but without a price divergence at the moment. Regardless, the indicator is getting extremely oversold which means you have to be cautious if you are trading short.The risk-reward does not favor new shorts at the moment.

To close let’s look at what the oscillator did in the crash of 2008.The chart below is computed from 1st dec 2007 to 31st March 2008.

The difference is that in 2008 the NYMO was reacting to a crash and we are having a correction at the moment.

A good correction runs between 10-13 % and generally finishes the daily cycle at it’s lows.I’m still expecting the new daily cycle which is overdue for a beginning to take us to swing highs by early next year before we can think about an intermediate degree correction.

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McClellan Readings (2)

What a day !

It’s days like these which makes one so passionate about trading and also puts up a notice that you cannot take the market for granted.

Consider it this way, the safest traders at the start of the series were the 5800 PE writers, who had nothing going wrong for them for the entire series, till it came to the last 30 minutes !

The Sellers have had it right this entire series,maybe their best series from 2008,and could not have asked for a better finish. They went for the 5800 PE writers at the close.Some survived the scare but the figure read as 22,74,000 reduced from yesterday’s 63,37,000 posted by Girish earlier this morning.

To be honest, I was thinking that it would be the 5900 CE which would be in the firing line, but the turnaround was swift and methodical.

In line with Shai’s post over the weekend and the fact that this was a move directed for the November settlement, we picked up some Longs at the close, 3 points from the lows of the day. We feel we have a great price on these and would like to keep it till the market tells us otherwise.

The December future actually reflected the correct price of the mkt today. One should not trade the expiring contract on the day of expiry as it can be manipulated for the Open Interest.

Confidence was missing in the banks today in terms of buying support. We will be keeping a close eye on this future for clues to market direction.

The Nifty and the Bank Nifty closed above the lows from yesterday.

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Sellers go for the jugular !

We opened our doors today to a whole bunch of enthusiastic traders wanting to check out Vtrender Live, our trading room and our orderflow indicators.

I’ve often said that the best place to check out the potency of any good indicator is a two-way volatile market and our guests would not have asked for a better day to have a close look at the Order Flow indicator in action.

At the end of the day, our day time frame indicator returned these signals :

Shai always says that these indicators which are built on volume profile are 20 % better than any of us, as they do not have considerations of greed and fear in the decision making process.

The long at 5848 upto 5905 and 5960 later, justifies the immense amount of effort and time we have put to get this upto speed !

Here is the Bank Nifty :

Incidentally the short was suggested at 12450 at the highs of yesterday and the reversal printed at 1.15 pm today at 11960 levels.

Looking ahead to tomorrow, the global picture was softening when our trading closed at 3.30 today. The US futures are near a critical level again and the open tomorrow will be exciting again.

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V shape