Heading into the open of today, we had a 3I day as a background.
The early morning inventory was short and the market wasted little time in getting near the level of 5435 mentioned in the weekend post.Incidentally the low of today (5438) was last seen on the 1st of September last year.
Once the seller was neutralized, the only message from the market we were looking at was strength above 5484 and movement at the previous day’s Point of Control.
There was responsive selling at the POC, but further buying later in the session turned it into a profitable day for the bulls.
Tomorrow morning the market will look for 5504 to protect the buying after which we can once again see 5549 and then 5580 and hopefully the big 5625.
In the BankNifty the poor lows mentioned at 10530 were broken to the downside and the lows from 14/ 1 and 17/ 1 were re-visited before the BankNiftyy made a reversal and closed higher at 10660.
Strength above 10740-10760 will put a revisit of 10900 back on the cards.
In my Last post I had mentioned that the noise around the settlement day was not clinching evidence to signal a change of trend but to quote from that post again ” Sometimes what didn’t happen has more implications than what actually occurred.”
The open was crucial as a follow up to that afternoon’s move and the open left nothing in doubt.
The sellers managed to take the Nifty future down 150 points in a session before some exhaustion in the Bank Nifty and some opportunistic buying as well as short covering in the Nifty future managed to take the Nifty up about 70 points from the lows.
The area around 5625 was a high volume zone noted at the close of trading on the 27th. In hindsight it represents the area where new sellers have entered the market and are ready to pin the market lower.
People who follow parameter based indicators would recognize this zone as the 200 DMA.But believers in market generated information should not hold any level as sacrosanct or too big for the market to scale.
Strength above 5625 will put 5685/ 5725/ 5785 in play. Each of these levels will be used by sellers to re-enter short positions in the market.
Looking down we have Friday’ s 5481 and then 5435 and 5373 as the next major supports for the market.Break of one should lead to the other.
For those of you who were wondering what happened to the OrderFlow chart of the Bank Nifty after my intra-day post, here it is :
The profile picture posted yesterday put in a poor low at 10530, in itself a reason to revisit that level again. We’ll see if it breaks the second time it gets there.
To close, I drew up a chart to represent the times, the Bank Nifty has been out-performing the larger nifty.
Have a Look :
It’s a 40 day chart where Blue represents the BankNifty future and the Green the Nifty future. It’s only from the 24th that the BN has been out performing the Nifty.The banks are important to our investment portfolio and we’ll continue to keep an eye out for this relative strength.
The ratio of the two is turning into a contrary indicator with an upswing marking a decline in the indices and vice versa.
Some thing to chew about over the weekend.
Have a good one everyone. !
Whilst a lot of us are pertubed about the movement of the Bank Nifty future and the fact that it is not making new lows along side the Nifty, here’s a chart which explains ..
It’s finding support from the High volume node of the profile dated 17th Jan from where it had launched off to 11280.
If this level gives way then there is a 100 point fall ahead at the minimum.
Meanwhile here is a chart of recent OF action :
Often times a view which one holds at the start of a session can change as the market keeps sending out a message.
We walked into this expiry day, expecting a close around 5700 which was the fairest price for the series for both buyers and sellers. Also the Open Interest build -up at 5700 by writers of both the calls and puts was strong enough to justify the thought process for an amicable close.
Instead the market had other ideas and for the second time in two months we had a settlement at the extreme end of the series and in favor of the party who had dominated from the very beginning.
The daily chart above should not leave anybody in doubt on who had control through the series.The blue horizontal lines represent areas of new selling and should the buyers test them again, they will have sellers coming back at them with renewed energy.
But the question which stood out on an intra-day basis, was whether profile by itself suggested that we may end at the lows today?
It certainly did.
Have a look at this chart against the one I posted yesterday.
Two things stand out :
1) A selling tail at the open
2) An inability to auction above 5676-5688.Once 5676 was broken, the lows of the bracket were definitely at play.
For Tomorrow :
a) We wait and see if the market gets back in the bracket and if 5676 is tested.
b) Monitor the open to know whether today’s late move was settlement only or has larger implications.Clues to watch would be whether Open is in value and range.
Sometimes what didn’t happen has more implications than what actually occurred.
Generally, the end of any series carries with it a little excitement on where it would end and pundits are known to record the value as a future reference.
We at Vtrender do not give any more importance to the closing expiry price than the close of any one trading day, and the larger auction process moves on regardless.
But we do have a little calculator which helps us arrive at an approximate range for expiry many days before.
That calculator has calculated the range of Thursday’s action to be 5625-5748.
Before we get into the Open Interest break-up, let’s look at the longer term view of the Nifty Jan Future in terms of Profile structure for this series.
The purple zone is where the Market has traded 70 % of the time and it’s chosen region to auction.
The price point of control at 5700 represents the pivot around which moves have been made and should be the same for tomorrow’s session.
Profile by itself would indicate the region around 5700 as a fair settlement price for the series.
Let’s shift our focus to the Open Interest at 5700 strike for Jan.
5700 Jan CE :
The table is for the Open Interest over the past five sessions here. It shows a reduction of -850650 units and a total OI of 5992500.
5700 Jan PE :
Reduction of -156900 here over 5 days and a prevailing build up of 5034800.
The picture cannot be complete without considering rollovers as well as the Open interest in Feb at the same strike
5700 Feb CE :
1666200 added and the total OI is 2516400. Most of it added in the past five sessions.
5700 Feb PE :
1371550 added against 3315400 as total Open Interest.The chart shows almost a 100 % rollover from Jan to Feb.
So Open Interest clearly shows what profile has been saying all along – that there is uncertainty or in the language of profile a balance prevalent in the current market structure.
I won’t be surprised if we expire between 5700 and 5716.
We were trading the January Future yesterday, but for tomorrow’s action we’ll shift focus to the Feb futures.
There’s a reason. At all times in the market we are looking for the presence of a longer term player who has a view of the market of more than one day. That person will be trading the feb tomorrow and it will be left to the day time frame to negotiate the Jan particularly from noon.Also we are “volume people” and there will be more volumes in the feb than in Jan tomorrow.
Here’s a chart of Feb Action :
Looking at this chart I only remember one saying which I learn’t years back : ” From failed moves come fast moves”.
As the Nifty opened above the previous excess zone of 5775 ( 5750 in Jan future) and buyers made a conscious attempt to stay above that level, the news flow in the afternoon was responsible to create a small selling tail at the top and a breakdown below value and Monday’s open price added to the downside momentum before the High Volume Node from 20th Jan ( pink dashed line) arrested the downtrend.
The market continues to be in balance in the weekly time frame and only a break down below feb level of 5640 will invite fresh selling.
Bank Nifty :
In my last post on Bank Nifty I had stressed on the importance of the 10930 zone as well as the auction of the 14th of jan as a defining point for the Bank Nifty.
Have a look at what happened since :
The break above brought 11290, but the subsequent sell-off has brought us back to last friday’s closing level exactly.
The profiles are each marked in the rectangles alongside.
From the current closing level, 10973 on the upside and 10873 on the downside should be watched for direction.