Most oscillators used as indicators are designed for flatter markets or the non-trending types.
But there is one good oscillator working on market generated information which uses also market internals and is an excellent tools to guage an overbought/ oversold condition in a trending market.
This one is called the McClellan oscillator and we visit it periodically to measure extremes of bullishness/ bearishness.
You can read about the McClellan here:
The McClellan has a reading of 64 currently near the overbought level of 80 but not yet signalling extreme bullishness in the markets. This was at the close yesterday.
Our markets have been up since morning, signalling that we may have a bit more steam left.
And as usual, market generated information works better than parameter based ones.
Here is a profile chart taken at 11.00 am this morning.
The chart is that of the Nifty April future :
Point 1 : is the buying prints from the volume point of control of the previous day.We saw a similar buying print from 5710 in the march future yesterday.
Point 2 : Responsive seller of yesterday afternoon, clearly taken out this morning. As a rule, initiative activity is stronger than responsive activity
Point 3 :Buying prints from yesterday’s session which took the market up.
For later today : : The market has reached the HVN of 5805 in the march futures today. The 5700 call recommended here at 20/- on Friday is now worth over a 100/-.
5837 NF and 5820 NF are creating the action now in April futures and a sustained move above 5837 should bring 5867 later.Those single prints hold the key to the day.
The market paused today near the top end of the 350 point range off the lows of last week.
From last night’s post, the market did consolidate but not between 5642 and 5690 as expected, but it was 25 points higher between 5665 and 5714, but the upper estimate for the day at 5728 was kept.
In the process, the profile became balanced indicating that the Steidlmayer imbalance period may be over and we may be making efforts to find a new balance at current levels. Accordingly we shifted our bias from aggressive long to neutral for the week.
Let’s look at the profile :
Point 1 : is the low of the day at the top end of the single print mentioned yesterday in friday’s profile.
Point 2 : represented the anomaly from yesterday and the repair job was done here today.
Point 3 : the highs of the day near 5728 completed the distribution after rectifying the anomaly.
Point 4 : is of interest tomorrow only on a price probe below 5649. Should that happen 5575 and 5589 should come in play
To answer a few questions now :
1) We have changed our bias to neutral more as a measure of risk than any perceptible weakness which we saw in price today.Our stated position is that the risk of being excessively long is high here considered the series expiry volatility and financial year closings.As we did not go below 5642/ 52, the responsive seller seen earlier today is not strong enough.
2) For tomorrow, if we trade above the point of control at 5710, we should go on to hit 5737 and 5757/64.Minor weakness will be below value area low at 5682 towards 5665/ 5649 below which point 4 mentioned above should play out.
3) On the other question of the 200 dma, our charts showed rotation at the HVN of 5714 and an avid profiler would give that more importance than a lagging moving average. The advantage of profile is that it is a sum of the buyer/ seller reaction of all the possible indicators and tools used by traders. Profile measures all buyer/ seller activity irrespective of the fact that the buyer or seller sold/ bought at 200 DMA or elsewhere.
Have a profitable day.
In financial markets, the past is history and the future is always a mystery.
Even though we have had a great month of March so far, it’s pointless to brood over those results, as they will not help our trades tomorrow.I had a few traders who wrote to me saying that they missed this 270 point show, the market put up last week, despite being regular readers here.To them and to several more, the big question would be now whether the market continues it’s uptrend or falls back into the previous bracket.
One day in a market cannot break or make a dominant trend.The idea is always to see continuation or rejection of a new move in the market, in the next session or two.
Let’s look at the profile from Friday :
The lines in the chart are the different value areas, represented by price profile and volume profile methods. Whilst, as a blog and as traders, we are sound believers of the volume profile method and by extension auction market theory rather than the market profile handbook, on a day after the one on Friday, I would wait for the two orders to reconcile.
In an ideal situation for Monday, I would expect the market to consolidate the gains from Friday between 5652/42 and 5690.
Strength above 5690 should lead us to the high volume node at 5714 and maybe to 5728. I will be really surprised if the market auctions over 5728 tomorrow.If we do close up for the day I will still be strongly looking at 5800 before expiry.
On the downside, failure to hold 5642 will mean a dip to the large TPO’s present at 5590. According to our statistics, a visit to the large TPO of the previous day can happen in 55 % of the cases. On Monday that will be possible only on a move below 5642.
After the profile gets completed tomorrow, we should have a better idea of the strength of the longer time frame player we saw in the markets on Friday.
One day at a time.
As many of you know, we treat the month of March a bit differently than most months purely because of the quarterly and the yearly window dressing seen in the markets over the past few years.
If you have been tracking this story alongside us from an earlier post we had mentioned on march 12th :
” I’ll like to break the remaining part of this series into two parts, with the trend being mild to moderately bearish for the coming week and a shift to mild bullish as we come closer to the expiry week”
With the highs of the series being less than 12 points away ( current highs of the day are 5599), it’s important to step back and look at where the futures are for the entire series.
We have noticed big volumes coming at the close and have not really been surprised at the gaps we have seen over the past 100 points.
NAV management will continue to be the theme for the remainder of the series.
Charts from last night.
We said :
-5527/ 5540/5556 possible as long as NF stays above 5507 tomorrow.
High of the day has been 5554
Bank Nifty :
We said :
– 11140 is target on upside.
11134 is high done
We said :
holding 2639, SBI can do 2682/ 2704
2677 is the high
We said :
– RIL can go upto 1024/ 1030 tomorrow.
1025 is the high
We said :
1552/ 1569 are immediate targets
1564 is the high of the day.
Incidentally both the targets given in the chart posted yesterday were done.
Next week, we will put some alerts out real time for intra day movements here on the blog. You can choose to get notifications in your inbox by choosing to subscribe in the box on top right.
The Nifty futures profile chart as of 2.10 pm is below :
We saw an open drive which was the longer time frame player stepping up.
Value now is being built at the upper end of the single prints from 18th March.
Holding 5460 this market can move up to 5527/ 5556 by tomorrow.
5500 is also the series Point of Control and slow distribution was expected here this morning.
The BankNifty at 10950, SBI at 2640 and RIL at 1011 are at crucial points for the day.All reference levels of importance.