In keeping our view on the Steidlmayer distribution, let’s look at Infosys today ( cash market).
For the many followers of Infy, the day of the results was an amazing erosion of value, not seen in years!
Here is the chart of Infosys in cash.
We will follow the Stedilmayer distribution ( SD) to point out a move in the instrument, which is around the corner.The details of SD can be found here
The Steidlamayer theory hold that markets do not go from bull to bear or bear to bull all the time, but form a balancing act in between through a 4 step process. The most lucrative opportunities are always in step 1 and step 4. Steps 2 and 3 are for people familiar with the art of writing options.
After the Initial price movement seen in INFY on results day, we had a few sessions where the markets tried to balance and create a new value or opportunity in the market.
As a follow up we also saw a P shaped profile which does seem to indicate that step 3 also seems to be getting over.
So we are preparing for step 4 which should go on to do at least 50 % of step 1 or form a new IPM below the balance area.
As the market is balanced, we hold a neutral view at today’s close and would look out for the following :
a) a move above 2966 cash, should bring 2991 and 3050 and 3090 subsequently.The region above 3090 is 50 % of the IPM as can also be confirmed by the single prints above it. This will be resistance for the move. Only a move above 3090 will bring momentum buying in infosys.
b)Should the market want to break above 2966, it should not trade below 2907 tomorrow.
In our previous post on Steidlmayer distribution, we had made a point that step 3 of the process was over and ” the market is on the verge of a large move”.
The point made about step 4 was ” usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM ( Initial price movement) range”
This week we saw a move from the Point of control of the b shaped profile, signaling the start of the new IPM, but for the conservative profiler, the final closing of the week was within the previous bell shaped curve and still within 50 % of the previous IPM range of 5550-5971.
Have a look :
Chart of NF April
For the New IPM, we had remarked that it should ideally begin with a trend day and take out the previous balance zone. We have seen evidence of a double distribution. which is a trending type of day in the markets and usually a signal for follow up action. Aggressive profilers would confirm the DD as a signal that we are in a new IPM which should challenge levels of 6090 next in the futures.
However as remarked in the comments section, the conservative player would wait for the previous balance zone to be taken out to confirm the new activity. We have a high-volume-node ( HVN) at 5946 levels and once that is taken out on closing basis, the stage will be set for the move to 6090 NF.
If however the market is in a mood to scale back, the 5808 on the lower side should not be violated. However only a break of 5733 from the b shaped profile will turn the sentiment bearish for the short term.
Looking forward to next week, we have options expiration as well as earning season underway. An options expiration by itself involves large inventory adjustments by market participants which gives the market added volatility. We have already seen reactions to Infy Numbers create panic in long inventory positions and it will be interesting to see the market’s response to RIL numbers.
So with the markets at the top of it’s recent trading range and a double dose of volatility in expiration and earnings, we have some interesting times ahead.