Month: July 2012

Most of you would have seen our last post on the Long BankNifty – short Nifty trade.

That post was here- https://www.vtrender.com/content/spreads

In that post made on 14th July , we had suggested that the outperformance of bankNifty would end and it would stop moving higher the way it had.

This morning we are seeing early indications that bankNifty has started to lead up again.

Have a look :

The bounce from the low volume node at 1.92 has been good and the market is within striking distance of the next LVN at 2.02.

we expect that pair to make it to 2.0346 eventually.

For the broader market, it means that bullishness is back in favor.

Today is expiry of July contracts and if you are looking at your screen you can be forgiven if you think that the action is similar to last series as we have the same set of prices on the screen and the activity has been eerily similar in the past few sessions.

The difference is that in June we were coming into balance from below and in July we are in balance from above.

The three composites are June, early July distribution and the current balance playing out on the right.

The current structure has balance and confined within the distribution of early June.

The green horizontal lines are the value areas and the market did well to rotate to the lower value area of June as expected when it entered the value area from above.

Lots of energy in the profile and the balance still developing.

We will wait for the exit of current value at 5090 – 5136 to play the next imbalance move which again will be a vertical drive from here,

Here is an updated chart of Natural gas.

Many people would not know that within a short span of time the commodity exchange MCX has risen to become the third largest commodity trading exchange in the world.

It points to the interest prevalent today in trading metals and energy and their like.

We at Vtrender track 5 instruments every day in our trading room and also send out trading alerts for them.

Here's a look at some charts for next week :

Silver  ( Large contract September)

This week Silver traded in a small range with dips to 53200 being bought and rips to 53050 being sold.It ended the week near 52800 levels.

Moving forward the downtrend is still not broken, but high volumes are coming at the current lows as evident in the developing Point of Control ( thick white line) . Also the composite profile ( blue histogram on left) shows a green horizontal line which is the same HVN line showing higher volumes at this price point.

A trading strategy would be to create longs above 53100 with a stop below 52400 as a mark of failure for upside targets of 54500 by the close of next week.

Gold ( large contract- August)

In this week gone by, Gold also maintained it's small downtrend seen from 30400 levels and closed the week at 29300 levels.

There were 2 dips near 29140 which were bought . Like Silver we are seeing high volumes come in at current levels in Gold too.

A quick long above 29250 should bring 29600 early in the week. Sellers would be expected to be back near 29650 and even higher at 29840 which are current resistance. Support below is 28995.

Copper (mini contract August)

Copper was our best performing contract in Order Flow this week. We took a long on Wednesday at the US session open at 425, which we booked yesterday at the open at 429.70 and went short at the same level to see 422 at the close of the session.

Copper saw a good bounce at 420 during the day, a level which we expect to hold.. It may be time to establish long positions in Copper at the start of the week to see an initial target of 424 and later 427.Stops to be maintained below 420.

Crude Oil (August contract)

Crude was the best performer of last week as it broke off a two week consolidation and traveled 200 points higher.

We expect it to hold above the LVN of 5020 ( red horizontal line ) in the chart and consolidate it's gains.

It remains a great day trading instrument much like the Nifty at NSE and with a similar ATR.

Our biggest winner in crude last week was a long at 4815 which was closed at 5099 early on Friday morning.

Natural gas ( July contract)

NT Gas made new highs this week as it broke above the resistance at 166-168 during Friday's session.

Profile picture shows a nice run up and consolidation and evidence of a breakout in the last session. Technical analysts would see it as a bull flag break and even Elliotists would see it a C wave if the break out succeeds.

Order Flow printed longs at 157.4 on Wednesday in Natural gas.

The series of July started out with a big upmove, lost steam around 5350, revisited the lows yesterday and now poised at a critical level, contemplating direction.

Here's a profile chart –

The chart above shows :

a) volume picture in black also called volume at price

b) value lines in purple also called VAH/ VAL

c) vwap in Orange

d) developing POC is white

e) Standard deviations of the orange vwap band in yellow.

The chart shows that we are poised currently at Value area low with a break inside promising to take us straight to at least the DPOC or dVAH as per the 80 % rule theory we follow in Market profile.

1) Most of the volume has been in the value area ( over 70 % of the series), hence chances of a close within the value area at this moment for the series appear bright.

2) the yellow bands represent the max movement away from current price for the series. It's not expected to expire away from these yellow lines.

3) A close above the vwap band will cut out the down move seen and once can expect a move to VPOC.

Here is an updated chart t the view expressed on Friday at the close of trading.

Spread trading is a little known concept here in India, but if you are a swing trader with a slightly longer time frame in terms of holding your trades, there are potentially great trading opportunities if you are correct in your assessment of the markets.

The opportunity is identifying pairs within a sector or even two different indices within an exchange and utilize the opportunity when you know that one instrument is far outtrading the other.

In the trading room, we love to follow the movements of the BankNifty and it's a little secret that the BankNifty has been the stronger of the two indices.

Have a look :

The upper chart is the Banknifty spot and the lower chart is the Nifty spot plotted on the same scale.

Now if you had been long BankNifty and short Nifty from say the last one month, you would have potentially made a 8- 10 % return on the spread with minimal risk.

This chart below illustrates :

The chart projects a 30 minute picture of a long banknifty short nifty trade with an ATR below.

As can be seen the ATR is fairly flat over a one month period which makes it an excellent spread opportunity.

This spread is currently trading above it's 2 year high, which means that it is time to book gains or even reverse the pair from here.

This information tells us that relatively speaking the BankNifty may stop out- performing the Nifty over the shorter term.

I want to place another chart where I feel the outperformance of another index may be coming to an end too.

We all know that Gold has been a more solid performer than Silver over the past 3 months.

Have a look :

The chart above is the Silver and Gold current month futures on the same time scale.

Unlike the NFBN chart above, it is obvious to the naked eye that Gold has been more bullish than silver from mid- may.

The chart below shows a trade with long Gold and short silver :

The chart shows the spread rising from 0.48 to 0.54 which puts the trade in the green.

These are market neutral strategies and would give you returns irrespective of market movement as long as you pick the right spread.

Once can also pick up pairs within sectors say a long Axis bank and short SBI trade within BankNifty or a long CAIRN, short ONGC within the energy sector.

I'll update at least one  pair in the coming week and we will monitor it on paper.

Have a good weekend.