Month: August 2012

Here are the monthly TPO charts of the Nifty and the BankNifty showing the price distribution in this month as of the close of trading on Friday- 24th Aug.

Nifty Futures Aug :

Please click on chart to magnify it.

The green shaded region is the developing value and the purple bars are the high volume zones.

Most of the value for this series has been created between 5324 and 5450 and the expected expiry should be in this zone.

5354 is the support for NF and a current high volume point.

Banknifty :

The BN profile has been sideways between 10560 and 10370 all the month.

The 10440- 10470 region decides the bias for the index with a move above considered to be positive and move below as neagtive for the index.

Here's a fresh look at MCX commodities and what to expect in the coming week.

Crude Oil September :

Crude has been on a big bull run and the month of August has seen crude rise from 4932 to 5425.

The Profile chart above shows volume developing at 5412 on Thursday and 5380 on the composite picture in grey at the right of the chart.

There is also a low volume zone at 5280 on the charts.

The chart suggests a "buy the dip" till this level of 5280 is protected. Upward Momentum can accelerate only above 5380 however towards 5412 and 5470 which should cap upsides for the week.

Below 5280 we can see a move to 5237/ 5219 which will be the final test for buying strength.

Copper M August Future :

Copper traded above resistance at 419.5 for the first time in this month and invited prompt short covering.

The chart shows buyers wanting to push the market now to 431 with a small resistance near 428.

Dips near 419.5 and 423.5 will be bought through the week.

Natural gas August Future :

Natural Gas continued to trade sideways in a 10 point range with selling pressure building at 161 and buyers at 150.3.

The week low at 149.3 and the closing of 150.3 continue to be important supports below which 140.5 can be seen easily.

resistance now placed at 156 and 161.90.

Silver Large Sept Future :

Silver is near 57700 previous resistance and consolidated on Friday.

The move from Tuesday is clearly extended and a pull back due.

First sign of weakness will be a trade below 56760 below which levels of 55700 and 55330 are expected.Further down it is not expected to trade below 54500 which is the place for all dip buys in the coming weeks.

Gold Large October :

Like Silver, Gold is also due for a pull back early in the week.

The critical level to watch for consolidation or pull back if any is 30630. A trade below that is expected to bring 30350.

Supports lower are at 30220- 30150.

The charts we stream live in the trading room have now the added functionality of seeing within the volume candle to show buying/ selling pressure.

The common term used in market parlance for the ability to do that is called Delta.

Delta takes out the guess work when it comes down to see how the market is moving on volumes.

Auction theory is fundamentally about the role played by buyers and sellers and volume breakdown helps to understand the role clearly.

Here's a chart which illustrates :

The chart above has :

a) price in 5 minute candle sticks in the top pane

b) volume traded for that candle in the pane below

c) the next pane has a break up of that volume with the green candle showing the buy volume and the red candle showing the sell volume

d) the final pane below is the net of that buying and  selling volume or the difference between the two.

For day traders who want to make quick buying and selling decisions, a look at the volume candle can show if buyers are coming at critical levels or just ahead of important news events.

Also post event it can quickly put you on the right side of the market, just by observing the buying or selling pressure.

The Nifty future continues to operate at the upper end of it's recent range

The composite profile again shows the balance developing which should set up another good vertical trade.

As always exit of value area and range is the best strategy to trade the balance zone.

Current value area is 5374- 5328 with the POC centered at 5356 which should be the SL for the move.

The profile suggests a 190 point move out of the balance zone which is likely to target 5570 on the upside or 5140 on the downside.

We will continue to track the imbalance as and when it develops.

SBI is down from 2090 on Wednesday to 1857 today on poor earnings.

Here's a profile picture :

After hitting balance on Tuesday, the stock shows there distinct distributions marked in green in the chart above.

Friday was a double distribution day as the stock found new value below 2000.

This morning's open has see the stock reject this distribution from Friday and continue lower to the medium term support at 1857.

A move above 1893 today can put the stock back to 1947/ 1965 where the seller should come back again.

An auction then lower from 1947 to 1897 is a bigger possibility.

Here are some updated charts of the commodities we track

Natural Gas August future :

NG had a good rum above 165 and just when it looked poised to scale 200, the seller stepped in at 180 levels and at the close of this trading week has managed to push it below the breakout level and into the previous balance zone.

The chart above shows dpoc in white and vwap in orange

Clear resistance now is at 162- 164 with support coming near 150.7

The mini composite in green purple on the right of the chart shows value being accepted below 168 now and 168 and above will be the minimum condition for swing longs

Below 150.5 a move to 140/8 will begin.

Crude Oil August future :

We spoke in the trading room on how extended crude was in the shorter time frame after the big move up from last Mondays' 4950 levels.

Crude got defended at 5090 on Friday where is the value high for the rise.Staying above 5090 during the week will make buyers come back to buy all dips. However a break of 5070 can invite 4992 again.

The chart shows a clear uptrend however and is likely to continue if prices stay above 4900 in the medium term.

Copper Mini August Future :

Unlike the crude chart above Copper has not been able to hold on to levels above 430 where it has met with heavy selling.

Chart shows prices below a declining vwap and dpoc which is a big indication for sell on rises.

However buyers have stepped to defend prices below 407.

Overall the profile shows a balance developing between 430 and 407 with a composite POC around 420 pushing price 10 points either side.

Gold Future October :

Gold remains between two high volume nodes at 30400 and 29600 marked as white bars in the chart above.

Shorter term the immediate dpoc at 29940 and vwap at 30030 will keep price fixed around here for some more time.

The smaller range for day traders is 29840 to 30180.

A move above 30180 should challenge 30480 again.

Silver Futures September contract :

Silver is more weaker than Gold meeting sharp sellers near the Orange vwap line at 54500.

54500 is also a Low volume zone and is marked out in the chart as pink showing rejection of price there.

Lower down 52400 levels and below are meeting buyers and a move above 53500 will give 53800 and 54300 all over again.

Here's a chart of the BankNifty spot showing the distribution of the past 2 months.

The Profile is a DD or a double distribution as it operates in the low volume zone in between the 2 distributions.

The market is being flooded with news flow this week with the RBI governor on Tuesday, the FED chairman yesterday and the ECB president today unleashing large scale policy wordings on the market.

Amidst all that we saw a Gaussian distribution in the market yesterday.

A Gaussian distribution is a market which has symmetry or is balanced.

Refer to the chart above and once can note that the last distribution was seen on 19th July.

Generally a move away from such distributions create low risk high profitability trade setups as can be seen from the move on 20th July which was a 200 point move away from the balance.

Within the balance structure there is no clear trade edge as buyers and sellers are equal and push pull the market.

How ever the break is always profitable as one party cedes control to the other creating the imbalance .