Year: 2013

As we look back into the October series, it's been a buyer dominated one and the buyer has stamped his authority through October.

 

In our last post – https://vtrender.com/content/september-series-charts, we had noted the September series vwap to be around 5734 for the expiring Fut or roughly 5700 in the spot.

 

That happened to be the low of this current series.

 

As we move into November the current vwap is at 6035 in cash.

 

 

As Profilers we know the market's medium term trend will not change till we get a close below this number.

 

Keep an eye out for 6035 through November.

 

We also note 6090 as a high volume node which marks the place where the maximum interest lay this series.

 

Above vwap, this would be the level the Buyer will first try to defend.

 

BankNifty :

 

 

This is a chart of the bankNifty cash index.

 

By virtue of that move on RBI day, the BN finds itself trading above monthly developing value and POC.

 

Vwap is at 10480 which looks like a short term base now for the medium term.

 

Supports for any major fall would be 10800 now.

vwap of October

As keen followers of Auction Market Theory and Volume at Price, we are keenly interested to know the kind of volumes which move the market.

 

Since the start of this year RM who gives us the daily McClellan readings has devoted a lot of time and energy to trace the footprints of one particular section of traders popularly known as Foreign Institutional Investors or FII's in our markets.

 

The helpful data from the NSE now ensures that we do get daily reports more on the likes of the Commitment of traders ( COT) report popular worldwide.

 

We track this data for a few reasons

a) It helps us ( as Viren says)  keep an eye on the neighborhood 

b) It shows us what the larger institutional desks are doing everyday.

c) This part of the market is very transparent and represents often times over 50% of the traded daily volume.

 

Here is a chart which was made by RM 2 days back on the Open Interest in futures and the FII role in them.

 

 

The chart is annotated and FII index Future longs and shorts can be compared with the total open interest of the market.

 

One thing which stands out is that every big upmove has happened with a fall in the red line or the shorts held by FII's.Most rallies have happened this year on short covering than active buying at the lows. The actual buying has come much later as the green lines would show.

 

A few days back I had covered in a post the September buying at 5700. That post is here : https://vtrender.com/content/vwap-September-revisited

 

When the Market hit 5700 the first time on 4th September , the total Open Interest in the Market in Nifty Futures was about 5L contracts and FII's held about 38% of the longs in the market that day.

 

Today when the market is at 6100, the total open Interest in the market is roughly the same around 5.2 L contracts , but FII's have increased their ownership in long positions from 38% to an astounding 76 % as of yesterday's close. 

 

That 76% figure would alert us to the possibility of some profit booking and hence we would be checking the daily stats to see if there are signs of some profits taken after every fall.

 

On Tuesday though, they added 28620 long contracts in futures and showed no signs of taking profits off the table.

 

Watch this space for updates.

FII Open Interest Sheet

In the trading room of Vtrender we have been tracking for quite some time a variation of an Initial Balance setup first popularized by Kris and RM .

 

The set up is that after an Initial Balance ( IB) is formed in the first hour, we are on the look out for range extensions in the next 30 minutes.

When such extensions happen in the period between 10.15 am and 10.45 am , we are then looking for the market to come back into the IB, following which we get a trade setup activated which takes the market to the other extreme of the IB.

 

Hope Fully this chart would explain it better :

 

 

The blue horizontal lines are the Initial balance (IB) or the first 60 minutes of the day.

 

Time wise it is being represented by the purple lines.

 

The orange lines are the next 30 minutes or the period between 10.15 and 10.45 am.

 

If it enter IB again from day high to below IBH it is a short and represented by pink in the chart ( pink will be on top of the orange)

 

If it enters from IBLow and goes up it is green ( green on top of the orange).

 

We have three variations of this set up in the past three days.

 

Monday we went short, tuesday the setup was long and today the condition was not met, so no trade alert was there.

 

Let’s look at these conditions for the trade to set up :

 

Condition 1 : IB gets completed at 10.15.
Condition 2 : Look in period for the setup is 10.16 to 10.46, not one minute extra here or there. ( Has to stay outside IB for at least one min)
Condition 3:  Has to Break IB ( high or low) between 10.16 and 10.46.
Condition 4 : Has to come back in IB before 10.47.

 

When the above 4 conditions were met we were looking for a trade which could take the market to the other IB extreme
high or low, often times the day high or low as well.

 

 

Overall whenever the condition was satisfied we had a 50% win loss ratio which should give about 40 points minimum as Ib is of that points with risk easy to manage at current day high or low.
Here are the results :
The charts above show results when the market went above IBH and came lower and in the process met all 4 conditions mentioned.
Also when it went below IBL and came higher , the results are mentioned separately.
We are getting a 50% win loss ratio for all the trades taken when the conditions were met.
The Risk Reward ratio is 1:4 , so for about 10 points of SL the potential reward can go up to 40 points which in my opinion is an above average setup.
This 50% does not include the times the market did not meet the SL and was profitable by closing at session vwap or dpoc.
 
Overall I feel a fairly good setup.

 

IB Extension Set Up

Here is a revisit to a post we have done earlier on the bias each day carries between the open and the close.

 

That first post on the subject is here – https://www.vtrender.com/content/nifty-daily-stats-3

 

You may like to revisit that to check results from that time to today.

 

This is of academic interest rather than a trading strategy but may have relevance to traders who trade the cycle between Monday and Friday.

 

To re – emphasize we are tracking the move within each day that is from Open to Close and if the Close is greater than Open then the day is a plus day and negative if the close is less than the Open price.

 

What this ensures is that we do not get any baggage from overnight news or gaps as the day session plays out.

 

 

The lower panes each are marked with the day and give one bar every week.

 

We can see that the last three Monday's have gone down sizeably from open to close and that tuesdays' have been up in the past one month.

 

Here is a longer term view of the same data to see how it has played out.

 

 

 

There has been a big chop in the way the data has played out from the last post.

 

But the common denominator still seems to be Wednesday which continues to be the best bet for taking a long position at the start of the day and carrying it to the close.

Nifty day of week change

A quick post with reference to a previous view on September's vwap posted here- https://vtrender.com/content/september-series-charts

 

We saw september as a series filled with short covering and longs and basically what we call in market profile as one time frame movement.

 

Such series often get to visit the vwap to test buyer/ seller strength.

 

Here is the NF September series with it's volumes overlaid on Nifty Spot so that we still get the volume weighted average price ( vwap).

 

The chart is ofcourse the Nifty spot or cash chart :

 

 

Vwap tagged to the tick and we have a lift off !

 

 

Vwap of September Revisited

Here is a Volume by Price chart of the September Futures (expired contract).

 

The Purpose of the chart is only to see and note the volume weighted average price (vwap) of the series as well as the region where the highest volume occurred.

 

 

The Orange is the vwap of the series and the yellow is the 2 Standard deviation of the vwap line.

 

The white horizontal lines are the Point of Control or POC.

 

The black horizontal bars are the volume at price.

 

The Value area is in purple.

 

The Market did not put in a normal distribution in September, so to me the value area of September is not important.

 

But the POC and the vwap of the above distributions are the most important points.

 

The vwap of September was at 5734 and the POC was the closing price or expiry price at 5882.

 

All prices are of course Sept Futures.

 

The rollovers were at a 65 point premium , one of the highest I have seen in several months .What it does is, it makes it difficult for a long only trader to hold on to a long position especially if price moves against him quickly.

 

A few things which stand out in the chart and something which we talk about in the trading room everyday 

 

1) The Market tested vwap on 3rd / 4th Sept for new sellers, broke lower but could not find any and carried up above vwap all month. Buyers breathe above vwap freely.

 

2) It's never advantageous to buy a 2 SD or a 3SD vwap touch. You are playing a trade with a 5% chance of winning.

 

3) The test of vwap is due sometime again soon based on this chart ( +/- 25 -30 points to account for OCT premium).

 

4) The Market will be under pressure below the high volume zone of 5882 and is likely to witness increased selling if vwap is not defended.

 

5) If the POC and the vwap are carried with volumes to a Nifty Spot chart then vwap is 5709 spot and POC is at 5869.

 

The BankNifty Sept Chart is below with the same logic as above

 

 

 

The above data is all market generated information.

 

It's the market's levels and something which the market would respect. 

 

We trade the market with it's levels, not of our own!

 

September Series Charts