Here's an update to a post I had made at the end of last week.
At that point of time the BN was in between 2 value areas and unclear on direction.
The subsequent move through the January value area and the halt yesterday at the exact print of value high shows the market's readiness for a 25 bps cut in rates but no conviction.
That upper value area high is important for new longs now.
Roughly 12834 spot. watch that level.
A few days back we had posted a profile of the Bank Nifty future showing the auctions of 2 months- Dec and Jan.
As the market gets ready to adjust inventory on RBI news flow, let's look at the same 2 profiles on the spot price.
The green tpo's and the while shaded region represent the value areas or the zone where the market traded 68.3% of the time. These are established as value or the region the markets liked to trade.
Notice that Jan is higher than Dec as we got the swing up early in the month.
Now the profile on the extreme right is the developing profile of the day and our region of focus ahead of the announcement on Tuesday.
As can be seen this current auction is placed exactly between the 2 value areas.
It's also easy to see how a big move will come about on Tuesday as the market auctions either through the Jan value area or the Dec One on news flow and inventory adjustments. As we say often in the room, it's not the news but the reaction to the news which brings about changes in trading positions and biases ( called inventory in the trading room).
So the move is from 12632 spot to 12808 or from 12504 spot to 12280 spot. Both moves in out opinion will be swift ones piercing through the value areas.
Here's a look at the composite on the BankNifty for Dec and Jan.
What's interesting to note that as Nifty is near range highs for Jan, BankNifty is nearing range lows for Jan near 12610.
The composite for the month of Jan has a developing POC around 12840 and is the level for bulls to close above to regain momentum.Value areas (developing) are at 12880- 12735.
12570 from DEC is the lower POC and support on a closing basis.
If the market breaks 12570 then it will require an even bigger effort on the part of Buyers to put it at new highs for the year.
That being said, the next RBI meet at the end of the month has the capability of initializing large scale inventory changes which will make the month of FEB a more important month for this index.
In our last update on the Nifty future we had noted a balance developing in the index and identified potential supports which were at the base of the single prints and the HVN of the smaller balance below.
Here's an updated chart, but we will look at spot prices instead today.
Nifty spot :
The chart above shows the balance developing from the 2nd of Jan and Fridays' profile shown separately to the right.
Today's developing profile is on the extreme right.
On Friday we identified single prints at the top of the profile which indicated a rejection of higher prices at the open. The move was lower through the day.
The POC of that profile is at 5981 spot coinciding with the value area of the composite.
In the auction of today and later in the week, this 5981 will be the minimum level that has to be scaled for upsides or even the state of balance continuing.
Lower supports continue to be in the 5930- 5937 spot zone a break of which should see 5902 quickly.
Overall the market is trying to break from the balance zone, yet not successful with a break of Fridays' lows confirming the development.
Auction is at an interesting place for the series.