Month: March 2013

We had a balanced profile in the markets yesterday as market participants waited on the RBI to announce it's monetary policy.


As traders we do not place a lot of importance to news flow or the type of news but are very interested in the end product which triggers a rebalancing of inventory.


In short we watch not the news, but the market's reaction to the news which brings out changes in established buyer- seller behavior.


Today's auction continued from yesterday and we had a 2 day DD in the markets.


The definition of a DD is here –


The day type fitted the definition well as the market found value around 5790- 5735 in the lower half.


Nifty Mp 26 Tracking The Double Distribution


The second bell shaped curve lower down does not look complete yet and the market may spend some more time in the lower part to complete the distribution.


A DD once complete can do one of 2 things-


a) Move to the centre of the DD in the area of poor distribution or minus development region as profilers like to call it and complete a larger distribution curve there .


b) Move below the Lower distribution and auction downwards.


Here's a profile chart from early this month.


Mp Nf2 1303192214 Tracking The Double Distribution


The chart above is from the first week and shows the profile from the 1st, 4th, 5th and 6th of March.


The 1st, 4th and the 6th were all balanced profiles with the move on the 5th trending higher from the POC of the 1st.


Today's sell off began as the profile from the 6th of March got compromised and proceeded to make it's lows at the bottom of the single prints of the 5th of March.


Hence an auction staying below 5730 tomorrow is likely to bring 5682 Mar again.


Tracking the Double Distribution

Here are 2 charts which show the short term view of the Nifty and the reference areas the market is currently auctioning at.


We had a trend day in the markets yesterday and the trading room tracked the balance profile and the ability of the markets to move around it.


That chart is here :


Nifty Profile Check- Short Term And Reference


The chart is of the Nifty spot and shows the short term view.


Even though we had budget and expiry and lots of sundry noise, good levels marked by previous buying and selling always triumph over everything else as it is the market activity which makes these levels up.


Hence if we follow price and the pure movement of buyers and sellers we need nothing else to understand these markets.


Profile charts, pnf charts and the like are the purest visualization of market activity and allow one to focus on price behavior without being distracted by multiple accompaniments many of which are derived and owe their existence to price .


In the chart above we see the market consolidating after a trend day lower on the 21st. This 2 day profile saw the highest volumes traded near 5854 which was the pivot of the move.


There was a break lower from this value area and a retest which happens in 90% of such cases.


The chart shows the retest done yesterday and meeting with rejection and the subsequent target of the rejection done at the close yesterday.


Coming to today's auction and what would be of interest to all of us is where the market auctions with respect to the trend day of yesterday.


We are seeing a market in imbalance and the next part would be to see if we get another balance of the kind visualized on the 22nd of Feb.


The purple in the charts is the value area and the current auction at the time of the post is not able to move above this value low.


Also on trend days we like to see if the subsequent auction is above or below the first third of the range to confirm continuation.


Now for the perspective – we always like to see what the market has done at current points in the past.


Nifty Profile Check- Short Term And Reference


The above chart is dating back to end November 2012 and has profiles for those days only.


As can be seen when we were last at these prices we saw a lot of single prints on the charts as buyers dominated the auction.


After the balance seen at 5634 we saw buying at 5663 and again at 5737.


Both these levels will come into play, infact 5737 region was already visited twice before we broke down yesterday.


It now represents resistance.


The entire zone marked in black is what we call in Market Profile – Minus development or a zone of low volume activity.


Generally speaking this zone gets filled up or auctioned completely before the market makes a move away.


So we should be seeing a bigger balance develop in this zone before the next stage of the market gets underway.







Nifty Profile check- Short term and reference