Fireworks or Torpedos

Viren has taken the evening off and asked me to post the charts on his behalf. He will be back in the comments section for his live market commentary.

So here they are..



I want to begin by thanking Mr. Illango for the recognition he has given to this blog on his site http://tradeinniftyonly.blogspot.com/.

We are a young blog and require all the support and encouragement from experienced bloggers such as him.Thank you very much.

I also want to thank Viren for the way he has put us all ahead of the market for the past 150 points-up and down. My appetite has been whetted for some more profitable set-ups from him.

I want to share with you this evening the Open Interest table for April:


With the extended holiday weekend coming up, option writers have utilised the opportunity to write both the 5300 call as well as the 5200 put, with an eye on theta decay.

This can be seen in the Open Interest at both the above strikes, which are the highest.

I do not expect any significant movement in the market tomorrow. We may remain range-bound.

However looking further into next week, it can be safely assumed that one of the strikes will give way, as you cannot expect Nifty to be in a 100 point range till expiry.Also OI is above 5 million at each strike, so a break will bring a lot of momentum. Based on the current Implied volatilty the range for April expiry comes to 5000-5500. So whichever way the break-out occurs, there is a 200 point movement to be had either side.

The charts I had uploaded last week in this post on Seasonality and Markets here paint a picture of a bullish early April.

However, even if you take a non-directional view and buy the 5200 put and the 5300 call at around 80 each on Monday (not tomorrow), you will still have a profitable trade on your hands, as soon as you get a confirmed break of either level.

Return of the Seller- 2

The seller returned, in a very unassuming manner, and just when I was tired and ready to throw off my short position.Thank God I didn't.


So what's in store tomorrow?

The 10 point gap at 5262-5272 created in the futures by March expiry is now filled and we should be ready to move higher tomorrow.Also the stampede to exit near the closing is always an indicator that higher prices are ahead.


Since 5262-5272 has been reached, I would look at an auction between 5272-5302 in the first half for tomorrow.Above 5295, which is VAL tomorrow, price can also target 5320-5325 in the morning session itself.

On the flip side, weakness below 5260 will bring 5225-5230 as in yesterday's projection.

As marked in the chart I will be watching for the return of the seller around 1.50 to 2.15 pm. He's showed up twice in two days at the same time and I would be watching out for him tomorrow.

Return of the seller?

Those who have been following my running commentary on Market action in the comments section, would have noted that I mentioned that I did not see any intent on the part of the sellers in the morning session.

Well that changed around 1.30 in the afternoon, when the seller arrived to leave his stamp on the day proceedings, as can be seen in the blue oval I marked on the chart.

The way he managed to reverse the trend of the day, leaves me to think that he is not done yet.

I am seeing levels of 5260-5272 and even 5225-5230, as possibilities if he decides to assert himself.

If we get these levels, it will eventually be good for this upmove.

Update

At the time of this post we are up 40 points with the Nifty around 5340 levels.
The buying which we have been seeing from 5100 levels, seems to be slowing down.
I will strongly advise against initiating new long positions in stocks or indices at these levels.
If you are long on existing positions, tighten your stops or book profits by EOD or tomorrow.
There may be another melt-up, but rest assured it will not be institutional driven and they may look at selling into the move.
I will not be active in the comments section this afternoon, so if you are long the Nifty and the Bank Nifty, keep booking profits.I will have an update EOD.

...And it continues.

I had written on Wednesday night about a break-out move in the Bank Nifty in this post here, and the above chart is testimony to that. I'll take a 300 point move in two days anyday. The best part of it is that it is not done yet.

My comment on "NAV Management" seems to have attracted a lot of attention, with even Shai dedicating a post to it.

The question I openly ask out is where are the sellers?


Since 5100 on the Nifty, I have not seen the seller make more that a 40 point move in the index. At the same time, the bulls have managed two 80 + point moves. The lack of sellers in the market was telling on Thursday, when we were below VAL for over 5 hours from 9.00 am to 2.00 pm and the sellers could manage only a 12 point move down during that period.Obviously the other party had to take over, and they certainly shook things up that afternoon.As can be seen in the chart,the next day on Friday they managed to hold their gains.This only points to higher prices ahead, but we'll see..

Seasonality and markets

On a hot Saturday afternoon, I've decided to take potshots at my fellow bloggist and check out his theory on "NAV Management".

I've known quite a few smart people who look at times of the year for trend changes or confirmation. The Thanksgiving Holiday in the US is one example when people have put all their "spare cash" to work in the markets often with positive gains.The assumption being that markets do not go down during that period.

So to put "NAV Management" to the test, I thought of nothing better than to see how it holds up in the charts.

Here's a chart of the weekly Nifty for the past three years:


The close in the past three years for the month of March has been at the highs of the month. With three more days to go for this month-end, we are at the highs of the month in March.The only question remains, whether we keep these highs or roll-over from here.We will know in three days.

Those three years prove that these things happen.

Still being slightly skeptic, I've decided to put the theory to the test now with the SPX. Their calendar year ends in December, so let's see what their markets have done in December.


Close at the highs for three years in four.

So that is six times in seven occasions on two highly liquid exchanges, across continents !

Odds are, we see higher prices in the Nifty, maybe 5350 or more by Wednesday.

Now you be the judge of that.

NAV management continues

I want to give a big high-five to my new found friends the mutual fund managers and to Shai because of who I could so carefully execute a plan and the move from 5220-5272, which we have been talking about on the blog for a few days now.

Yes, It was on the charts and yes Market profile pointed to the move. Yes, Shai used some option arithmetic and told me this morning that we will get an expiry near 5272, but without my mutual fund manager friends who are so keen to protect their gains for the year, would this move have been possible?

As for what the charts are saying, don't even think to short before this month is over.

Nifty Expiry

I had a query from Viren last week about predicting a range or a price target for expiry.

Whilst we do not really have good reliable software like max pain to get the correct expiry figure, I have found that some good old-fashioned Option arithmetic can help predict the closing price of the Nifty fairly accurately.

I had posted this information on a public forum earlier, so those who know it already, please excuse us, but for those who do not- have a pencil, paper and calculator ready.

I intended to do this post in the morning and even communicated to Viren a closing price of 5272 ( +/ - 10 points), but got stuck in my daily routine and when I saw the close, I had to leave everything aside and do this post.

Hopefully it should help you sort out the next one...

Here are the calculations. If you are good in options, you will have this figured out...Old schoolers like us used these maths to figure out if options were cheap or expensive.

We begin by looking at the VIX and the spot closing from the day before.

Step 1 : Look at the spot price from the day before ( 5225 )

Step 2 : Look at the Vix from the day before ( 18.13 )

Step 3 : Look at the days to expiry ( 1).You can do this any number of days before expiry.

Step 4 : Divide this figure from step 3 by the nos of days of the year ( 365/1 )
You get 365.

Step 5 : Take the square root of the figure in step 4 ( 19.10)

Step 6 : Divide Vix by 100 ( 0.1813)

Step 7 : Now divide step 6 by step 5.You get 0.0094.

Step 8 : Multiply step 7 by the spot price of step 1 ( 0.0094 x 5225 = 49.6 )

Step 9 : Add and subtract step 8 from step 1 ( 5175-5275)

Step 10 :Now let’s monitor the Open interest.

Since Nifty has closed at 5225, we will look at the open interest at 5200 and that at 5300.

5200 PE has OI of 6 million and the OI at 5300 CE is of 5.6 million. In view of this, we can forecast an expiry between 5200 and 5300.This also discounts the possibility of a move to 5175.

Aligning this view with our range from step 9, we can see Nifty at the upper end of the range.The high of the day was 5268 and the Nifty closed at 5260.



That's it. 10 easy steps to take expiry blues away.

Nifty EOD 23rd mar

I want to start with a disclaimer.

The market profile is a methodology of trading, not an indicator, and interpretations made from the system are individual in nature i.e different people will interpret the same chart differently ( as in all charts). It is not a predictive tool, but used to interpret market action, using volume, price and time.The observations posted by me through the market profile are my own and I could be wrong.

With that off, let's start by looking at the charts.


It always is difficult to come back and look at charts after a trading holiday and even more so when other world markets are functioning.I wonder when the NSE would have a 24 hour futures market--it will take so much of the dis-connect away, especially with all the added holidays we have in this part of the world.

The chart shows a close in value, at POC, indicating balance being restored in the markets after the gap down on Monday. The chart also shows sellers having failed miserably for the second day in a row to keep prices below 5220.Infact it is the third time that prices below 5205 were rejected swiftly and this only points to higher prices ahead. So keeping our range of 5220-5272 in mind, a test of 5272 should be next. We'll see..


The Bank Nifty is a stronger looking chart and points to a big move tomorrow as prices have coiled within a smaller value area. I will be looking at this chart as an indicator of market direction tomorrow. I foresee a big breakout.

It's expiry tomorrow, besides the return from the holiday. So a lot of moves may not make sense. So stay light, stay smart tomorrow.

Nifty Musings

Over the weekend, I made two observations on two of the indices I follow and trade on, and they both had to go off together for me to execute my plans on them.

The Nifty had to bounce off 5180 strongly and the ES had to bounce off 1147.

For the Nifty, I didn't see the bounce, only a tick on my ODIN confirmed it. Later on I was told that it was a false tick, but at that moment it was enough for me to buy the gap down.Price got rejected precisely at POC and it was enough for me to start thinking short again.

That's for today, let's look at the charts to see what we have tomorrow.



For the Nifty, we have had a break of the 50 point range from last week. Yes a 50 point range again- Nifty is choosing to do this again between 5220 and 5272 last week as against 5100-5155 from the week prior.

But I am not very convinced that we have had a break of the range yet, because it was a single print movement in the first half hour as well as the last half hour below 5220. Not convincing is the way I see it.

So 2 possibilities for tomorrow and they both involve 5220 ( give or take a few)

1) Auction in the low volume 5220- 5175 range, where 5177 should provide a support for the market
2) back in the 5220-5272 range and rotation.

(I am more biased towards a rotation back into 5220-5272, but we'll see)

I admit it is not very helpful, but our ever reliable purple lines ( value areas ) will show you the way. As before we will play an exit of value tomorrow.

Where's the inter-market study dude?

I put up that title to chide myself in doing this post, 'cos this is the reason I started this blog-- to "study inter-market relationships".

I have often encountered hostile reactions in blogs and public forums, when I talk about the US markets or the FTSE or the Hangseng where the discussion is around the Nifty. They say Dow, Cow and Mow do not matter in the Indian context. Really? I wonder whether some of these fellows were born post January 2008!

To illustrate my need for this post, let me put up this chart:


This is a chart of 4 major indices : Nifty, SPX, FTSE and the Hangseng.

It is a foregone conclusion simply by looking at the chart that each of these markets is connected to the other albeit in varying degrees.

And as you can see they are making their moves together....but that is the broader picture.

I'm here to talk about the minor deviations, get a bit more precise and develop edges in different time frames and to use one market to predict moves in the other.

Sometimes one market knows something the other doesn't and that's where the edge develops.

If two markets are in focus, and they move at the same time together, then it does not help, but it is a confirmation move- one for the other. But when these co-relations breakdown one becomes predictive for the other.

This is what I found in the Nifty a while back...

Here is a snapshot of an excel sheet I maintain :


To the right I have closing prices of the indices for the past one year. The box on the left is the co-relation factor with the Nifty.

As you can see, the corelation with the US spx is 91 % and that with the FTSE and the HSI is 90 %. Incidentally Nikkei is the least at 84 %.

Now let's get to the interesting part :

I have plotted the 50 day and the 10 day averages for the co-relation.

If you see the 50 day average fore the Nifty, it is negatively co-related ( had broken down) and in the past ten days there has been a revision to the yearly average.One look at the 50 day average , 10 days back, would have told me that there has to be a big upmove coming.

The co-relation can work the other way around too...the Spx or the other indices can fall to make up with the Nifty, but the odds are better for one index to move up than for four to fall.

In view of the expected drop on Monday in the Nifty on account of the RBI's announcement, one would be advised to keep an eye out on global indices and this co-relation index.

Nifty Intra Values

Value areas for the Nifty are :

5252-5242-5235. Have some trouble uploading the Nifty Chart.

Have a good day.

Nifty Update

Viren here.
Today's market action was strongly bullish and though we came off the highs of the morning, buyers did enough to keep sellers at bay.Being above value all day and keeping sellers at bay justified the bullish behaviour exhibited since yesterday.So the day belongs to the Bulls.

I am not posting any charts today, but just expressing an opinion of the state of the market as it is. I have fallen in line with Shai's view that this market will see Nifty go north of 5300 and more before we see any reaction. His reasoning is very simple- When our friends from across the pacific can take their index to new yearly high's , how can we lag begind?.So we see 5315 printed tomorrow?? maybe.

From a swing trading perspective I am keeping an eye out for the Open interest accumulated at 5000 on the put side. Yesterday I saw writers behave suspiciously as they were reducing their exposure when the market was moving strongly.Today my doubts were confirmed when EOD stats showed a reduction of 5 %. I need more confirmation tomorrow for me to take action on this interesting development.Maybe, writers are using the low IV's to square off---but that also means that they are expecting IV's to increase and we all know what that means.

Stumped

This latest bull run in the markets has left me stumped, to say the least!




I continue to stare at the screeen as the Nifty prints 5260 and I wonder how? To be honest I have had trouble buying stocks here.

My ever dependable NYMO has been giving me a bearish diversion, whilst working out the overbought condition. But the diversion means nothing in the face of this hungry bull which is planning to mow down every bear in sight. Now let me be straight here-- I am not a bear in this market, not been one for the past 9 months and it has put me on the right side of trades.All I am looking at is a minor pull back, which has been non-existent. I look towards the west and the S&P and I see it up over 14 days now!. I have never seen a bigger winning streak.

I still contend that these are dangerously high prices to buy into, but if you are nimble the risk may be worth it.

Nifty EOD 16th march

Hey all,

I received a few emails from some serious readers about my lack of posts on this blog for the past several days.

There were two reasons- the first being that I took off, on an unscheduled R&R on Thursday noon and the second being that the markets didn't do anything in between my last post and this morning.Quite seriously, when I returned back to my lappy on Monday afternoon I found the Nifty at the exact same spot I left it on Thursday noon at 5133 odd levels.

That being said, we did get a serious upmove later this afternoon. Let's look at the charts:


I had mentioned that an exit of value was the best approach in a range-bound market in my last post here. For those who stuck to this strategy the benefit today, would have been far more than the wrong moves we had before today. I'll be the first to admit that I took a 15 point hit at the top of the range expecting a pull back, when I should have quietly followed the plan as per the blog.Nevertheless I did make up with a quick 30 point gain at the end of the session.

The increased value and the volume point to the fact that it was not just short covering but genuine buying which took the market higher.For tomorrow I want to see a retest of 5165-5180 region before the market decides to climb higher.Watch VAL carefully if we get there.

Reliance I had mentioned earlier as one of my generals, without which Nifty will find it difficult to make big moves.Today it came to the party in a big way closing at 1069 levels for a 40 point gain.


Of the 3 charts put up today, Bank Nifty looks the weakest. The upmove from 1.30 wasn't very convincing and I will be very surprised if we do not test 9025-9010 levels again.

Starting tomorrow, I intend to hangout in the comments section and would be posting my intra-day updates and my observations as I see them. Shai has also agreed to share his views of the global indices and their influence on the Nifty.So do drop in and share your views if any.

Vix and the Spx -Updated

We have been waiting from Spx 1130 for a pull back in the index because the move from 1044 looked stretched and the upmove looked difficult.

Though we made about 20 more points in the SPX the upmove has been very laboured to say the least.The fact that the index has not given us a 20 point correction suggests to me a lot of strength in the index and I would be surprised to see the index not touching 1200 in the next 3 months.

Even right now at known previous resistances, I am calling for a minor correction of 20-30 points in the Spx, which should not trade below 1120 now.This is keeping in mind the overbought nature of the NYMO.

The VIX chart above is another confirmatory signal.We are below our green line and I have drawn 2 new trendlines in pink. A move above our pink TL at 19.5 should confirm that a short term top is in.

Updated Charts- Reaction Imminent

Here are the updated charts for the NYMO and the US Dollar.

You can find previous comments on these subjects here and here

Nifty-10th March EOD

Viren here.

Hope you all had a good profitable trading day.

Things started on a sour note for me this morning when some of my short stops which I had carried from day before, got triggered at the VAH and the market didn't give me a chance to get long at that spot. However I remembered the rejection from 2 days back at 5142 and was quick to jump for shorts around 5135. Also at the back of my mind, was the divergence at play in the Nifty and the Bank Nifty--the Banks were below tuesday's highs whereas the Nifty was near Monday's.

Let's look at the charts now to see where we go from here...




The Nifty moved sharply higher from VAH, but was met with aggressive selling at Monday's highs near 5145.Again a 40 point drop followed, this time a bit slower but buyers stepped in late in the afternoon to make price close in value.


The Bank nifty didn't make it anywhere near Monday's highs. It closed exactly at Tuesday's value. No change.

What's in store :

We are seeing buyers step up near 5100 in the Nifty and sellers at 5145.

For the Bank Nifty the levels are 9060 for buyers and 9180 for sellers.

I do get a feel that Bank Nifty will lead tomorrow...one way or the other.Keep an eye on it.

Strategy :

The purple lines on the charts are the value areas.

Strategy tomorrow will be to trade on an exit of value at either level, followed by addition of positions at the above mentioned Nifty/ BN levels.

If we are in between again, trade small...trade smart.

NYMO

Earlier this evening, Viren and myself were chatting when he told me about an interesting thing he observed this afternoon on his platform.

He was watching a Nifty Futures chart and an ES chart.
Both were at Value area Lows at around the same time (uncanny).Both moved for a brief while in value before dropping down and moving away from their respective Value Area Lows.

Whilst to me, it points to the importance big money is giving to Profile data, to Viren it simply meant that right now "sentiment is the same across the globe" and always has been...which brings me to the subject of my post today- the NYMO.

Unfortunately, I do not know whether this indicator is present for the Indian set-up, but it is a very important barometer of overbought/ oversold levels.


The NYMO works for stocks traded on the NYSE, but if you are a believer in the notion that sentiment is global, then it's truth applies to all markets.

In the chart, you can see that we have entered in the red rectangle only six times in the past 2 years and we are in it now!

Of course in Oct, Dec and Mar the levels are even more elevated than today, but those times were different and the situation is not the same anymore.
There has always been a pull back in stocks once the NYMO has entered the red zone.

Here is another chart, more relevant to our market and to illustrate my point with our very own Nifty:

The red line is the NYMO and the black one is the Nifty.




The NYMO and the Nifty make their moves together-up or down.

The NYMO is due for a pull-back. the Nifty will follow...

EOD Analysis-8th March

Hey All,

Hope you all had a good trading session. I am back with my charts and hope to get a quick analysis done. Let's Begin :








If I had closed my eyes and not followed the trade as it unfolded today, I would have certainly thought that I was looking at the chart of Friday again.

The action in the Nifty today, matched the action on Friday. A Higher open, inability to move higher, then sellers take over, and a ' buy the dip' at a crucial MP point.

For the bulls, one can argue that we moved higher on an end-of-day basis. One can also argue that the action once again was over the POC and VAH from the last day. If memory serves me right, then I remember only 1 day that the market visited VAL from Budget day. Overall very bullish action.

For the bears, I will argue that the bulls have not been able to take the price higher than the opening print by more than 15 points for 2 successive days now.Again the sellers today were able to bring the market down by about 40 points again without much resistance from the buyers.

I am not trying to take both sides here, but trying my best to be objective in my analysis so that we are ahead of the move which is to unfold.

To me, we are definitely seeing buying exhaustion with signs of the sellers getting aggressive.

But I will have to see more of the above statement tomorrow and in the days to come...

...which means that I will be with the buyers as long as price holds up above VAH, will be neutral in the value area and be a seller below VAL.

The purple lines are my decider lines tomorrow.

I have included a chart of Reliance today- a general of this army- which closed below value today.

Nifty- Intra Update 8th March.

We have got the opening of 5135 as expected and posted in EOD analysis from Friday.
Rememeber Buyers are in control till VAH is protected.
Shorts are safe only below VAL. Watch the tape for cues.

Nifty-5th March

Hey all,

I'm back with my EOD analysis of the Nifty and Bank Nifty index for the trading day 5th March.

My last post on this subject was eery in it's prognosis for the Bank Nifty in particular. Check out the lows on the index.


Let's look at what things are in store for us for Monday :




After a strong move in the US markets overnight, it is a foregone conclusion that we will have a gap-up opening on Monday.I'm looking for an opening around the 5135 level, maybe higher.The question is what happens after that. For the answer let's look at the charts.

First the Nifty :

We had a gap-up opening on Friday, but the buyers were unable to drive prices higher than 5117.Sellers soon arrived on the picture, and were able to drive prices down effortlessly to 5065 which is a major MP zone and we had a bounce.The day action showed the presence of sellers at higher levels, but also showed that buyers were willing to buy dips.

So on Monday, we wait after the open to see if the buyers can show up to take the index away from the opening price.If we see a repeat of friday, then sellers will step in again.Incidently, the value close and the POC pointed to a higher open even before the US moves.

Bank Nifty : I have been watching this index carefully for the past one week now and seen how buyers have held the 8960-8980 level strongly all week.Strength in the index continues till this level is held.The value close is higher and the POC is moved to 9050 suggesting a higher opening and the renewed presence of new buyers.

From a swing trading 1-5 day view, I see both indexes showing signs of buying exhaustion. We have had a 200 point move in the Nifty from Budget day and the entire action has been above POC and VAH, in the next session. Friday was the first day, sellers arrived.So on Monday, I will be watching out more for the return of the seller.

Nifty and Bank Nifty- 4th Mar

It feels good to be posting here on Vtrender.

I want to thank Shai for the opportunity to add my inputs and would be happy to have your reactions.

If you see the charts above and understand the horizontal lines across the charts, you have rightly inferred that I am here to discuss Volume Profile analysis of the Nifty and the Bank Nifty.

These are 2 day charts, with the profile on the left denoting the price action from yesterday and the profile on the right of the chart is the action from today.

The price action in the Nifty today formed a traditional 'Inside day' ( well almost) and the value area was confined to yesterday's value area ( purple bars).Within the action of the day today, we had buyers stepping in to arrest the downward momentum at precisely the Value area Low ( VAL) and they took it back above value later in the day.

In the Bank Nifty( BN), buyers let the BN drift some 35 points below VAL, before stepping in to drive price back in value again.

Inferences for tomorrow ( 5th March):

Nifty : The day set-up is positive and buyers have showed their hand by stepping in to take price higher.We would be looking for a follow through tomorrow based on this action.If you are leaning on the bearish side a break of 5075, followed by a break of 5057 should set you up for some nice profits.

Bank Nifty : This chart is slightly less bullish than the Nifty.We have seen a shift in Point of Control ( POC ) slightly to the downside. So if you are bullish on this index, be quick to take your profits. If you are bearish, then a break of 8965, will confirm the price pattern on the chart.


I have asked Shai to include some resources on Market Profile on the blog, so I will be free to use some terminologies and ensure that you guys know it is not Greek and Latin !!

Viren

I want to take this opportunity to introduce to readers of our Blog, our new guest contributor- Viren Rasquinia.

"Viren" as he is popular in blog circles, has a rich knowledge of Market Profile, specifically volume based price action.I've known him from a few US based blogs which he has made richer with his inputs. Viren trades all markets and has expressed a desire to contribute on the Indian Markets.

He would carry end-of-day and intra-day analysis of the Nifty and the Bank Nifty as well as a few other stocks, he trades on the NSE.

I wish him the best and would be eagerly looking forward to his analysis.

Nifty and Bank Nifty

One of our regular readers, Viren sent me these charts of the Nifty and the Bank Nifty.

I'll reproduce his message here:

As explained earlier, the purple lines are the value area and the yellow line is the POC which represents the highest volume of the day.Above value area buyers are in control and below value sellers..

BN was not a short except if it traded below 8440-8430 which was value area high from Friday. As you noticed that buyers came again at that level and took price higher.Had it entered value, it would have been a short.

In the Nifty, price entered value of friday and notice how it bounced off the POC.That was a good place to book shorts. Once it came above value again there was no looking back. A safe long was above 4994 and a short below 4880. 4994 was the Initial Balance, hence a cross above that was that Buyers were re-asserting. Conversely had it moved below VAH, we would have seen POC and VAL again.

See, if you observe the chart and listen to the message of the market trading is so much easier.

For tomorrow, the purple lines are the value area. Look to go long above VAH and short below VAL.

Cheers,


Well Done Viren...

I also use a lot of Market Profile for my swing trading and day trading requirements. What Viren is using are Volume Profile Charts, which look at the volume at each price point to fattom what the Buyer and seller are doing at any price.

I hope to add my own inputs in future posts..