Let's look at what the charts are saying :
First the Bank Nifty.
This has been a chart as strong as any you could look at, repeatedly frustrating sellers during the week. I mentioned that on friday, value was being shifted lower in the daily. Have a look at what the weekly of the Bank Nifty Future is telling :
We are noticing signs of long liquidation at the top, evident in the P shaped profile. Whilst this does not necessarily mean that the index will drop like a rock, it certainly points to the buying momentum waning. Now it is upto the sellers to step in to move it lower. If that happens look for 10280 and 10150 to be targeted during the week.
We'll watch for signs on Monday, whether that happens.The first tell will be an auction or a failure of an auction above Friday's value high / value low.
Let's look at the weekly chart of the Nifty Future.
This was a very dull week with sideways action as evident in the value which was within last weeks'.
The immediate supports are in the 5390-5405 region. Higher up a close above 5465 was not maintained for the daily momentum to go up. Besides 5465, the other reference level is 5485 in the hourly.
Hopefully, moving away from the value areas either side, should bring momentum to the index, something which has been missing all through the week.
Let's also have a look at the weekly $spx spot prices.
In the future we had mentioned earlier how the 1096 level and the 1129 levels are important reference levels. Failure to auction above 1129 future unleashed some pent-up selling pressure on friday.
The chart still projects long liquidations near the top at 1129 odd levels.
It will be interesting to see if 1090-1100 on the spot can hold.
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4 comments:
New post on Vtrender 2 :
http://vtrender.blogspot.com/2010/08/vtrender-2.html.
Shai,
Good summary Shai. I did get my MP Setup this week and MP concepts are starting to make sense to me!
I have few questions based on the charts posted here.
1. Is just a P-shape profile sufficient to conclude long liquidation or you also look at volumes on 1-min/5-min charts?
2. There are 2 parameters in the AFL - Price Profile and Volume Profile. Is the Volume profile more like arriving @VWAP? or
3. Around expiry both Nifty-I & Nifty-II have volumes. Which one would you consider? The only issue comes if there is a premium or discount otherwise the Value ares should be the same.
PS: Now its my turn to apply what I learnt in classroom to stock futures - which is where the real action has been so far.
Girish,
The P shape is caused by a failure on the part of longs to carry momentum forward leading to liquidation. This can be confirmed by an auction below value low the next day.
VWAP is volume weighted average price and has no bearing on profile-shapes.But on volume profile charts, it is an important parameter.
Generally traders trade in the front month till the day of expiry, hence we tend to give prominence to values of the current month.There is a bit of difference in the next day's values, but can be overcome by trading conservatively in the first few hours post expiry if the market auctions around these zones.
Thanks for the reply.
I had gotten confused between Price Profile & Volume profile.
Volume Profile seems like the Volume by Price indicator in QT - basically looking at the volume at price regardless of time whereas Price Profile is Time based.
http://www.mypivots.com/investopedia/details/225/volume-profile
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