Bounce gains momentum

5868 did a job today by galvanizing buyers to 5915 and providing support on the rebound from there.

5868 is also the weekly value area low and if the 80 % rule plays out it can fetch a trip to atleast 5975.

Here are the charts for today :

Nifty :



Bank Nifty :



Value was created today at 5820-5890-5904 in the Nifty.

It was 12040-12000-11880 in the Bank Nifty.

5850 should support the market on the way down tomorrow with 5810-5820 as important reference levels for tomorrow's action on the downside. Up above it is 5930 and 5975.

Options/futures data for 29th Nov (EOD)

Summary:
1. Options table didn't change much during yesterday's action - some more calls added at 6000/5900 and lot more puts added at 5600/5700.
2. 5800-6000 range remains intact with 5800 strong support and 6000 being the strong resistance.
3. 5900 is somewhat 50-50 level with negative bias due to 40L calls vs 27L puts.
4. Writers seem to be reluctant to write lots of 5900/6000 calls while they are happy writing a comparatively higher number of 5800/5700 puts. So options writers' bias is to the upside. Need to see if this trend continues.
5. PCR slightly changed from 1.26 at 1.23
6. Adv-Dec changed from 0.13 to 0.90, with a massive change in McClellan Oscillator reading changed from -1128 to -91, implying market is returning to normalcy.


Nifty Futures:
2.5Cr OI up 1% (3L shares added to OI) - positive OI addition, as we saw in last few days of Nov series


Banknifty Futures:
14.5L OI up 1.3% (0.2L shares added to OI) - positive OI addition in BN too. Small but definitely +ve OI addition.

Oversold Bounce

The bounce which was expected in the weekend posts by Shai and Girish played out and we had a move to friday highs again today.

The Vol profile chart shows a higher percentage of buyers than sellers and some initiative activity at key levels.



5804 and 5830 are important ref levels to the downside with the turn level of 5868 standing in between what could be a move to 5930 and 5975.

The Bank Nifty consolidated today below the highs of friday, but was not able to take out the early morning highs later in the day.



Support for the Bank nifty still lies at 11680 which in our book is as big as the 12460 levels of November future whose breakdown resulted in a 1000 point drop.

Like 5868 in the Nifty 11824 holds the key for further moves.

Options/ futures data for 26/11

Summary:

1. Again as we saw on Thursday, the DEC Options data is not displaying that bearishness we have seen on the screen in the last few days. Just take 5800PE vs 5800CEs - the 5800PEs are massive 51L vs 24L 5800CEs (even after a 100% increase in 5800CE OI on Friday). 

2. 5900 seems to be balanced level with a negative bias. Given that there is only 9L difference between PE/CE, it could go either way depending on whether buyer or seller is strong

3. As of now, 5800 is the support and the 6000 is the resistance. Below 5800 there are good supports at 5700 & 5600

4. PCR dipped on Friday from 1.32 to 1.26 - but these are still much higher numbers than what we saw in last few days of Nov expiry (around 0.97-1.08)

Nifty Futures:

2.49Cr OI down 3.87% (10L shares cut) - opportunistic short closure? But not that big OI change though

Banknifty Futures:

14L OI flat - despite the index moving almost 300 points down and 400+ points up intraday, there is no change in OI!

McClellan Readings (2)

The chart which i posted in my previous post was indeed the NYMO advance-decline chart, specifically used to calculate overbought and oversold conditions on the NYSE ( New York stock exchange).

We are not trading on the NYSE, but actually the NSE and the only change in the formula has been the values of the NSE as opposed to the NYSE.More recently the NYMO was at a -80 levels on the NYSE with the futures at 1171, before a 36 point move began to 1207 there.

But make no mistake, the indicator is as powerful on the NSE as it has been on the NYSE.You can read more about the NYMO or the Mcclellan indicator here

The McClellan Oscilator is amongst the best reversal indicators in the market today as it measures extreme bullishness or bearishness in sentiment through the advance-decline ratio which in itself is the best gauge of market sentiment.It works well for all contrarians.

Here is the chart updated from the beginning of 2010.



Notice the lows of the Mcclellan marked by swing lows on the Nifty.

There are two ways to play the McClellan indicator.

The first one is to be on the lookout for extreme readings of -80 to +80 at the close of the day session. Here existing positions can be closed or new contrary positions can be initiated for a swing trade.

The second and more powerful use of the McClellan is when it sets up a divergence with price.In february of 2010 we had one such divergence which ended the correction at 4675 for a move to 5300 which came in the first week of April.The indicator hit a low of -135 on 6th feb whilst price hit 4675 on the 8th of feb.

We are at similar levels of the McClellan, but without a price divergence at the moment. Regardless, the indicator is getting extremely oversold which means you have to be cautious if you are trading short.The risk-reward does not favor new shorts at the moment.

To close let's look at what the oscillator did in the crash of 2008.The chart below is computed from 1st dec 2007 to 31st March 2008.




The difference is that in 2008 the NYMO was reacting to a crash and we are having a correction at the moment.

A good correction runs between 10-13 % and generally finishes the daily cycle at it's lows.I'm still expecting the new daily cycle which is overdue for a beginning to take us to swing highs by early next year before we can think about an intermediate degree correction.

McClellan Readings

As market men struggle to decide whether to sell at 5750 levels in the Nifty future or buy around these levels, here is one indicator which diminishes the immediate prospect of a down move from these levels on Monday.

It's called the McClellan Oscillator.Developed by Sherman and Marian McClellan, the McClellan Oscillator is a breadth indicator derived from Net Advances, the number of advancing issues less the number of declining issues. Subtracting the 39-day exponential moving average of Net Advances from the 19-day exponential moving average of Net Advances forms the oscillator.

I should first thank Moh before putting this chart up as he advanced this chart to Viren who forwarded it to me. Thank you Moh.



The blue line in the charts is the Nifty spot and the brown shaded region is the indicator reading. The oscillator operates in a -80 to +80 region which are in itself extreme readings.

At -110 after yesterday's close, it has registered the most extreme reading in 5 months and is calling for a pull back.

Options/futures data for 25th Nov (EOD)

Summary:
1. The DEC OI table doesn't display that bearishness that we have been used to in the last few days of NOV series.
2. To me 5900 is a balanced level with & 6000 is a bit of a resistance.
3. 5800 is the support with multiple supports below 5800.
4. Both 5900/6000CEs added 10L/8L respectively yesterday which looks like call buying given that very little calls were written @5800.


Nifty Futures:
2.6Cr OI up 29% (58L shares added) - Again 100% rollover + some new OI added. DEC series starts off with 14L more OI than what NOV started off with.


Banknifty Futures:
14L OI up 12% (1.5L shares added) - Little less than 100% rollover on last day. DEC series starts with almost 1L less OI than what NOV series started off with.

Sellers go for the jugular !

What a day !

It's days like these which makes one so passionate about trading and also puts up a notice that you cannot take the market for granted.

Consider it this way, the safest traders at the start of the series were the 5800 PE writers, who had nothing going wrong for them for the entire series, till it came to the last 30 minutes !

The Sellers have had it right this entire series,maybe their best series from 2008,and could not have asked for a better finish. They went for the 5800 PE writers at the close.Some survived the scare but the figure read as 22,74,000 reduced from yesterday's 63,37,000 posted by Girish earlier this morning.

To be honest, I was thinking that it would be the 5900 CE which would be in the firing line, but the turnaround was swift and methodical.

In line with Shai's post over the weekend and the fact that this was a move directed for the November settlement, we picked up some Longs at the close, 3 points from the lows of the day. We feel we have a great price on these and would like to keep it till the market tells us otherwise.



The December future actually reflected the correct price of the mkt today. One should not trade the expiring contract on the day of expiry as it can be manipulated for the Open Interest.




Confidence was missing in the banks today in terms of buying support. We will be keeping a close eye on this future for clues to market direction.

The Nifty and the Bank Nifty closed above the lows from yesterday.

Charts of Dec future

Here are some charts of the Dec future for the nifty and the bank nifty as of the close of trading yesterday.

Profile View : BN Dec




Profile View : Nifty Dec




Bank Nifty Vol Profile from yesterday :



Nifty Vol profile from yesterday

Options/futures data for 24th Nov Sep (EOD)

Summary:

1. The options table for today is pretty simple. The range suggested is 5800-6000 for expiry.

2. 6000 is the resistance with 78L OI @6000CEs vs 42L OI @6000PE. 5800 is the support with 63L OI @5800PE

3. 5900 is a 50-50 level where bulls and bears will fight it out today for expiry

4. PCR has dipped even more from 1.01 to 0.97

Nifty Futures:

1.2Cr OI down 19% (29L shares cut)

2.0Cr OI up 32% (48L shares added) -- Again 100% rollovers and some more OI addition. May be the dip buyers?

Banknifty Futures:

6.5L OI down 16% (1.3L shares cut)

12.6L OI up 42% (3.5L shares added) -- 100% rollover and some new OI added

Options/futures data for 23rd Nov (EOD)

Summary:
1. The market seems to be taking 3 steps down and 2 steps up and options data seems to be suggesting the same.
2. As mentioned yesterday, nifty range of 5900-6100 is still valid. 6000 is now  officially a resistance but high OTR (Options True range) and 10L difference between 6000CE/6000PE means anyone can claim it.
3. 5900 is still the support but- still a bit shaky one because of yesterday's call writing.
4. PCR dipped from 1.05 to 1.01 -- overall don't expect this to move big time before expiry


Nifty Futures:
Nov: 1.48Cr - OI down 25% (50L shares cut)
Dec: 1.52Cr - OI up 68% (62L shares added) -- strong rollovers + new OI addition


Banknifty Futures:
Nov: 7.8L - OI down 29% (3.2L shares cut)
Dec: 8.8L OI up 127% (5L shares added) -- again strong rollovers + new OI addition


Nifty weekly chart shows that support came in yesterday around VAL of the breakout week in September. The scary thing? Below 5770-5805, there's not much support until 5600

charts

Bank Nifty :



Nifty :



Value Areas :

5960-5949-5911 in the Nifty

12260-12239-12147 in the BankNifty.

V shape

We opened our doors today to a whole bunch of enthusiastic traders wanting to check out Vtrender Live, our trading room and our orderflow indicators.

I've often said that the best place to check out the potency of any good indicator is a two-way volatile market and our guests would not have asked for a better day to have a close look at the Order Flow indicator in action.

At the end of the day, our day time frame indicator returned these signals :



Shai always says that these indicators which are built on volume profile are 20 % better than any of us, as they do not have considerations of greed and fear in the decision making process.

The long at 5848 upto 5905 and 5960 later, justifies the immense amount of effort and time we have put to get this upto speed !

Here is the Bank Nifty :



Incidentally the short was suggested at 12450 at the highs of yesterday and the reversal printed at 1.15 pm today at 11960 levels.

Looking ahead to tomorrow, the global picture was softening when our trading closed at 3.30 today. The US futures are near a critical level again and the open tomorrow will be exciting again.

Options/futures data for 22nd Nov (EOD)

Summary:
1. From options table what we can conclude is - Nifty status is back to where we it was on Thursday's closing and one can forget Friday's action as a 'bad dream'. Basically all of the options actions that happened on Friday were promptly reversed. Calls writtern @6000/5900/5800 covered and puts that got covered @5900/6000 were written back.
2. 6000 now becomes a 50-50 level with 50L calls vs 62L puts.
3. Nifty range suggested by options is 5900-6100, with 6100 the resistance and 5900 the strong support
4. PCR is also exactly back to Thursday's level of 1.05!


Nifty Futures:
NOV: 1.98Cr OI down 14% (35L shares cut from OI)
DEC: 0.9Cr OI up 69% (37L shares added) -- Again like Friday more than 100% rollover but not as large as Friday.


Banknifty Futures:
NOV: 11L OI down 23% (3L shares cut) -- OI is now down from 17L at its peak in Nov, 28-35L in September!
DEC: 3.9L OI up 100% (2L shares added) 


Want to end this post with two Nifty charts:
1. Monthly Volume Profile charts show -- Nifty seems to have a liking for 6000 for expiry. Sep expiry close to 6030 and Oct expiry close to 5990. No conclusions, but just an observation that one expiry happened close to POC and the next one at VAL

2. Action on Oct22nd/21st: What what we saw Friday/yesterday was very similar to what we saw on 20th/21st Oct - will we see a repeat of 22nd Oct action today? (Here's the link for Viren's post on 22nd Oct http://www.vtrender.com/2010/10/vol-profile-charts-for-22nd-oct.html)

Nifty closes up

Open House Update : I've just issued all the passwords for the Open House tomorrow. Please check your mail for all instructions to log into the Trading room tomorrow.

The Nifty and the Bank Nifty today did a good job of closing above value area high from friday.Though price was with the buyers all day today, in terms of momentum for the swing term, it is still an equal game and action early tomorrow morning would set the trend up for the next 100-150 points.



The price action of today is a DD pattern in the Nifty, which has scope for continuation, but there were no immediate triggers for a run-away upmove.It is safe to say that the downtrend has been halted for the tiome being as we saw value being established side-ways today.



The Bank Nifty reached out to it's previous break-down zone today near 12460 which halted it's advance slightly.

We used the divergence between the Nifty and the Bank Nifty at the close on Friday to set up good long positions which are up 325 points at the moment.

Looking further, we expect the Bank Nifty to lead again and a move above 12460-12490 should confirm that.

Let's see what tomorrow brings.

short term reversal

At the time of this post, the Nifty future is at 5954 currently above 5939 which is not just Value area Low but also a previous support and a break-down point from Friday afternoon's session.

Staying above 5939, this market should target 5974 and then 5996 where the market would find resistance as Shai Pointed out in his weeekend post.

The Bank Nifty is also above value area low at 12150.

Options/futures data for 19th Nov (EOD)

In case you haven't signed up for the Vtrender Open House on Tuesday, please find the details of this exciting announcement from Shai's post here

Summary:
1. What can I say? Options table has just too much bearishness written all over it and when everyone is one same side of the trade, market sometimes doesn't reward that crowded trade as much.
2. Given the OTR (OI True Range) of 6000 was close to 15L, bears were able to take it easily with 11L calls written and the ever dependable 6000PEs backed off.
3. Even quite a bit of 5900CEs were written making 5900 also vulnerable for bear attack but with 69L of OI @5900PE, 5900 is still the reasonably good support for this market
4. 6000 is also now a resistance but I still want to view it as balanced because of the high OTR. 6100 is the first resistance and 6200 is the strong resistance.
5. PCR has dipped from 1.05 to 1.0 -- This is the only 6th time PCR has dipped so low and rest of the 5 times were 400+ point corrections during the last 1.5 years. So a reversal from here is possible even if its temporary.


Nifty Futures:
NOV: 2.3Cr OI down 2% (5L shares cut)
DEC: 53L OI up 27% (11.3 shares got added) - Strong rollovers + new OI added with premium reduction on Friday -- Fresh Shorts? Only time will tell.


Banknifty Futures:
NOV: 14L OI down 1% (0.15L shares cut)
DEC: 1.87L OI up 34% (0.45L shares added) - Again similar story like Nifty OI


PS: There was a power cut in my area in B'lore all of yesterday night which drained off my inverter too! I could post only after coming to office. Sometimes makes me wonder why I am investing in NTPC/NHPC/GVKPIL/TATAPOWER - when in fact the power tariffs are promptly going up but service we get from out Electricity board is still what we used to get in last decade :(

Swing Bottom ? / Open House

In last weekend's post printed here, Viren had made a case for this market to be sold into at every rise throughout the week.

The market began the week by attempting to get over 6160, failed and finished the week at 5875, roughly a range of 300 points from top of the week to the bottom.

On friday, we saw signs of an early capitulation as investors headed for the exits after the oft defended 5925-5937 levels gave way in the Nifty future.What didn't help matters were rumors of the prime minister resigning, as a web page from 2008 landed in our trading room as well !

Capitulation or not, we will know only next week when the markets open, but the fact remains that the Nifty has a lot of work left ahead to resume it's faltering uptrend.

We at Vtrender are not in the business of picking tops or bottoms, but have reasonable conviction to state that the bottom may be just 100 points from Friday's closing levels.

Have a look at these charts :



The charts are a composite profile of the Nifty future for the past 100 days divided into three profiles each of 30 days. The Purple within the charts are the value areas.

On Friday the selling stopped at the high volume region of the 9/10 ( September) profile at 5860 region.The zone between 5860 to 5930 remains a low volume zone and the market may go sideways in this zone as it attempts to redefine value after Friday's failed attempt at 5962-6000 zone.

The easy move would be above 5930 to 6000 levels or below 5860 to 5775 regions.We estimate the 5775 region to be the swing low from where a reasonable 200 point rally should materialize. If the market does get to 6000 before that ( arrow in chart) it will have some tough answering to do and only a move above 6080-6150 on the monthly time frame will give the index an all-clear for new highs.

The key for Monday and Tuesday will be 5860-5930 region.



The levels for the Nifty spot are shown above with the bottom projected at 5850-5755 levels.I've put up the chart as next week is expiry and there may be movements in the future of 50 points from discount to premium as smart money will try to induce fresh shorts or shake out weak longs out of the auction process.Remember option expiry is also slaughter house for the new option writers, so put a smile on your face as new writing appears in November options.

The past two days have been extremely volatile even for us in the trading room, but a quick look at our orderflow indicators tells me that they have survived a fiery baptism in our markets.It's two way markets which have been the graveyard for most of the indicators worldwide, but our orderflow indicators did a great job to put us in line with the trend. Have a look :



9 great trades in the past two days when the Nifty future was doing 40 points in about 15 minutes on an average.The method is an intra-day stop and reverse method. You do not need any great TA knowledge to follow these, as the indicators have been taught to follow the best of Market profile (without the fear and greed).Buy when lower pane is blue and reverse when red.

We are throwing our doors open for one day only to all of you on Tuesday to come and have a look at these indicators doing a job ! Actually we have two of them in the trading room, one designed to catch 10-20 points swings and one like the above designed to keep you in larger trends of 40 points each.

The Vtrender Open House is on Tuesday from 9.15 am to 4.00 pm.Invitation is open to all and completely free.All you would need to do is send us an email, so that we can issue you a password for the event.You can be with us the whole day or anytime of your choice. The doors will be kept open all day.

Mails for entrance can be sent to vtrender@gmail.com.

Have a pleasant weekend !

Down trend continues

In my comments from yesterday posted here, I had mentioned that I was not comfortable with the 100 point rise in the Nifty without the supports of the banks at the close of the session yesterday.

Well the selling began in earnest at the open itself and a trip to the lows at 5935 was made, before the market started auctioning again with horizontal development enough to give the market a balanced look till 2.45 pm.At that point with 45 minutes for the session and the week to end, I was seriously thinking that the downtrend would be ending as we looked like putting a neutral day at the swing lows of the move.

The aggressive selling which followed has put the market with a real chance of hitting 5765-5750 NF levels.



The only hope for longs would be a change of sentiment over the weekend and a rally at the open to discard this move late in the day.

Looks tough but not impossible. 5925-5937 will hold the cue on Monday morning if we do get back over there.





The Bank Nifty got resisted at the POC all day today in it's rally attempt ( the Nifty stayed below VAL ).

The lows of October were visited by the Bank Nifty before it closed around 80 points up from there.The Nifty closed below October Lows.

In itself it has sent out a message.

The picture will be clear on Monday Morning.

Options/futures data for 18th Nov (EOD)

Summary:
1. From Options table, now the range is expanded to 5900-6200 with 6200 the strong resistance and 5900 the strong support. 
2. The two intermediate levels 6000 & 6100 are now close to balanced, the reason being - like we have ATR to measure the volatility/day swings, I want to coin a term called OTR (OI True Range) - which measures - by how much option OI at a level can change. In the last few days OTR for 6200/6100/6000 (PE or CE) has been around 15L. So if there is just 15L difference between CE/PE at a given strike, we can consider that level to be close to balanced because of the high OTR we saw in last 4-5 sessions. The conclusion is that if a strong buyer or seller emerges at that level it can be easily crossed or shattered.
3. Immediate worry to bulls is that of the 36L calls written @6000 and 15L calls @5900 in last 2 days, only 4L have been covered. But these guys may back off if Nifty manages to cross 6090+
4. PCR changed from 1.05 to 1.08 - still in the "reversal possible" range


Nifty Futures:
NOV: 2.38Cr OI down 4% (10L shares cut) 
DEC: 42L OI up 28% (9L shares added)


Banknifty Futures:
NOV: 14L OI down 4% (0.65L shares cut) -- Despite that mega fall, no new shorts have come in. Its been only OI reduction in the last few days.
DEC: 1.34L (0.43L shares added)


Monthly MP charts:
The only thing that has happened in this month's fall is the test of Monthly VWAP. Is that coming?

An extended downtrend?

A 100 point bounce from 5925 levels and a close above value high seem to have got people excited and talking about a bottom.

Bottoms are a process, never an event!



Well, we may go up again tomorrow and the peculiar 'P' shape observed in today's profile was weird because it comes on a downtrend. We would have been happier seeing a 'b' today.

The chart above shows a strong seller at 6050-6055 region, who sold thrice at that point ( Notice the horizontal bar is 90 % red at 6050).

If this seller is overcome at the open tomorrow, then we will auction in the single print zone upto 6090 levels.Expect reaction to build up either here or at 6165 levels. This market will be sold into till these two levels are conquered.



Another reason for my unease about this move up today in the Nifty, was that the Bank Nifty closed well below the lows from tuesday. The Bank Nifty has led the Nifty for the past 1000 points and even today, it was the weakness in the banks which drove the Nifty lower early in the morning.

Readers would remember 12460 as the level which caused the gap-up after the ICICI results took the Bank Nifty up 400 points the previous day. 12460 was finally broken today ( after 3 attempts) on volumes and the 12460-12490 zone will be a difficult terrain to cross.

Any rally without the Bank nifty making highs would be suspect. I prefer to be a bear until then and wait out this move up.

Options/futures data for 16th Nov (EOD)

Just wanted to point out that I have added an Interactive Google gadget to the OI table which will be always displaying the previous day's OI data - Here's the link that explains how to use it - 


Summary:
1. The bear attack more gruesome on Tuesday with options table become way more bearish than my liking. Too much call writing at 6200/6100/6000 and even some at 5900! Also decent put covering at all higher levels including 6000PEs
2. 6200 now becomes the strong resistance and at 6100 bears have slight edge because of the 60L calls vs 50L puts
3. Some cause for concern are 29L 6000CEs written and 11L 5900CEs - if these don't get covered soon then Nifty is headed much lower regardless of the bounce that comes.
4. PCR is now at 1.05 - almost the lows I have seen in last 3-4 months. If we take a contrarian approach, this kind of low PCR should signal a reversal, even if its small and temporary.


Nifty Futures:
NOV: 2.5Cr OI flat - OI has remained almost flat (may be 2-3% down) during the entire fall from 6340+ to 5970s. So no big shorts are added. But this is a options heavy market and all the big plays are in options now than futures!
DEC: 32L OI up 13% (3.8L shares added) - Last couple of days there has been some OI addition to DEC


Banknifty Futures:
14.9L OI down 2% - Don't know i we will ever see those 28L-35L OI days..


Charts from Viren:

Google gadget that always has previous day's interactive OI table

In the spirit of being a bit sophisticated than just having a vanilla options table, I have tried to add a google gadget with link to the options table from my google doc


Steps to view the Interactive OI table:
1. Click Finish (No selection of fields required)
2. Select the "Show Only Chart" option as shown in the snapshot below

3. Select "Show Chart Legend on Top" from the second set of selections as shown below