Saturday, April 30, 2011
Thursday, April 28, 2011
Wednesday, April 27, 2011
Tuesday, April 26, 2011
Infosys
In keeping our view on the Steidlmayer distribution, let's look at Infosys today ( cash market).
For the many followers of Infy, the day of the results was an amazing erosion of value, not seen in years!
Here is the chart of Infosys in cash.
We will follow the Stedilmayer distribution ( SD) to point out a move in the instrument, which is around the corner.The details of SD can be found here
The Steidlamayer theory hold that markets do not go from bull to bear or bear to bull all the time, but form a balancing act in between through a 4 step process. The most lucrative opportunities are always in step 1 and step 4. Steps 2 and 3 are for people familiar with the art of writing options.
After the Initial price movement seen in INFY on results day, we had a few sessions where the markets tried to balance and create a new value or opportunity in the market.
As a follow up we also saw a P shaped profile which does seem to indicate that step 3 also seems to be getting over.
So we are preparing for step 4 which should go on to do at least 50 % of step 1 or form a new IPM below the balance area.
As the market is balanced, we hold a neutral view at today's close and would look out for the following :
a) a move above 2966 cash, should bring 2991 and 3050 and 3090 subsequently.The region above 3090 is 50 % of the IPM as can also be confirmed by the single prints above it. This will be resistance for the move. Only a move above 3090 will bring momentum buying in infosys.
b)Should the market want to break above 2966, it should not trade below 2907 tomorrow.
For the many followers of Infy, the day of the results was an amazing erosion of value, not seen in years!
Here is the chart of Infosys in cash.
We will follow the Stedilmayer distribution ( SD) to point out a move in the instrument, which is around the corner.The details of SD can be found here
The Steidlamayer theory hold that markets do not go from bull to bear or bear to bull all the time, but form a balancing act in between through a 4 step process. The most lucrative opportunities are always in step 1 and step 4. Steps 2 and 3 are for people familiar with the art of writing options.
After the Initial price movement seen in INFY on results day, we had a few sessions where the markets tried to balance and create a new value or opportunity in the market.
As a follow up we also saw a P shaped profile which does seem to indicate that step 3 also seems to be getting over.
So we are preparing for step 4 which should go on to do at least 50 % of step 1 or form a new IPM below the balance area.
As the market is balanced, we hold a neutral view at today's close and would look out for the following :
a) a move above 2966 cash, should bring 2991 and 3050 and 3090 subsequently.The region above 3090 is 50 % of the IPM as can also be confirmed by the single prints above it. This will be resistance for the move. Only a move above 3090 will bring momentum buying in infosys.
b)Should the market want to break above 2966, it should not trade below 2907 tomorrow.
Saturday, April 23, 2011
Initial price Movement -2
In our previous post on Steidlmayer distribution, we had made a point that step 3 of the process was over and " the market is on the verge of a large move".
The point made about step 4 was " usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM ( Initial price movement) range"
This week we saw a move from the Point of control of the b shaped profile, signaling the start of the new IPM, but for the conservative profiler, the final closing of the week was within the previous bell shaped curve and still within 50 % of the previous IPM range of 5550-5971.
Have a look :
Chart of NF April
For the New IPM, we had remarked that it should ideally begin with a trend day and take out the previous balance zone. We have seen evidence of a double distribution. which is a trending type of day in the markets and usually a signal for follow up action. Aggressive profilers would confirm the DD as a signal that we are in a new IPM which should challenge levels of 6090 next in the futures.
However as remarked in the comments section, the conservative player would wait for the previous balance zone to be taken out to confirm the new activity. We have a high-volume-node ( HVN) at 5946 levels and once that is taken out on closing basis, the stage will be set for the move to 6090 NF.
If however the market is in a mood to scale back, the 5808 on the lower side should not be violated. However only a break of 5733 from the b shaped profile will turn the sentiment bearish for the short term.
Looking forward to next week, we have options expiration as well as earning season underway. An options expiration by itself involves large inventory adjustments by market participants which gives the market added volatility. We have already seen reactions to Infy Numbers create panic in long inventory positions and it will be interesting to see the market's response to RIL numbers.
So with the markets at the top of it's recent trading range and a double dose of volatility in expiration and earnings, we have some interesting times ahead.
The point made about step 4 was " usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM ( Initial price movement) range"
This week we saw a move from the Point of control of the b shaped profile, signaling the start of the new IPM, but for the conservative profiler, the final closing of the week was within the previous bell shaped curve and still within 50 % of the previous IPM range of 5550-5971.
Have a look :
Chart of NF April
For the New IPM, we had remarked that it should ideally begin with a trend day and take out the previous balance zone. We have seen evidence of a double distribution. which is a trending type of day in the markets and usually a signal for follow up action. Aggressive profilers would confirm the DD as a signal that we are in a new IPM which should challenge levels of 6090 next in the futures.
However as remarked in the comments section, the conservative player would wait for the previous balance zone to be taken out to confirm the new activity. We have a high-volume-node ( HVN) at 5946 levels and once that is taken out on closing basis, the stage will be set for the move to 6090 NF.
If however the market is in a mood to scale back, the 5808 on the lower side should not be violated. However only a break of 5733 from the b shaped profile will turn the sentiment bearish for the short term.
Looking forward to next week, we have options expiration as well as earning season underway. An options expiration by itself involves large inventory adjustments by market participants which gives the market added volatility. We have already seen reactions to Infy Numbers create panic in long inventory positions and it will be interesting to see the market's response to RIL numbers.
So with the markets at the top of it's recent trading range and a double dose of volatility in expiration and earnings, we have some interesting times ahead.
Tuesday, April 19, 2011
Steidlmayer Distribution
Markets exist to facilitate trade. In the OrderFlow exchange which happens across various time frames, it is important to step back and always assess which time frame of the market is controlling the price moves.
We have seen an up-down april series so far, with the move which started from march 21 off 5577 levels ( actually from the bottom of that large bracket closer to 5370) running into rough weather near 5940 NF levels.
At today's close we are at 5766 off 200 points from the highs seen recently.
Often when the market is on the verge of a large move, either direction I tend to look at the market through the Steidlmayer 4 step process also called Steidlmayer distribution.
Before we go into the chart, let's understand what the Steidlmayer distribution actually is :
A Steidlmayer Distribution has four parts:
1) It begins with a directional move which we call an Initial Price Movement (IPM).Most of the time a trend day starts a new development. An IPM is one time frame activity or a series of directional bars with few or no overlapping ranges and retracements.
2) Rotation begins and with it, the formation of the Point of Control ( POC) . A pure rotation should have POC moving sideways.This later takes the shape of a bell curve.This also brings an end to the IPM
3) From this sideways movement, the market moves into a b shaped profile or a p shaped profile.The "b" shaped profile is bearish and the "p" shaped profile is bullish.
4) Distribution completes and usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM range. If the latter occurs, the IPM will go on to form either a larger sideways market or the start of a new directional trend.
Here's a chart of the Nifty future as a daily profile.
In the chart we have an initial price movement off 5577 levels followed by a sideways move. We alos saw evidence of minus development yesterday and and an auction today which was at the lower end of yesterday's profile. Ideally tomorrow we are set up for a move back into the balance zone of last week or a move below 5715 NF which may bring levels of 5630/ 10 below. The balanced profile of today also confirms a range break out happening.
Let's look at another chart which has merged profiles.I prefer to look at these charts as the structure is based on market movement.
The merged profile shows a bell curve near the top and a b shaped profile at the close today, signaling a possible end to the sideways movement.
The Steidlmayer distribution is bearishly tilted at the moment and a confirmation would be a break below 5717 tomorrow. However should it hold ( 5717) the possibility of a rotation back upto 5836 cannot be ruled out also.
If that happens, the sideways move will be prolonged.
We have seen an up-down april series so far, with the move which started from march 21 off 5577 levels ( actually from the bottom of that large bracket closer to 5370) running into rough weather near 5940 NF levels.
At today's close we are at 5766 off 200 points from the highs seen recently.
Often when the market is on the verge of a large move, either direction I tend to look at the market through the Steidlmayer 4 step process also called Steidlmayer distribution.
Before we go into the chart, let's understand what the Steidlmayer distribution actually is :
A Steidlmayer Distribution has four parts:
1) It begins with a directional move which we call an Initial Price Movement (IPM).Most of the time a trend day starts a new development. An IPM is one time frame activity or a series of directional bars with few or no overlapping ranges and retracements.
2) Rotation begins and with it, the formation of the Point of Control ( POC) . A pure rotation should have POC moving sideways.This later takes the shape of a bell curve.This also brings an end to the IPM
3) From this sideways movement, the market moves into a b shaped profile or a p shaped profile.The "b" shaped profile is bearish and the "p" shaped profile is bullish.
4) Distribution completes and usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM range. If the latter occurs, the IPM will go on to form either a larger sideways market or the start of a new directional trend.
Here's a chart of the Nifty future as a daily profile.
In the chart we have an initial price movement off 5577 levels followed by a sideways move. We alos saw evidence of minus development yesterday and and an auction today which was at the lower end of yesterday's profile. Ideally tomorrow we are set up for a move back into the balance zone of last week or a move below 5715 NF which may bring levels of 5630/ 10 below. The balanced profile of today also confirms a range break out happening.
Let's look at another chart which has merged profiles.I prefer to look at these charts as the structure is based on market movement.
The merged profile shows a bell curve near the top and a b shaped profile at the close today, signaling a possible end to the sideways movement.
The Steidlmayer distribution is bearishly tilted at the moment and a confirmation would be a break below 5717 tomorrow. However should it hold ( 5717) the possibility of a rotation back upto 5836 cannot be ruled out also.
If that happens, the sideways move will be prolonged.
Friday, April 15, 2011
OrderFlow at 1.00 pm.
In Market profile, the auction theory is all about the buying and the selling of the market.
Fortunately in our trading room, we keep a record of this through our OrderFlow indicators.
The orderflow measures the buying and selling of the market and puts us ahead of some great trades through it's uniqueness.
It is based on the actual money chasing longs/ shorts and always a good window on where the market is selling off and where it is buying into.
On Wednesday, the buying in the market was depicted through a blue streaming line ( blue is for buying and red for selling) and this morning we had a red orderflow straight off the open.
Today the buying has been less, evident in the lesser blue in today's charts compared to the one on wednesday which was all blue until the close.
Fortunately in our trading room, we keep a record of this through our OrderFlow indicators.
The orderflow measures the buying and selling of the market and puts us ahead of some great trades through it's uniqueness.
It is based on the actual money chasing longs/ shorts and always a good window on where the market is selling off and where it is buying into.
On Wednesday, the buying in the market was depicted through a blue streaming line ( blue is for buying and red for selling) and this morning we had a red orderflow straight off the open.
Today the buying has been less, evident in the lesser blue in today's charts compared to the one on wednesday which was all blue until the close.
Wednesday, April 13, 2011
Profile at noon.
We have seen a strong buyer off the open this morning, more as a response to the lower prices near the 5730 levels we had marked out as borderline in Monday's post.
In profile a gap is considered a splendid risk-reward opportunity as it points to the presence of a longer time frame player in the markets. Incidentally, a gap is considered as a movement away from the previous day's range ( high or lows), and not the difference in a close and open.
The open drive which was initially a gap-fill turned into a successful 80 % rule trade and current prices are up over 115 points from morning lows of 5750.
Of interest to us now, is two points :
a) staying above the 5850 level marked out in Monday's post
b) the lower end of the double inside days from last week at 5880.
I have marked the double inside days as one single profile in the above chart.
You would have noted on Friday last, the market rejecting this entire zone from 5880-5936 in the move off the morning.
The rest of the chart is annotated.
In profile a gap is considered a splendid risk-reward opportunity as it points to the presence of a longer time frame player in the markets. Incidentally, a gap is considered as a movement away from the previous day's range ( high or lows), and not the difference in a close and open.
The open drive which was initially a gap-fill turned into a successful 80 % rule trade and current prices are up over 115 points from morning lows of 5750.
Of interest to us now, is two points :
a) staying above the 5850 level marked out in Monday's post
b) the lower end of the double inside days from last week at 5880.
I have marked the double inside days as one single profile in the above chart.
You would have noted on Friday last, the market rejecting this entire zone from 5880-5936 in the move off the morning.
The rest of the chart is annotated.
Monday, April 11, 2011
Intra day Profile
Here is the profile chart as of 1.00 pm today.
The region between 5880 and 5940 as well as the probe to 5971 marked a bracket of last week. On friday the responsive seller completely rejected this value and we saw a move lower to the balanced profile and the region of 5860 as expected.
This morning we are seeing a continuation of Friday's auction with price probing to a new level of 5801 currently.
The possible targets are the single prints from 30/ 3 or the POC from 29/ 3 near 5970 levels.
It will be important to see buyer behavior at these levels. A further down move can bring 5730 which will mark the end of the up auction and one time frame behavior seen from 5300 levels. Also I have marked a dividing line between 5855-5865 for new shorts entered today. However a push to new highs for the swing trader will begin only above the top bracket or above 5911 levels.This can take the market back up to 6031 levels and beyond.
The region between 5880 and 5940 as well as the probe to 5971 marked a bracket of last week. On friday the responsive seller completely rejected this value and we saw a move lower to the balanced profile and the region of 5860 as expected.
This morning we are seeing a continuation of Friday's auction with price probing to a new level of 5801 currently.
The possible targets are the single prints from 30/ 3 or the POC from 29/ 3 near 5970 levels.
It will be important to see buyer behavior at these levels. A further down move can bring 5730 which will mark the end of the up auction and one time frame behavior seen from 5300 levels. Also I have marked a dividing line between 5855-5865 for new shorts entered today. However a push to new highs for the swing trader will begin only above the top bracket or above 5911 levels.This can take the market back up to 6031 levels and beyond.
Desi MO (McClellan's oscillator for NSE)
The method to calculate McClellan's Oscillator with amibroker has been explained in the following document:
https://docs.google.com/document/d/1alumqZ4NqGOp1ajFE95Miupadt4Kznscw0WnM92cEV4/edit?hl=en#
Saturday, April 9, 2011
Can Profile predict?
The short answer is "No".
No trading system can.
But what it can do is anticipate "wisely"
What is the difference?
That's anticipation.
The Market profile is a system which measures the buying/ selling of others and can show at various stages who is in control. Traded volumes give powerful information on these roles and if utilised well are a single point gateway of getting the trading odds in your favor.
Unfortunately for us our business of trading is dominated by big money and larger institutions.. At the core of it is a simple buy- sell mechanism . You buy and someone who has bought before you now becomes a seller (for whatever reason) and gives it to you and we have a trade. But it is also true that the more money you have the more influence you can have on the price action. so if a person keeps buying and buying and buying at every fall he can potentially arrest a falling price. So if you find yourself trading against guys who have more "money power" than you , you don't go against them, you go with them.
We have tools at vtrender which show us this buying and selling happening in real time and where the control is. You can't beat them, you join them.
Now you are playing with the person who is controlling the ball and you can see where he is headed.
That's anticipation for you.When it gets armed with data and analytics it no longer is prediction.
No trading system can.
But what it can do is anticipate "wisely"
What is the difference?
That's anticipation.
The Market profile is a system which measures the buying/ selling of others and can show at various stages who is in control. Traded volumes give powerful information on these roles and if utilised well are a single point gateway of getting the trading odds in your favor.
Unfortunately for us our business of trading is dominated by big money and larger institutions.. At the core of it is a simple buy- sell mechanism . You buy and someone who has bought before you now becomes a seller (for whatever reason) and gives it to you and we have a trade. But it is also true that the more money you have the more influence you can have on the price action. so if a person keeps buying and buying and buying at every fall he can potentially arrest a falling price. So if you find yourself trading against guys who have more "money power" than you , you don't go against them, you go with them.
We have tools at vtrender which show us this buying and selling happening in real time and where the control is. You can't beat them, you join them.
Now you are playing with the person who is controlling the ball and you can see where he is headed.
That's anticipation for you.When it gets armed with data and analytics it no longer is prediction.
Wednesday, April 6, 2011
Profile musings?
We have had a tiring three days of trading in the Nifty futures, with the market refusing to move beyond an established daily range and two sided movements in the markets.
Indeed strong initiative activity has been met by strong responsive activity on both sides yesterday and today.So whilst yesterday's initiative seller was met by responsive buyers, today's initiative buying has been downed by responsive selling.
If we merge all the three profiles, we get a sense of where the distribution has been happening.
Incidentally we are still around the 5900 spot level we spoke about two days earlier
That's the power of the point of control . It tends to attract all prices to itself.
But let's look a little beyond the POC and try to understand what the chart would be doing in the next two days.Whilst it's always hazardous to guess a break out of a balance zone, a closer look inside the profile shows range extensions on the south side, one unsuccessful and another successful ( today's profile) which would try to indicate a shift in the market sentiment at current levels.Clearly the smart money seems to be moving out at higher levels.
Let's also look at this next chart :
It's a 5 day chart for the entire distribution above 5830 and does seem to indicate that there needs to be more work done at 5860 levels.If 5860 does not hold then the market will rush down to 5815-20 from 31/3.
If I am wrong about this, then NF should stabilise above 5940 tomorrow and go on to meet 5976 and 6015.
It's a balance profile after 3 days, which actually is a 50-50 , but internals say that sellers have an edge.
Indeed strong initiative activity has been met by strong responsive activity on both sides yesterday and today.So whilst yesterday's initiative seller was met by responsive buyers, today's initiative buying has been downed by responsive selling.
If we merge all the three profiles, we get a sense of where the distribution has been happening.
Incidentally we are still around the 5900 spot level we spoke about two days earlier
That's the power of the point of control . It tends to attract all prices to itself.
But let's look a little beyond the POC and try to understand what the chart would be doing in the next two days.Whilst it's always hazardous to guess a break out of a balance zone, a closer look inside the profile shows range extensions on the south side, one unsuccessful and another successful ( today's profile) which would try to indicate a shift in the market sentiment at current levels.Clearly the smart money seems to be moving out at higher levels.
Let's also look at this next chart :
It's a 5 day chart for the entire distribution above 5830 and does seem to indicate that there needs to be more work done at 5860 levels.If 5860 does not hold then the market will rush down to 5815-20 from 31/3.
If I am wrong about this, then NF should stabilise above 5940 tomorrow and go on to meet 5976 and 6015.
It's a balance profile after 3 days, which actually is a 50-50 , but internals say that sellers have an edge.
Tuesday, April 5, 2011
NF Intra Update
Our conflict of interest for a bias to trade today has been resolved with the market choosing point 3 in the update of yesterday
The chart was for the Nifty spot against the regular NF chart which we generally put out, but it was intersting to note that NF was at 5935 yesterday in the afternoon when spot hit 5900 and 5916 this morning when it did the same.
Regardless, we trade off the chart we see and our levels still are good irrespective off the movement of the spot v/s the future. At 12.30 Nf is trading at 5890, having hit 5880 off the weakness we mentioned would come below 5932 today.
The chart is annotated and self explanatory.
The point of interest would be to see if there is a visit to 5960 and to check for evidence of responsive buying there.
Above 5905, we will see day highs again.
The chart was for the Nifty spot against the regular NF chart which we generally put out, but it was intersting to note that NF was at 5935 yesterday in the afternoon when spot hit 5900 and 5916 this morning when it did the same.
Regardless, we trade off the chart we see and our levels still are good irrespective off the movement of the spot v/s the future. At 12.30 Nf is trading at 5890, having hit 5880 off the weakness we mentioned would come below 5932 today.
The chart is annotated and self explanatory.
The point of interest would be to see if there is a visit to 5960 and to check for evidence of responsive buying there.
Above 5905, we will see day highs again.
Monday, April 4, 2011
5900 spot
here is a daily bar chart establishing the downtrend from 63xx levels to 51xx levels.
A composite profile of daily prices is drawn across the chart.
There are two profiles, one for the entire down move from early November to the mid feb lows and the second pne from 5177 to current prices.
As can be seen prices closed near the point of control for the entire down move at 5900-05 spot.
The rally from 21st march is still running strong and there is no signs of any visible weakness on charts.
That is on the daily level.
However on an intra-day basis, for tomorrow, we have a conflict on our hands
1) resolution of the balance zone 5835-5880 has been to the upside, suggesting more upmoves. Incidentally the balance zone produced a 86 point upmove at today's closing prices based on NF.
2) we had a Double distribution day today which is also a sign of continuation.
3) The profile however also throws in a 3 I day, which is generally suggestive of capped up-moves at least till the last hour of the day.In a 3 I day, the highs are usually made within the first 60-90 minutes of trading.
Hence for tomorrow, if we do open and stay above 5959 in the first hour, I see a move to 5985 NF and 6012 NF, within the hour.Weakness will be on a break of 5932 towards 5905 and 5880.
For the upmove to continue, NF should not trade below 5880 tomorrow.
A composite profile of daily prices is drawn across the chart.
There are two profiles, one for the entire down move from early November to the mid feb lows and the second pne from 5177 to current prices.
As can be seen prices closed near the point of control for the entire down move at 5900-05 spot.
The rally from 21st march is still running strong and there is no signs of any visible weakness on charts.
That is on the daily level.
However on an intra-day basis, for tomorrow, we have a conflict on our hands
1) resolution of the balance zone 5835-5880 has been to the upside, suggesting more upmoves. Incidentally the balance zone produced a 86 point upmove at today's closing prices based on NF.
2) we had a Double distribution day today which is also a sign of continuation.
3) The profile however also throws in a 3 I day, which is generally suggestive of capped up-moves at least till the last hour of the day.In a 3 I day, the highs are usually made within the first 60-90 minutes of trading.
Hence for tomorrow, if we do open and stay above 5959 in the first hour, I see a move to 5985 NF and 6012 NF, within the hour.Weakness will be on a break of 5932 towards 5905 and 5880.
For the upmove to continue, NF should not trade below 5880 tomorrow.
Friday, April 1, 2011
Welcome to April
On april fool's day, we start a new series with a pressing question on whether the move seen in the last half of march would continue to 6040 or we would see a revisit to 5550/ 5650.
We are currently working a balance zone between 5835 and 5880 with an excess both sides being rejected in the past two days.
The resolution of this balance zone will set up the next high probability trades.
Clearly the month of March was different from the past five months as we witnessed a stop in the one time frame movement seen from the start of November.
The current levels which are above 5800 seem to suggest that the downmove has been nullified and we are working our way back up to 6300 levels again.For this to be possible we will have to close out April above 5800 also.
The chart illustrates the buying seen above 5550 levels and continuation above the red line in the second pane will signify more buying interest.
However if 5800 breaks then a 100 point drop to 5700 is on the cards.
We are currently working a balance zone between 5835 and 5880 with an excess both sides being rejected in the past two days.
The resolution of this balance zone will set up the next high probability trades.
Clearly the month of March was different from the past five months as we witnessed a stop in the one time frame movement seen from the start of November.
The current levels which are above 5800 seem to suggest that the downmove has been nullified and we are working our way back up to 6300 levels again.For this to be possible we will have to close out April above 5800 also.
The chart illustrates the buying seen above 5550 levels and continuation above the red line in the second pane will signify more buying interest.
However if 5800 breaks then a 100 point drop to 5700 is on the cards.
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