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.

Nifty March series outlook.

Last weekend, when we looked at mid term and short term charts of the Nifty spot, we identified two regions for the Nifty, one around the 5550 zone for the medium term and another around 5472/93 for the short term.

At the end of the week, the Nifty found itself closing below both the mentioned levels.

In a trading environment, which is increasingly being dominated by news flow from east to west and with the mid-east also demanding attention it pays to be extra careful in the markets, regardless of what the technical picture may be projecting at the moment.

It's not a time to be too adventurous with leveraged positions, but to be careful with a good understanding of risk-reward for short term trades.

Come Monday, the news flow from Japan and the EU conference will affect our Asian markets and the Europe open one way or the other. We also have the RBI policy which can keep the Banks muted in the early part of the week.The Bank Nifty did not support the down move of yesterday afternoon and without it's participation it is difficult to see the larger Nifty move strongly during the week.

Let's turn out attention to the Nifty March future with an eye on what the expiry may be on the 31st of march.

I'll like to break the remaining part of this series into two parts, with the trend being mild to moderately bearish for the coming week and a shift to mild bullish as we come closer to the expiry week.

The observations are from the chart posted below. I'll elaborate :



Based on last weekend's post and the fact mentioned at the top that we could not clear the week above 5472 and 5550, we may be headed towards 5377 and 5340.

The composite profile shows heavy volumes now at 5500 regions which could be new shorts having entered the market yesterday. Certainly the region around 5500 would be a stop and reverse for the rest of the series.5300 should be the extreme end at which the market can go to, below which the new buyers ( green candle in the pane) would give up all hope.The low volume zone around 5400 has not indicated a great preference for auction ( as expected in profile), with two 50 + point moves above it this week.The vwap for the series is 5460 regions where we closed yesterday and seems to suggest that the bulk of the volume is below 5500 levels for the series which is also the preferred region for auction.On two counts therefore, 5500 would be a good stop for shorts.

Now for the second part of the series, where the outlook should be bullish.

Last March, we had an amazingly profitable time at Vtrender with our theory on seasonality and markets. You can catch that post from last march here.

Basically the theory is that the month of March is a profitable series for bulls and should close at the highs.Now like all theories, this one also needs to be taken with a pinch of salt, but profile also teaches us that markets have memory and tend to do things which they have often done many times before again and again.

So we'll watch for the bearishness to subside and the bullishness to begin.

To that end, the news flow this week should help.

Expiry for Feb

Over the weekend, Viren had posted an interesting chart about the Point of control for the series holding price down and a flat market for the week.

Unfortunately the profit for the straddle has been severely affected by a rampaging Vix which has put paid to hopes of a theta decay for most writers from last week.

But the importance of the chart for direction cannot be undermined.



The Vix range for expiry tomorrow is 5500- 5381 and the market should operate within that range tomorrow provided we do not have another 10 % bump-up in the Vix during the day.

The values developed for the series are 5385-5475-5553.

5475 has been a pivot around which most of the trading has been happening and attempts to break down below 5429 have been stopped by an adamant VWAP which has converted those moves into day lows right around there !

Very clearly fresh downward impetus will be below 5385 and upward bias will resume over 5553 for the month of March.

My charts indicate new shorts in march futures at current levels, could also be rollovers, and we would wait for price to confirm that downward bias.

For tomorrow, there is a 30 point trade above 5460 to consider, a 20 point trade below 5427 and a further 30 points from there to work out of.

Happy Trading.

Order Flow : 11th FEb

Earlier today, we noticed a not very confident probe of price below value lows, though the distance covered was around 45 points to 5175 levels.

What was noticeable was an important part of the index - the banks not moving below value or to new lows.

If you had watched the value areas closely especially the relevance of the point of control, it was not at all a difficult day to trade today.

The OrderFlow charts made the job even easier. Take a look :



Order Flow suggested buyers coming to replace reluctant sellers at 5194.These confident buyers managed to take the Nifty up to 5328 in one continuous move measuring 134 points.



The BN got resisted at VAH early in the morning, but once it broke through there was no stopping. I tried to take a counter trend trade around 10265 levels, but had to quickly give up to persistent buyers for a minor 30 points of profits.When the previous highs around 10290 were taken, there was no looking back.

The profile charts of today throw interesting possibilities for Monday, many of which we will discuss in the webinar tomorrow.

So if you have not registered for it yet, try the link at the top right of the blog or send a mail to vtrender@gmail.com.

Market profile is one study which can call the major levels and the moves of the market right, 90 % of the time.So if you are still struggling in your trading, start reading up about profile.Your trading will get the edge it requires!

Volume Point of Control ( POC)

Many of you following this blog would be familiar with the terms VAH, VAL & POC.

These are the value area high, value area low and point of control.

Whilst the VAH & the VAL are important for a particular days action and the next, and lose their relevance after some time, the POC becomes even more important as time passes by.

Markets have memory and great auctions, up or down have been known to halt around the POC.

Since this is the area where the highest volume is traded, markets try to gravitate towards all such points, past and present. The POC is called the efficiency point of the auction process and the single area at which both buyers and sellers agree on fair price for the day.

One of my good friends, Chad Payne from Linnsoft put up a post sometime back on the effectiveness of the POC in trading the ES futures. I asked him to share the chart with me and together we put up the following chart for our very own Nifty.



Let me explain :

The question we put together were :

1) How far is the distance between a point of control of a given day from that of the previous day?

2) How many times did price open up above the previous days point of control?

3) How many times did price open up below the previous days point of control?

4) How many days had a POC very close to the previous POC by a factor of 5 points?

5) How many days did the Nifty open within the previous days range and touched the previous days POC?

6) How many days did the Nifty open outside the previous days range and touched the previous days POC?

The answers are all there in the chart above ( you may have to download it ) .

The top most pane is that of the Nifty spot for a period of 158 days as shown by the green line in the pane below.this is also our sample size.The yellow dots on the chart ( updated till the close of today) are the volume point of control ( VPOC) for the current day and the blue dots are the VPOC for the previous day.

1) How far is the distance between a point of control of a given day from that of the previous day?

The answer is in the third pane in blue bars from the top. The average range between VPOC's is 72 and

2) How many times did price open up above the previous days point of control?

The fourth pane in green bars gives a value of 90 days in 158 days which is 57 % statistic. So 57 % of the time, price opens above the previous days POC.

3) How many times did price open up below the previous days point of control?

The fifth pane with red bars gives you 68 times the market opened below VPOC or the balance 43 %.

4) How many days had a POC very close to the previous POC by a factor of 5 points?

9 days in 158 had a distance between the POC's separated by a difference of 5 points. Percent wise that was less than 6 % .When I increased the difference to 10, the nos of days increased to 23 or 15 % of the time, the POC's had a separation of 10 points.

5) How many days did the Nifty open within the previous days range and touched the previous days POC?

54 days.yellow bars in the second pane from bottom.

6) How many days did the Nifty open outside the previous days range and touched the previous days POC?

12 days.Bottom most pane.Another statistic (not in chart) showed the Nifty opening outside of range 58 times in 158 or 37 % of the time. Only 20 % of this time did the market go and touch VPOC.

So what do we know, that we did not know already.

One is that the distance is good between POC's. Two is that they rarely are found near each other and three that if the open is out of range, the previous days POC has to be forgotten !

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..