Nifty update for 01-November-2012

Nifty gave a much needed short covering rally before heading lower to 5560 zone. Bank nifty has broken down on monday and it is heading towards the immediate support zone of 10900-11000. There is no point in initiating long positions in a short covering rally and if the market has to rally it will spend days in the lower end of the channel and banks should give some meaningful recovery for nifty to move up. Volatility and turnover data is showing marginal short covering happening in stocks but FII's are still playing with their arbitrage positions in nifty options.There is no harm in booking short positions in PSU banks as they have started correcting much before nifty broke down and the rewards were decent enough. On the long side Wipro also gave a smart recovery and the stock is moving up with lot of buying interest at lower levels. Thus wait for an accumulation pattern in all the major large cap names before initiating any long positions. The range can be 5600 - 5660

Nifty update for 31-Oct-2012

Nifty broke all the support zones and is heading towards 5530-5560 which can be the immediate target in the short term. Majority of the large cap names are heading downwards but as these stocks gave signs of break down much earlier it is better to book partial profit anywhere below 5600.It is wise to watch whether nifty futures is getting support below 5600 zone and then try going long in nifty as there is no point in catching a falling knife now. Anything that falls will give us some time for accumulation and let people start accumulating stocks and dont jump to initiate long positions.Volatility data is showing new short positions in stock futures than in nifty. As expected the rate sensitives lead the fall and it is better to avoid PSU banking space from the buying list. Turnover data is showing that the participation was low but the institutional traders have emerged as sellers in the equity market. Lets watch for 5-10 of November for an interim bottom to be formed and till then i would not be a buyer as long as some support zone emerges.The trading range can be 5580 - 5660.

Nifty update for 30-Oct-2012

Nifty held 5700 zone once again and is expected to trade till 5530-5560 with a reversal above 5740.Lot many stocks are getting added to the sell list in the coming days too. As the range is so tight traders should be able to churn their portfolio's at a faster rate.Two stocks which got added to the sell list are BHEL and TATA motors while Wipro is only one major stock which looks promising for some upside momentum. As expected Wipro and LIC housing gave a decent move on the upside but PSU banking space is expected to slide further.RBI policy would have an impact in the further moves in Nifty but the chart structure of many large cap names are weakening with larger distribution patterns.If we consider only nifty it seems to be good that the index is getting support at lower levels but stocks need some more time for accumulation.Turnover data says all these days were low volume days and it is good to see that stocks are falling with low volume and we would be close to the bottom between 5-10 of November.Volatility data is showing a very volatile session ahead of the RBI policy meet and it can continue in the coming days too. The range for nifty can be 5670-5740

Nifty weekly update for 29 Oct - 2 Nov 2012

Nifty held 5700 once again but expected to trade till 5530-5560 zone with a reversal above 5740 levels. The correction would be slow and painful and i would expect the corrective phase to continue till 5-10 of November and resume the uptrend after that. There are chances for an immediate bounce as the world markets are close to the support zones. As the market is in a tight range it is always advisable to take a trade close to the upper and lower end of the trading range thus buying puts close to 5730-40 levels would give us a decent trading opportunity. Though the market is in a corrective its relative outperformance with the world markets are really encouraging and a dip towards 5530-60 levels should be taken only as a retracement from the top and that is quite normal in every market. The medium term target of 6150 is still valid as the market is still maintaining a higher top higher bottom scenario and the reversal should happen only below 5450-5500 levels. I have taken a negative view in the short term mainly because of the way stocks are performing in a market like this.In a range bound which is ready to go up would never show a distribution pattern like this. If we look at stocks like SBI, Reliance capital, BATA India and Reliance Infra the distribution pattern is very evident and this is affecting the private banking space which is a relative out performer.Reliance Infra is a new addition to list of stocks which are breaking the support zones and the stock is expected to touch 470-465 soon if nifty is stuck in a range.Volatility data is showing some short covering happened during the last hours of the trade and it could help for an immediate rebound but the distribution pattern is still active is most of the major large cap names.The short term range can be 5670 - 5740.

Nifty update for 26-Oct-2012

It was a choppy day and nifty held 5700 zone but only options writers could benefit from these kind of range bound sessions. If we have a look into the stock specific data stocks like BATA India, SBI and Reliance Capital are heading down by breaking important support zones. Bank nifty is still holding some important levels due to banks like Axis bank , ICICI bank and YES bank. As said in the previous post I would be holding my short positions in BATA and SBI as the view is negative in the medium term. World market charts are out of the basic bull market pattern of higher top and higher bottom formation and it would be a worrisome picture for Indian equity market.Thus put options can be bought in PSU banking space and metals as these are the weaker names in the market and wait for a deeper cut to get into mid cap names like Wipro and LIC housing. The strategy should be to book longs in stronger names like L&T , ICICI bank and Axis bank as there is no point in creating short positions in these stocks and try creating short positions in the mentioned names if they are breaking down. Volatility and turnover data are showing addition of new short positions in nifty with some cash based selling too. I would like to maintain a bullish stand in dollar index for a target of 81.5 and it is wait and watch game for nifty whether it is holding 5630-40 zone.

Nifty update for 25-Oct-2012

Nifty held the upper resistance level of 5730-40 levels and gave a negative closing just before the holiday. If we look at the chart of S&P a major technical support zone has been broken around 1425(the lower end of the range mentioned yesterday).It would be headed lower till 1395-1400 zone from where a bounce could be expected but the long term charts are losing the upward momentum and could be worrisome for traders all around the world.Dollar index is also heading towards 81.5 zone where equity traders would face a tough time ahead. Thus if we look at these kind of correlations the world market let it be FTSE or S&P it is dangerous for Indian equity market.We have a near term support zone close to 5630-40 and a decisive break below these zones would confirm the weakness and if it happens banking stocks are expected to correct first especially PSU names like SBI and Bank of India.Another stock which is trading below the long term upward channel is BATA India. The stock was making higher highs consistently for the past two years and the long term trend is expected to turn bearish below the previous low.If we look at another possible scenario of nifty breaking 5730-40 on the upside stocks like Reliance Infra , LIC housing, Wipro are expected to move higher. The 100 point range should be watched carefully and it is wise to take trading decisions based on major large cap stocks in specific sectors.As of now the rollovers are not showing major long additions in all the major sectors.

Time cycle analysis

If we look at the current rally from June we could see that close to 25-26th October the rally can get matured as it would complete 144  days from the bottom. 144 should be considered as an important number if we see the current cycle.An important date would come between 5-11 of November and the emergence of a major trend can happen between these days. Usually the day after expiry is crucial and a major trend deciding move can happen these days too.In a nutshell we have two important dates after the expiry and till 5500 on the downside the bullish trend is intact as there is a higher top higher bottom scenario

Nifty update for 23-Oct-2012

Nifty held the support zone of 5640 levels and is expected to trade till 5750 in the short term.For a nifty trader anything less than 50 points move should not be considered as valid and it is still well within the range. Some large cap names gave a short covering rally but i would like to use this as an opportunity to exit the long positions. As said in  the previous posts there would not be any hurry to build short positions and get into stocks like LIC housing and WIPRO with a 10 points stop from the buying levels. 235-240 and 340 levels would be decent support zones respectively and i dont expect a major downward move from these levels.If we look at the chart of S&P it is also well within the range of 1425-1455 where we could see lot of consolidation happening and dollar index would still be a major threat for nifty for any up move.Dollar/INR would be forming a symmetrical triangle pattern which could usually form a range bound market within 52.5 -54 for a month or so. Though the the range is a little bit large it would provide much room for option writers to sell out of the money options in the currency market.As of now the range for nifty is well defined and it is getting decent support at 5640 levels and getting resisted at 5740 levels sustainable performance by large cap stocks could lead to some more upside. Though the stocks are performing i dont see any reason for stocks to perform at the end of the current expiry season.Turnover data is still at a very low level and we could see that instead of delivery based buying short covering is triggering quick up moves which are not reliable. Volatility index is showing that it is at one of the lowest levels in the history and any major up move could reduce it further which can be a threat for the up move.In a nutshell just accept the fact the range bound market is still active and one has to patiently wait for a major break out on the upside for any buying positions.

Nifty weekly update for 22-26 Oct 2012

Nifty spent the week in a tight range of 5640-5740 and is expected to trade within the range till the current expiry.If we look at the chart of major global markets we could see that all these major ones are close to the support zones. Dollar index is close to an important support of 78.5-79 which i think would not be broken in the near term. As long as these support zones are held a bounce to 81.5-82 zone is quite possible and traders in the equity market should be aware about this development as it can have an adverse effect in the Indian equity market. Now come to the charts of major large cap stocks like l&t and SBI (i am referring these charts as they were the out performers in the previous season). Both these stocks are kind of making a rounding top and is considered as bearish in the shorter term.These can just move to their medium term moving averages and usually in a bull market that is the way how large cap names perform.In a nut shell we have strong support zone close to 5600-5640 where lot of huge put options build up can be seen and on the upside the resistance levels are clearly marked close to 5740 zone. If we are in a structural bull market it is wise to buy the dips than buying a break out trade. As of now a break below the support zone can just be a bear trap as lot of traders might find it as the beginning of a new downtrend but it is better to wait as a buyer than a short seller especially in nifty.The stock specific data is telling us to go long on some of the stronger names like LIC housing (close to 235-240) and WIPRO (close to 335-340).We could see these stocks are stronger names in their own respective sectors but have corrected more than other stocks. As these are close to their intermediate support zones any dip close to these levels are buying opportunities and avoid large cap  names like SBI and l&t.In a nutshell wait for a buying opportunity in nifty as it is not giving much evidence of holding the support zones but i would be a buyer in the mentioned stocks close at those support levels.As a trader it is always wise to keep the volume in control so it gives a much room for flexibility in churning the portfolio thus don't jump into lot of buying positions and let the market give us a clear direction.

Time cycle analysis

Nifty is close to the strong support zone of 5600 -5640 and i dont see it breaking before this expiry as options build up is happening in that way.Close to 25-26th of October cyclical charts are not showing any levels below 5600 and it is wise to sell at the money calls if you are buyer in nifty futures.On the upside too it is not showing any levels more than 5740 in the coming week.Thus the large cap names can correct than nifty thus dont jump in as a buyer.Volatility and turnover data showing that the short build up has already happened at higher levels and the cost of carry is really low so that we cannot assume further short build up at lower levels.

13-October-2012

I was not able to update the blog from monday as i was down with high fever and still in a recovery stage.I would be updating the blog from coming monday.
Cheers,
Vinu

Nifty weekly update for 08-12 Oct 2012

Nifty is done with the intermediate target of 5850 and is expected to correct till 5630-5650 in the short term with a reversal above 5850-70 which is a crucial point to watch out for. It should be considered as a consolidation/ correction within the ongoing bull market and look for buying opportunities in this type of a market. I would still be betting on TATA steel which was an under performer in the current rally and the stock has a good potential to go up in the long run.If we have a look at the premium in nifty futures we could see a phenomenal rise and a premium of something like 35-40 could be seen as a topping out pattern in nifty. It reveals that there are only buyers in the market and to keep the balance of trade there should be some correction in the near term.The medium term target has been raised to 6150 with some consolidation and structurally the market looks good as lot of sectors are yet to participate in the upmove. Banking stocks are kind of overdone with the rally and i would expect the PSU banks to correct before any upmove. Stocks like Canara bank and Bank of India would be first among the list.Among other stocks Sesa goa is looking vulnerable below 171-170 zone and it is expected to correct till 160 with a reversal above 180.

As per the time cycle we have a 95-100 period cycle in Nifty which it is following since 2010 and October is cyclically not a great month for equity markets and we could see an interim low during this month before a substantial upmove. It is not a bearish view but a much needed consolidation before any valid upmove.

(See the attached chart for more details)

Nifty update for 05-Oct-2012

Nifty moved closer to the immediate target zone of 5850 but as said in the previous posts i am not chasing any banking stocks as of now for a trading opportunity.As a trader i might have missed some opportunity in catching some 2-3% move in banking biggies but there is no need to chase this market.It would consolidate , there would be profit booking sessions and get in when the opportunity arises.I have been upbeat on the banking space and the mentioned names in the list were SBI, Canara Bank, Bank of India and YES bank (12,13 -Sep blog). Readers should understand that i am saying to book profit from a traders perspective. As an investor one should stay long in banking space with a one year horizon.From a trading perspective Mphasis gave a negative return and i have to accept that i was wrong in analysing that stock. With a consolidation close to 5630 - 50 levels the index is expected to touch 6150 by the year end and any dip could be used to buy quality stocks like TATA steel and mid cap IT stocks. Volatility data is showing some profit booking happening close to 5840 and these might be warning signals for a consolidation phase. If we look at the sector wise performance the rally was fueled mainly by banks and no other sector has contributed like banking space and thus it would be a positive factor for a good positive move.In the next phase when ever there is an upmove in base metals in the commodity space we could see a decent rally in metal stocks like TATA steel , Sterlite and JSW steel.Thus no need to chase the market and utilize every opportunity in the consolidation phase to be on the long side. 

Nifty update for 04-October-2012

Nifty held the support zone and inching towards the immediate target zone of 5850 but as said in the earlier posts it is time for unwinding some long positions in the banking sector. As a trader one should be good at reshuffling the portfolio according to the situation. Midcap IT space looks attractive with Mphasis as the top pick in the sector.CNX IT and Pharma are two spaces where we could see renewed buying interest and incase of any profit booking traders would jump into these sectors to make some quick money. Volatility index was showing addition of some long positions during the end of the session but if we have a look into the turnover data we could not see much buying interest at higher levels. As an investor instead of buying at a higher price it is better to hold on to the previous long positions especially in the midcap IT space. Dollar/INR is moving to the support zone of 52 range and a short term bounce is possible at any point of time and it looks quite cheap after a fall from 57 range. Thus as a trader it is time to be a little cautious on buying positions especially in those stocks which are positively correlated with nifty. The broader range could be 5710-5850.

Stocks to watch

Mphasis and Escorts - Both these stocks have given a break out after a long consolidation of 2-3 months and i guess buyers have got enough time to accumulate these stocks. As an investor i would be getting in for a 10 % return at current levels and keep a stop of 395 and 62 respectively.

Nifty update for 03-October-2012

Nifty is trying its best to create a new high over 5750 but even if it creates the chances of sustaining at upper levels would be very less as the cash in flow levels have exceeded the upper levels.As per technical charts when there is a negative divergence one should square off the long positions and wait for a better entry point. When the momentum is so strong traders usually wait for a dip to create long positions and no need to get into trap by creating short positions. As i was mentioning in the previous posts traders should book their long positions in banking sector and look for opportunities in metal sector at lower levels. In the commodities market one should have a careful look into the reversal for copper as it could be a catalyst for metal stocks in Indian equity market. Dollar/INR has breached a decent trend line support and it is not maintaining higher tops and higher bottoms scenario and any bounce back to 54 levels could attract lot of selling pressure. The broader range for the month could be 5630-5850.