NIFTY – Bullishness to continue, but limited upside!

Technical Analysis:  Week 02/09/2013 – 06/09/2013

Last week I had recommended that the expiry week is going to be most favorable for Option Buyers. I am sure that both Put as well as Call buyers must have minted money during the week. The Options buying was recommended mainly considering VIX (Volatility Index) being on its peak to make new high around 35. It was shown on the technical chart that Index had broken the rising channel and downfall was expected but the pullback from the low of 5119 to around 5500 surprised everyone.  However, there are important Derivatives Indicators we need to review before we set the expectations right for September 2013 series.

What’s Next? August F&O series ended with a way below average Rollover which was just at 51%. What it means is smart traders covered their short positions which they had built in the range of 5900-5700. There is no carry forward of short positions for September 2013 series. This is a sign of relief for the bulls. However the further journey for NIFTY index is not so easy until we see any fresh buying interest. There was 18% increase in Future OI (Open Interest) with 1.3% gain on price, but this trend has to continue in the coming week. The PCR which tested its oversold zone around 0.8 just before expiry is now at 1.45 as September series begins, which means very limited space for NIFTY to move up.

On Technical Chart the Index is still bellow rising channel. For the coming week the target for Index above 5500 is 5600-5720 which are 50% and 61.2% Fibonacci Retracement levels for the current fall from 6093.

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NIFTY – Rising Channel Broken!

Technical Analysis:  Week 26/08/2013 – 30/08/2013

Considering the OI-PCR ratio we were anyway expecting more downside during the week. On Wednesday 21st, this most proven derivatives indicator touched 0.80 level on EOD basis and we alerted everyone on our website about potential bounce back on Thursday morning itself. Index took technical support at the Gap around 5260 (which was left on 7th September 2012) and bounced up to 5478. On Thursday & Friday, NIFTY index recovered by 200+ points from the low of 5254. However, FIIs were net seller by 1400+ crore in cash and Index futures each on these days. Index bounced back on Thursday & Friday but that is due to short covering only.

What’s Next? On technical chart, Index has broken the rising channel. Weekly chart is showing “Bullish Hammer” type candle but Index must close and sustain back inside the Channel to confirm the bullishness, if any. The 38.2% Fibonacci Retracement level for the current pullback is at 5570.

The highest OI at 5600 strike price Call option confirms that it is hard for NIFTY index to cross 5570-5600 level in this series. At the same time there was heavy Put writing at 5400 strike. Therefore at this moment the trading range till expiry seems to be locked between 5400 and 5600. However opportunistic NIFTY traders should keep close eye on Put/Call buildup at these strike prices and take full advantage for Options trading. Remember that the Risk/Reward ratio is always most favorable for Options Buyers during expiry week!

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NIFTY – Critical support at 5400-5450

Technical Analysis:  Week 19/08/2013 – 23/08/2013

Last week I had given 5450-5720 as a trading range for NIFTY Index and as you know, during the week NIFTY Index could barely reach up to 5754 and crashed to 5496 on in a single trading session on Friday. You are seeing multiple reasons to justify the fall; RBI imposing capital controls, US tapering down of QE, Rupee making new all-time low etc. However, technical chart and derivatives insights had given weakening signal well in advance!

NIFTY is now very near to our lower target of 5450 and we need to take a fresh look at the data to figure out where market will move from this point onward.

What’s Next? As you can see in the chart, NIFTY is approaching most critical support level at 5450, which is being provided by trend line and Gap zone between 5447-5477. Technically this is the last hope for NIFTY before we see more panic.

An option buildup at 5400 Puts still continues to be the highest accumulation point with more than 20L addition on Friday. But the worrying factor is OI-PCR at 0.97, which suggests that there is still enough room for downside. The FII Indictor is also looking scary. FIIs have net short positions in Index Futures & Call Options and long in Put options. On Friday Index collapsed >4% with >18% additions in Future OI for August series, which indicates huge short position buildup in NIFTY Futures.

Hence to conclude, NIFTY Index may bounce back from the range around 5400-5450 but any pullback will be new shorting opportunity for the traders

 

NIFTY Trading Range 5450 – 5720

Technical Analysis:  Week 12/08/2013 – 16/08/2013

As expected, NIFTY broke 5600 level during the week. It made a low of 5486 and then tried to recover by closing the week at 5565. On Daily chart it clearly shows further downside breakout but one can not ignore the gap zone between 5477- 5447 which can act as an intermediate support for this series.

What’s Next? As you can see in the chart, NIFTY has broken next trend line support @5620 on Tuesday. However, it managed to survive above the previous low of 5477, which was made on 10th April 2013. You can also clearly see a big gap which was left by NIFTY index at 5447 in September 2012. Hence a narrow range of 30 odd points between 5447-5477 is extremely important. According to me this range will provide a strong support for NIFTY index in near future. The Options data build-up also hints that 5400 is a good support for August 2013 F&O series. The OI PCR is at 0.93 which is very near to its oversold zone.

Hence, I think there is a limited downside for NIFTY at least for August 2013 series. For the coming week, the immediate resistance is at 5620 and above this NIFTY index will try to reach 5720

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NIFTY Support levels 5800-5700

Technical Analysis:  Week 29/07/2013 – 02/08/2013

Based on the Derivatives Indicators, last week we had said that NIFTY in oversold zone and correction would begin as soon as it kisses 6070-6130 zone. We had also said that though it will enter into correction mode, it is unlikely to break 5900 till F&O expiry. During the week NIFTY acted exactly as predicted. First it made a high of 6093 which was almost as midpoint of 6070-6130 range and then collapsed to 5900 on expiry day. The technical chart is showing weakness but the immediate support levels are not too far

What’s Next? In my previous articles I have already said that the target for correction is around 5800 levels. On technical chart you can see that 200EMA line is at around same 5800. Also, there is Gap Zone at 5700.

Though it’s too early to comment on Derivative buildup, the options writers were busy writing 6000 & 5800/5700 strike price Call and Put options respectively. Hence 5800-5700 looks like a support at the moment and the upper side is being capped at 6000 level.

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NIFTY unlikely to give correction before July F&O Expiry…

Technical Analysis:  Week 22/07/2013 – 26/07/2013

Last week we discussed about OI-PCR ratio in extremely overbought zone and were expecting NIFTY to enter into correction mode as soon as it approaches 6070-6130 range or breaks the crucial support of 5950.  On Tuesday it did break critical support at 5950 but managed to survive by closing just around 5955. Then on Friday it tried to kiss the upper resistance band but could reach only up to 6067 and closed the week at 6029. The key derivatives indicator OI-PCR (Open Interest – Put/Call Ratio) continues to be in overbought zone and Index is due for correction. However, the coming week being Expiry week for July 2013 F&O series, market may test the patience before any correction begins.

What’s Next? The Technical levels remain same as what we discussed last time. However, the question is when NIFTY can enter into correction mode. If you carefully look at the options buildup then you will observe that it is very unlikely for NIFTY Index to break 5900 level before July F&O expiry on this Thursday. Hence, Option buyer should be careful if they are buying Puts for July series. The better strategy will be to buy August series ATM or near ATM Puts and at the same time selling OTM Puts to reduce the risk.

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NIFTY 5970-6000 targets achieved! What’s Next?

Technical Analysis:  Week 15/07/2013 – 19/07/2013

Since last few weeks I was talking about continuation of bullishness with a target of around 5970-6000 level for NIFTY Index. During the week NIFTY achieved this target by making a high of 6019 and closed at 6009. The bullish momentum looks like unstoppable but market is now in extremely overbought zone and can give unexpected correction before the rally continues towards next milestone.

What’s Next? As you can see on the technical chart, Index has crossed the hurdle at 61.8% Fibonacci retracement level and now the last hurdle i.e. 76.4% retracement level is at 6070 level. Till last week the Derivatives buildup was suggesting 6000 as a boundary for this series but there has been a significant change in Option Writers positions during the week. Reduction in 6000 Call Options Open Interest due to unwinding of their positions suggests that the upper limit for NIFTY index has moved to 6100. Hence the next target for NIFTY Index above 6020 is at 6070-6130 which is 76.4% Fibonacci Retracement and previous tops respectively.

However PCR OI ratio is at 1.71 which is highly overbought zone. Therefore NIFTY is expected to enter into a correction mode as soon as it approaches 6070-6130 range or breaks the crucial support of 5950 on lower side. The target for this correction would be around 5800.

NIFTY – Upper side capped @ 5970-6000

Technical Analysis:  Week 08/07/2013 – 12/07/2013

Last week I had written that at overall level both Technical & Derivatives indicators were suggesting continuation of bullish momentum and this rally would be approaching 61.8% Fibonacci Retracement level at 5970. As expected, during the week NIFTY index went up and took a halt at 5900 which is 50% Fibonacci Retracement milestone. The momentum is still positive but the upper side is now very limited for the July 2013 series.

What’s Next? On Technical Chart you can clearly see that there are multiple resistances at 5970 level. 61.8% retracement level will act as first resistance. Then there is another resistance line which is highlighted in red color. This resistance is coming from series of previous highs made by NIFTY index. Therefore NIFTY Index must cross this crucial hurdle around 5970-6000 if bullish trend has to continue. However, derivatives data clearly shows that it is far difficult for NIFTY to cross this hurdle in July 2013 F&O series. The highest OI is at 6000 Call options and option writers are fearlessly writing more and more Calls at this strike price. The OI-PCR is at 1.38 which means it will enter into overbought zone soon possibly by the time NIFTY hits 5970-6000 target. Therefore to conclude, 5970-6000 is the limit for July F&O series and it is better for NIFTY traders to start booking profits on long position and start building short positions as Index enters into this crucial resistance zone

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Bullish momentum to continue…

Technical Analysis:  Week 01/07/2013 – 05/07/2013

During the week we saw a spectacular bounce from 5600 level to 5840. The good news for Bulls is that the NIFTY Rollover for June’13 series is just 47% which is well below the average. What it means is major NIFTY short positions have been covered in June series and the bullish momentum which we saw on Thursday/Friday is likely to continue further. 

What’s Next? On Technical Chart NIFTY index has closed above 200 EMA & SMA. A big gap up opening along with long green Marubuzu Candlestick on Friday indicates strong bullishness. It has also closed above 38.2% Fibonacci Retracement level. The technical Indicators are also confirming the bullishness. On Derivatives side after touching 0.8 ratios in June series, the PCR is at healthy 1.4 level. I was expressing worries about FII indicator till last week but this indicator has also given some sign of relief this week. So at overall level both Technical & Derivatives indicators are suggesting that the bullish momentum will continue in the coming week. The immediate target for this rally could be around 5970 which is 61.8% Fibonacci Retracement level of the current fall.

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Can NIFTY Index hold 5600 till expiry?

Technical Analysis:  Week 24/06/2013 – 28/06/2013

I have been continuously stressing on how FII indicator is turning more and more negative and any pullback s a shorting opportunity. During the week a Dead Cat Bounce could lift the NIFTY index hardly up to 5863 and collapsed. Thursday was 100+ point Gap down opening and by Friday it made a low of 5600.

Now the situation is trickier. The technical indicators as well as Derivatives indicators are in oversold zone but FII indicator is not showing any sign of recovery and on the contrary it is turning worse. The question in every NIFTY trader’s mind is can NIFTY index hold or break 5600 till expiry on this Thursday.

What’s Next? As per the technical charts major technical indicators are in oversold zone. The OI PCR is at 0.8 which is again an oversold territory. The highest open interest is for Put option is at 5600 strike price Put option and there was further addition on Friday. Which means at this moment it is very unlikely that NIFTY index can break 5600 level before this expiry. However, there is equal addition in Call option open interest too. Considering the current market scenario one need to be very alert and need to monitor options buildup very closely. I suggest to short NIFTY only and only if it breaks 5600 along with decline in open interest for Put options in the coming week. Otherwise Index is ready for another sharp bounce possibly up to 5780 before expiry on this Thursday.

Dead Cat Bounce!

Technical Analysis:  Week 17/06/2013 – 21/06/2013

I hope during the week all NIFTY traders pocketed full 150 points fall in NIFTY. Last week I had written about hammering NIFTY below 5850 as it was expected to break this critical support and fall right up to 5700. As predicted NIFTY broke critical support on Tuesday and reached to the target of 5700 by Thursday morning on opening bell! It made a low of 5683 and closed exactly at 5699 on Thursday. However, after achieving this target NIFTY Index has given strong bullish signal for the coming week.

What’s Next? If you look at Candle Stick pattern on the technical chart, you will notice bullish reversal pattern call “Morning Star”. [Morning Star: a short middle candle that gapped down on the open, and a long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first day.]

Market is in oversold zone and key Technical Indicators such as Stochastic Oscillator, Money Flow Index are giving bullish signals. PCR (Put/Call Ratio) almost hit 0.8 level on Thursday and now at 0.92 levels. On Friday majority of the stocks went up due to short covering. Hence, expect market to go up further in the coming week till around 5950. However, one can’t forget that FII indicator has turned extremely negative. Therefore unless and until this indicator shows any positive sign, I would consider this up move as Dead Cat Bounce and wait for an opportunity to hammer NIFTY at around 5950.

 

NIFTY Traders, be ready if Index breaks 5850?

Technical Analysis:  Week 10/06/2013 – 14/06/2013

Apology for not being able to update Market Rahasya website for last two week as most of our team members were away on summer vacations.

After facing a resistance near 6200, NIFTY Index is now in correction phase. This week Index opened at around 6000 and closed near 5880. It did make some efforts to recover from day’s lows but faced tremendous selling pressure on every rise. This is a clear sign of further weakness. During the week FII’s have given alarming signals and one need to be careful if NIFTY index breaks 5850 level in the coming week.

Why 5850 is critical? On Technical Chart you can see that 5850 is 50% Fibonacci Retracement of the recent rally from 5477 to 6229. You will also notice that that there is an open Gap between 5844-5853. Hence, this range becomes a support zone for NIFTY Index. One can expect some technical bounce around this level.

However, FIIs are giving strong negative signals. They have reduced their long positions in Index Futures significantly. Also, they are increasing the long positions in Put options and shorting Call options. Hence, I doubt whether NIFTY can hold the support level of 5850. The break below 5850 would trigger a fall up to 5700 within no time. So, NIFTY Traders be ready to hammer NIFTY gain if it breaks 5850!

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NIFTY @ 6180 | Target Achieved, what’s Next?

Technical Analysis:  Week 20/05/2013 – 24/05/2013

During the week NIFTY Index rallied exactly as I had predicted. It was predicted that Index will struggle a bit to cross first resistance at 6111 but ultimately it will break this resistance and reach 6180-6200 levels. During the week this is what exactly happened. Index first mad a high of 6114 and tumbled by 140 point on Monday. However it showed a smart recovery on Wednesday and gained by 150+ points and covered the entire loss.  Finally the Index made high of 6198 and closed the week at 6187, which was exactly within our given range of 6180-6200. I hope all our readers enjoyed the rally and have taken the money home from the table. Index is now at Make or Break stage and I would suggest to wait and watch before taking any new positions.

What’s next? Technically speaking, level 6180 is a “make or breaks” level because during January 2011 Index had made a high of 6180 and thereafter there was a fall of almost 1000 point without any pause. Obviously one can expect huge profit booking at this level 6180 because of the past history.

If you look at the Call option buildup then 6200 is still a resistance as I did not see any panic among Option Writers to exit from this level. Therefore the best strategy is to wait and watch the Open Interest (OI) at 6200 strike price call option. If you don’t see any decline on Monday/Tuesday then resistance at 6200 will get confirmed. However, if you see decline in OI in the early part the week then be sure that NIFTY Index will break 6180-6200 resistance line and don’t be surprise to see index reaching previous high at 6338 with the speed of rocket.

The PCR (Put/Call Ratio) is at 1.43 which means it has still not reached overbought zone though Index has already reached very near 6200 level. The FII indictor continues to be bullish and still no sign of any divergence yet. Hence overall view still remains bullish. Therefore to conclude, if NIFTY Index is able to cross 6200 level in the coming week then NIFTY traders can once again take long positions with a target of around 6340.

Time to book profits near 6180-6200

Technical Analysis:  Week 13/05/2013 – 17/05/2013

In my previous article i.e. week before RBI monetary policy day, I had written about continuation of bullish momentum and had given a target of 6000 level before 3rd of May, which was RBI monetary policy announcement day. During last two weeks index continued to rally as expected and achieved the target of 6000 on 2nd May itself. In fact on Friday of this week it almost kissed 6100 level. So far NIFTY index has gained nearly 600 points without any pause and it seems to be unstoppable at this moment. However, Index is very near to the critical resistance at 6180 and therefore I would suggest being cautious from this point onwards.

 What’s next? On Technical chart the immediate resistance is at 6111, which is previous high made on 29th January 2013. Index may struggle a bit to cross this level but most likely this will be broken in the coming week. However, the next resistance at 6180 seems to be a tough challenge to cross. This level has a lot of history behind. This high was made during January 2011 and thereafter there was a fall of almost 1000 point without any pause. Hence, there is going to be a huge profit booking as soon as Index reached near 6180 level.

Derivatives data too confirms that 6200 as a strong resistance for the May 2013 F&O series. The highest OI for Call option is at 6200 strike price Calls. Therefore the possibility of crossing 6200 level in this series is very low. The PCR (Put/Call Ratio) is at 1.37 which means there is still some more room for index to move up. But I expect that the PCR will hit its upper limit by the time Index hits 6200 odd level. The FII indictor continues to be bullish and FII’s net positions in derivatives segment supports continuation of the current rally for some more time. But this indicator too is approaching its apex point where divergence is likely to begin. Therefore to conclude, 6180-6200 seems to be the ultimate target for the current rally.

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Next cue: RBI’s monetary policy review on 3rd May

NIFTY - Technical Analysis:  Week 29/04/2013 – 03/05/2013

April 2013 series ended on a very promising note. A spectacular recovery of nearly 400 points from the low of the series around 5500 to 5900. The reversal was seen during mid of the series i.e. on Tuesday, 16th when it confirmed the support at the gap zone between 5447- 5526 and closed above previous red candlestick. Simultaneously Options buildup showed huge reversal in Option Writer’s positions and confirmed the supports. On the same day it crossed 200 day EMA and closed above it signally powerful bounce back.

Interestingly on Thursday FIIs (Foreign Institutional Investors) have bought record high Index Futures worth Rs. 3,700 crore and Rs 1,450 crore in the cash market. In fact FIIs had net short positions in Index Futures at the beginning of the April series but since mid of April they have been covering their short positions in Index Futures and today they have turned net long position holders as May 2013 series begins. So, what are they expecting in the months of May?

What’s Next? I expect the current bullish momentum to continue in the coming week. The Technical chart shows that NIFTY Index has given a bullish breakout by crossing the multiple resistance lines around 5800. Hence going forward, expect this level to provide support. However, the next immediate technical resistance is at 5970. The NIFTY rollover for the new series is at 67% which his significantly high compared to last two month’s average which was just about 54%. This is a positive cue for the market because it implies carry forward of long position for May series. Most likely NIFTY index will try to kiss 5970-6000 range by 3rd May 2013 which is RBI’s monetary policy announcement day. Thereafter it is advisable to wait and watch whether NIFTY index sustains above this level and decide the next move!

NIFTY: Watch channel line resistance @5800

NIFTY - Technical Analysis:  Week 22/04/2013 – 26/04/2013

Last week the situation was little uncertain and I was doubtful about NIFTY index holding 5440 level. Though the PCR was in oversold territory the Option writers were still confidently writing the Call option till Friday, 12th April. However, a confirmed bullish reversal signal for the week came on Tuesday, 16th when Options buildup showed huge reversal in Option Writer’s positions. During the week NIFTY index opened near 5500 and reached almost 5800. A spectacular rally of nearly 300 points in just 4 trading sessions!

The India market is rallying on hope for rate cuts from RBI’s monetary policy review on 3rd May. The exciting factor for the week was fall in Gold, Silver and Crude prices. The fall in prices of these commodities is obviously going to ease the pressure on external trade deficits. Also, the inflation data has surprised positively raising hopes for interest rate cuts

The other factor is earning season. The earning season actually started with disappointment by Infosys but TCS and HCL Tech posted decent results which helped to improve sentiments for IT sector. Banks have started posting decent results too.

What’s Next? If you look at the Technical chart, you will notice that NIFTY Index is trading in a falling channel shown in the dotted parallel lines. Above 5800 Index will break this falling channel but there is one more trend line resistance coming from the top which is at 5850. Therefore one can expect 5800-5850 as next resistance level. If Market is able to break this barrier then the next target comes at around 6000 which may be achieved if RBI announces any rate cuts during the monetary policy review on 3rd of May 2013.

Derivatives data is of course showing resistance at 5800 level. I suggest watching Call option buildup at 5800 strike. If you see addition in Open Interest at this level on Monday then it will confirm the resistance at this level. However, if you notice unwinding in Call options by Call writers and Open Interest start declining then be sure that the resistance will be broken very easily and don’t be surprised to see 6000 level by 3rd May 2013 which is RBI’s monetary policy announcement day.

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NIFTY: Next Target below 5440 is @5280

NIFTY - Technical Analysis:  Week 15/04/2013 – 19/04/2013

Last week I had explained about gap zone between 5447-5526 and how Index was expected to bounce back sharply as it reaches near 5440. During the week NIFTY Index behaved almost as expected. It made a low of 5477 and bounced back sharply. However, the pullback was short lived.  It hardly reached 5600 and Infosys ruined the market sentiments. NIFTY Index opened with a gap down of nearly 100 points on Friday morning and closed the week at 5528. According to me the pullback for NIFTY Index stands terminated at 5600 and I see more dark cloud cover as we enter into 2nd half of the April 2013 series.

What’s Next? Technically, the gap zone is still open between 5447-5477. Going forward 5440 level is extremely important. I would like to repeat that this is only 50% retracement level of the entire rally from 4700 to 6111. Hence break below 5440 would mean a slide up to 61.8% Fibonacci Retracement which is at 5280.

From Derivatives angle the only favorable indicator at the moment is Put/Call Ratio (PCR), which touched the oversold zone at around 0.80 and now hovering around 0.90 point. But it needs cross 1.0 level to indicate any strength. Invariably NIFTY index bounces back from 0.80 ratio level which did happen during the week but the Options buildup data does not support any further +ve momentum. As on Friday, Options writers were fearlessly writing call options and winding up their positions from Put options. This is more or less confirmed signal that Index may breach 5440 level in the coming week and continue towards the next target of 5280.

Pullback Terminated, Next Target 5440…

NIFTY - Technical Analysis:  Week 08/04/2013 – 12/04/2013

I was expecting a pullback from 5600 to at least around 5850. However NIFTY Index could barely manage to reach up to 5750 and pullback got terminated. Generally 200 day moving average acts as strong support/resistance and index or stock tussle around these averages before it makes or breaks. However, on Thursday morning Index broke 200 day EMA as well as SMA effortlessly with big gap down opening. By Friday it made a low of 5535 and closed just below all major support lines. This is definitively a sign of weakness indicating further fall.

What’s next? NFTY index is now ready to fall and achieve our 2nd target of 5440. Technically speaking there is a gap zone between 5447 and 5526, which was formed in September 2012. Gap means not trading happened in this price range. Going forward this Gap zone is considered to be a strong support zone. Therefore NIFTY index can find a support anywhere in the range of this 80 odd points. Generally it is observed that eventually these open gaps are filled. Hence there is a high possibility that index will fall around 5440 level to fill this gap. Also as on Friday, Options writer were switching their positions in Put Options directly from 5600 to 5400 strike price. This indicates that options writers are not sure whether Index will hold 5500 level in the coming week. And as you know Option Writer are proved to be right majority of the time. So, expect NIFTY index to break 5500 level in the coming week and to fill a gap at 5447.

Just to remind you once again, I have already talked about Fibonacci retracements level for NIFTY index in my previous articles. At 5600, index achieved its first target of 38.2% retracement level of the entire rally from 4700 to 6111. Now the next target is at 50% retracement level which is 5440. Once again expect some sharp bounce back in NIFTY as soon as this level is reached. NIFTY traders can take full advantage by covering short positions at around 5450 and going long for some quick and handsome gains.

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NIFTY finds support @5600, What’s Next??

NIFTY - Technical Analysis:  Week 01/04/2013 – 05/04/2013

Last week I had predicted a limited downside for NIFTY and pullback rally from 5600 level and that’s what exactly happened during the week. On F&O expiry day NIFTY Index made a low of 5605 and pullback started on account of short covering. It then recovered by almost 90 points and finally closed the week at 5682. That’s the power of Derivatives Analysis. Technical Analysis only indicates support and resistance, but the actions seen in Derivatives confirms whether it will hold or break the support/resistance. Market is once again back on the dividing line between Bulls & Bears. Index closed at 5682 which is just near its 200EMA (5670). Hence expect the battle between bulls and bears to continue in the coming week.

What’s Next? During the week NIFTY index has taken support at 38.2% Fibonacci retracement level which was 5600. It is currently hovering around critical 200 day averages. Market is in highly oversold zone. Most of the technical indicators and oscillators are below the threshold level of oversold line. As you can see in the chart, the momentum indicator – Stochastic Oscillator is at the verge of giving ‘Buy’ signal from the oversold zone. However the only hurdle is broken support trend line at 5700. Index must cross this hurdle if it has to continue with the pullback which got triggered on the back of short covering on Friday. It would be bit early to find some confirmed cues from Derivatives but it hints that 5600 is a good support. Technical and derivatives both are hinting for relief rally in April 2013.  My personal view is it should cross 5700 and rally towards 5850 minimum!

NIFTY @5650… 1st Target Achieved, What’s next??

NIFTY - Technical Analysis:  Week 25/03/2013 – 29/03/2013

 Last week I had written about how Derivatives buildup was showing clear weakness and NIFTY Index heading towards its 200 day EMA at 5670 on technical chart. As expected, during the week NIFTY Index achieved its lower target of 5670. It made a low of 5632 and closed the week @5650, which is below 200 EMA.

On the monetary policy review day the Reserve Bank of India lowered the benchmark repo rate –by 25 basis points but kept CRR. This was widely expected and, therefore, could have had hardly any impact on Market. However immediately after this, the next news stroked about DMK’s withdrawal from the ruling coalition and market started collapsing because it made the political situation uncertain. On global front European markets are eyeing towards Cyprus. ECB  has given deadline to allow the Central Bank of Cyprus to keep providing banks with emergency funding until next Monday. Needless to say that there will be ripple effect on Asian markets including India.

What’s Next? On Technical chart NIFTY index has achieved its first target towards its 200 day EMA at 5670. The immediate support below EMA is its 200 day SMA (Simple Moving Average) which is at 5620. I have already talked about Fibonacci Retracement level in special article on Budget 2013. NIFTY index will achieve 1st target of 38.2% retracement at 5600. But before it proceeds toward to 2nd target of 50% at 5440 I expect some pullback from 5600 levels. The coming week is an expiry week for F&O March 2013 series. Options buildup shows that it is very unlikely that Index can break 5600 level in this series. The Open Interest Put/Call Ratio (OI PCR) has almost reached to an oversold territory. Hence I expect very limited downside for NIFTY index in the coming week and get ready for a pullback rally from 5600 level.

RBI’s Monetary Policy Review - Next cue?

NIFTY - Technical Analysis:  Week 18/03/2013 – 22/03/2013

During the week NIFTY Index just kissed yet another resistance around 5970 and gave up on any efforts to cross the hurdle. Monday itself it formed a “Doji” candle indicating indecision on the technical chart and started declining from subsequent days. Then came Thursday morning when the whole market was shook up by online magazine CobraPost when their sting operation on money laundering claimed that the staff of India’s top three private banks (ICICI Bank, Axis Bank and HDFC Bank) was helping customers do deals that violate income-tax, enforcement and banking laws. However the banks immediately clarified that they fully compliant with the regulations and assured that they will probe the matter. This helped the stocks recover most of the intra-day losses. In a process NIFTY Index tumbled to 5791 and closed the week at 5875.

Now market prepares to face the next hurdle as Reserve Bank of India (RBI) sits to review its monetary policy. Market participant are very hopeful of another 25 bps cut in the midst of conflicting signals coming from the economy making RBI’s task as usual difficult. Though the market participants are hopeful about the rate cuts, the Technical & Derivatives data is giving altogether different signals on the final outcome post this event

What’s Next? Technical chart shows that NIFTY index is confirming resistance at 5970 and heading towards its 200 day EMA at 5670. On Derivatives front, Open Interest Put/Call Ratio (OI PCR) has started declining from overbought zone. Currently it is at 1.4 and it will be a warning signal if it drops below 1.2 thresholds.

No matter what surprise RBI comes up with on Tuesday, 19th of March but Options buildup shows a clear weakness, The highest Put buildup is at 5700 strike and Option Writers were skeptical about writing more Put option at 5700/5800 levels on this Friday. Therefore by any chance if Index jumps up to 5970-6000 on account of rate cut news from RBI then it will be a golden opportunity to go short in NIFTY.

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Broken Trend Line Support to act as Resistance @6050-6100

Technical Analysis:  Week 11/03/2013 – 15 /03/2013

Index gave an early signal of confirming support at its 200 day EMA (5650) when it formed Doji type candle on Monday near 200EMA support line and next day opened up with gap and closed the day with Bullish Marubozu candle. It bounced back from the low of 5663 and gave a spectacular bounce back of 4% and gain of 280 points in the week. However the pullback was mainly on account of Short Covering rather that fresh buying.

One of the trigger which boosted the sentiments during the week was Moody’s expressing on Thursday that the worst might be over for India in 2014 by the economic growth bouncing back to 7 percent. They raised the India’s 2013 GDP forecast to 6.2 percent from 5.1 percent.

What’s Next? On Technical chart there is further upside if Index crosses the next resistance at 5970. The target above 5970 looks like near 6100 level where the Trend Line shown in red color would put a full stop to this pullback.  The Options data suggests that Index will continue rising further as Option writers are unwinding their positions from Call options and writing Put options heavily. However key Option Indicator – PCR (Put Call Ratio) is at 2.3 which is extremely Overbought Zone. Therefore I wouldn’t be surprised if market witness vertical fall as soon as it touches Red Trend Line resistance line at 6050-6100. So, be cautious going forward!

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Hope for new high vanishes in thin air! (28/02/2013)

As expected market gave thumbs down to flat Budget 2013. The Sensex went down by nearly 300 points (1.6%) at 18854, and the Nifty collapsed by 100+ points (1.8%) at 5694.

Last week I had clearly written that most of the positives of the Budget were already discounted in the current price and therefore one can’t expect very positive surprises or big jump beyond 6000. In fact I had advised that if Index reaches around this level then it will be a shorting opportunity for NIFTY traders. I was expecting some bounce before NIFTY index could crash but it did not happen. In the last week’s article I had shown Head & Shoulder pattern formation with neckline around 5820 levels. Index opened the week at 5870 and broke the critical technical support line at 5800 on Tuesday itself. This was a confirmation for what to expect from the budget event.

What’s Next Post Budget Event?

Budget day event has more or less set the direction for 2013. The hope for the new high in 2013 seems to be getting vanished in the thin air. If you recollect my views at the beginning of the year, I had given a comparison of the scenarios between start of 2012 vs. 2013. When we entered into 2013, majority of the experts were extremely optimistic about new high in this year. I had warned about the fact that history shows market always proves majority wrong! We all know how market positively surprised everyone in 2012 and therefore I had said that ‘fingers crossed’ as we enter into 2013…

Now NIFTY index is very near to its 200 EMA which is at 5650. On budget day it just managed survive above this level by making a low of 5674 but going forward this technical support level looks very vulnerable to me. Break below 5650 will drag the NIFTY down all the way to 5400 to fill the gap between 5420-5526. Hopes drive the market sentiments. Going forward expect market to trade with a very cautious approach for the rest of the year 2013. I do not see any trigger which is capable enough to take the market to new high in this year. On the contrary expect a correction of the rally which begins in Jun 2012 from 4770 to 6111 in January 2013. The Fibonacci Retracement levels for this correction are 38.2% at 5600, 50% at 5440 and ultimately 61.2% at 5280 for sure before we hit the election year 2014.

Market in cautious mode ahead of Budget 2013

Technical Analysis:  Week 25/02/2013 – 01 /03/2013

Last week we had said that expect NIFTY index to fall near 5800 level where it can find a support. During the week NIFTY Index went very close to this level. It made a low of 5836 which was very near to our expected lower level target of 5800 and closed the week at 5850. On Thursday global markets plunged on the worry of Federal Reserve may end QE sooner than expected. The Indian market was also hit by this panic and NIFTY index lost nearly 100 points on this day. However the interesting thing to note is even on this day the FIIs were net buyers in cash segment by 1200+ crores!

What’s Next? As per the Technical chart you will notice some sort of famous “Head & Shoulder” pattern formation with Neckline at around 5800 level. On Friday Index has formed a small “Doji” type candlestick with some upper shadow. This means there is some signal of pause at critical support line. So, technically speaking one must stay alert if Index breaks this critical support at 5800.

As per Derivatives insights, the market seems to be caught in a narrow range of 5800-6000. The Put options buildup still shows that Index will hold 5800 level. The OI PCR is at 0.84 which is nearly in oversold region and historical data shows that the Nifty Index generally bounces back from this zone very sharply. However the Open Interest buildup at 6000 strike price Call option suggests that most of the positives of the Budget are already discounted in the current price and therefore one can’t expect very positive surprises or big jump beyond 6000. It is very unlikely for NIFTY Index to cross 6000 mark on the budget event. In fact if Index reaches around this level then it will be a shorting opportunity for NIFTY traders.

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NIFTY - Trend Line Support Broken! But…

Technical Analysis:  Week 18/02/2013 – 22 /02/2013

At the beginning of the February month we had said that the break below 6000 would bring NIFTY Index down up to 5850-5900 range. We had also said that though this is a good support level to re-enter, we would wait for the confirmation because Money Flow Indicator (MFI) was showing divergence on the technical chart indicating smart money is actually flowing out of the market.

This Friday NIFTY index made a low of 5855 and closed at 5876, which is exactly in the middle of our expected support range for NIFTY index. Therefore it’s important to take a look at technical and derivatives insights to predict the next price movement from this point onward.

What’s Next? For the whole week NIFTY Index struggled to survive above psychological level of 5900 but could not succeed. More importantly it kept on hitting the broken support line and closed below that trend line support on weekly basis. This is the first warning signal confirming weakness on the price chart. Options writers who were confidently writing 5900 strike price Put options were seen unwinding there position on Friday. However interesting thing to note is they are still comfortable with 5800 strike Puts. The Open Interest Put/Call Ratio (OI PCR) is still at 1:1. So derivatives data indicates that though technically NIFTY index has broken technical support, it has a limited down side and may hold 5800 level in the near term.

Even price chart shows level 5800 is a good bounce back point. Most of the Technical Indicators such as Money Flow Index, Stochastic Oscillator etc. are in oversold zone. However they have not given any reversal signal till Friday. Therefore the best strategy would be to wait and watch till Index reaches to 5800 in the coming week.

Next two weeks are crucial for the India stock market as we approach the Budget 2013. Market will not easily give up till the final announcement and expected to rise again on budget hopes. Therefore to conclude, there is a high chance that NIFTY Index can bounce back from 5800 level with a target of 6000.

 

NIFTY on the edge of the Trend Line Support

Technical Analysis:  Week 11/02/2013 – 15 /02/2013

Considering the decline in PCR ratio, I had said that NIFTY Index would drop in the region of 5850-5900 and during the week NIFTY dropped exactly in this region. It made a low of 5883 and closed on the edge on the Trend Line support.

What’s Next? Though NIFTY broke the trend line support marginally on Friday one need not worry about it immediately. It would be worth to wait and watch how index trades during this week. The reason is though index broke the technical level marginally it still able to hold 5900 on closing basis. The other important reason is Put/Call option buildup in Derivatives. As on Friday the highest Open Interest (OI) buildup was at PE5900 and Option Writers were still confidently writing 5900 strike price Put options. Therefore I feel that NIFTY is likely to hold 5900 level in the coming week.

Along with Technical Support (which would deceive many times) I would suggest keeping close eye on Open Interest of Put option. If option writers continues writhing 5900 strike price Put option on Monday then expect our market to bounce back from the current levels. However the target for this bounce back would be very limited. Derivatives data confirms that the upper limit of NIFTY index for February 2013 series is locked at max 6100.

Budget 2013 – Next important trigger for the Market

Weekly Technical Analysis : 04/02/2013 – 08/02/2013

During the week RBI ended the excitement around monetary policy with a balanced act. Reserve Bank of India lowered the benchmark repo rate and cut the cash reserve ratio (CRR) by another 25 bps each. It’s a positive cue for the market which signals the central bank has now joined hands with the government to revive the growth momentum of the economy. Now hype around monetary policy is over. Though market analysts are expecting another 25 bps cut in March, RBI signaled that further rate cuts are dependent of easing of inflation pressures and government’s commitment on continuing to deliver on other reform policy fronts.

On back of this balanced act NIFTY Index responded very mildly and just managed to kiss the upper side of the bullish rising channel at 6100 and was back to 6000 level when market closed on Friday. Technically it survived above critical benchmark level for yet another week. From this point onwards market will look forward to union budget as next important cue.

What’s Next?The February 2013 series will be interesting to watch how market starts moving in anticipation of the budget. This is going to be a single big event for India market because this is the last budget this government will be presenting before elections. Therefore expect lot of hype and lot more expectations ahead of the budget. Majority feels that market will rally further in anticipation of this budget and NIFTY may touch new high post budget rally. However as I have been always saying, one need to be cautious when everyone is confidently bullish.

Let look at what technical chart is saying…The NIFTY price chart looks extremely bullish satisfying all the characteristics of bullish trend. It is consistently making typical higher top / higher bottom formations. However it is struggling to cross the January 2011 high of 6180. The only trigger for crossing this high in this January was RBI monetary policy review. Markets would have crossed this high if RBI had cut the repo rate by 50 bps instead of 25 bps. But that did not happen and NIFTY index faced the resistance at 6100.

Chart shows that if Index breaks 6000 level in the coming week then it can fall in the region of 5850-5900 levels. Technically this is a good support zone but the only factor which worries me is Money Flow Index (MFI). If you look at the chart carefully then you will notice that though Price is making new highs MFI is actually declining. Which means Smart money is actually going out of the market on every rise. Therefore it will be advisable to wait for the confirmation from MFI when we try to re-enter in the market at lower levels. On Derivatives side it is little early to get confirmed cues for February 2013 series but PCR has dropped all the way from 1.5 to 1.08 which indicates some more downside in the coming week. 6100-6200 still going to remain as strong resistance till the end of February F&O series.

 

 

NIFTY Options Traders don’t miss the opportunity on 29th March

Weekly Technical Analysis : 28/01/2013 – 01/02/2013

Last couple of weeks we have been talking about upper side for the NIFTY is being capped near 6200 and therefore one needs to be cautious from here onwards. During the early part of the week NIFTY Index achieved the milestone of 6100 but collapsed back to 6000 level on Thursday. I still maintain the target for the NIFTY index as 6200 but the targets are never achieved in a straight line. It always creates confusion among traders with up and down movements on daily basis. However, coming week is going to be a golden opportunity for NIFTY options traders. Let’s understand how?

On Tuesday 29th of January RBI will announce the monetary policy. There is lot of expectations around rate cuts this time. You can’t guess the outcome on 29th with 100% accuracy but one thing is sure…that is market is going react wildly on either side based on interest rate cuts decision. NIFTY traders would be wondering on which side to take the position. Should I go long or short? It will be a big risk as you don’t know which side market will move. However, if you know some simple Call/Put Options trading tricks then you can make your day in just few hours on this day. 

How to build Straddle? On 29th morning, before the policy announcement buy Call & Put in 1:1 ratio. Select the strike prices which are close to the NIFTY spot. The total Call + Put cost will be roughly around 55. So, the breakeven will be around 50-60 points movement for NIFTY index. Anything beyond 50-60 points will give handsome returns on the same day. The assumption is immediately after policy being announced market will move in either direction beyond 50-60 points. And just in case it doesn’t then you can still exit on the same day without any significant loss. So, Option Traders don’t miss this opportunity on 29th of March.

Correction to provide an opportunity to Buy

Weekly Technical Analysis : 21/01/2013 – 25/01/2013

Last week considering the heavy options writing at 6100 strike price Call options and 5900 Put options, we had assumed that NIFTY index would trade within 5900-6100 range for the week. We were actually excepting another opportunity to go long in NIFTY if it would have dropped in the region of 5900. But during the week Index opened at 5968, made high of 6083 and closed at 6064, which was anyway within our expected trading range.

Heavyweight Reliance and Oil-Gas sector on Friday spearheaded the rise of 100 odd points for the week. Now for the coming week Banking and other related sectors will be eying on RBI’s monetary policy on 29th January 2013.

NIFTY Index closing above psychological ‘6000’ mark on weekly basis for second time is of course a bullish sign on Technical Chart. For January 2013 F&O Series it has a potential to go up to 6200 level. The Derivatives data also confirms that 6200 is the upper limit for this F&O series. Expect heavy profit booking around this level because this is the same high which was made in January 2011 from which Index started declining and the downtrend continued till Index made a low of 4640 by the end of 2011. Going forward one need to be choosy about those stocks that are approaching the support levels rather than those who are already at their top.

Stock Watch: This week we are going to see two more stocks which are there on our radar. Marico Industries and Hindustan Unilever from FMGC sector.

Marico: As chart shows, this stock is in strong uptrend and moving in a perfect channel since last one year. It has come near to channel line support this week. 220 is a good price to enter and hold this stock with minimum 3 to 6 months view.

Hindustan Unilever: This stock is approaching its support level. This week it has come to 490. It is a good opportunity to accumulate this stock in a range of 485-465 and hold for minimum next 6 months.

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Correction to provide an opportunity to Buy

NIFTY Technical Analysis 14/01/2013 – 18/01/2013

Last to last week NIFTY index had closed above crucial 6000 level and had raised the hopes for the target of 6180. However, during the week it was unable to sustain above this important breakout level. The week opened near 6042 and immediately came under some profit booking pressure and ultimately closed at 5952 with a loss of just about 70 odd points. Possibly index would have lost much more but IT index lead by heavyweight Infosys provided much needed support and saved the index from panic on Friday. Almost all the indices were down on Friday by 1% to 2.5% percent but IT sector was up by 3.7%. The biggest losers were capital goods, cement and Infra who lost more than 2.5% on a single day.

The profit booking is quite expected and I see this correction as an opportunity to enter into many stocks. In the given chart you will notice that NIFTY index has a strong trend line support near 5850. This week’s derivatives data shows that Option Writers are betting of 6100 strike price Call options and 5900 Put options. What it means is Index is expected to trade within this range during the coming week. Hence if index come near 5850-5900 level then it would be good opportunity to go long for NIFTY traders for the target of 6100.

In fact you can also see that many of the index heavy weight stock are also coming near their support zone and likely to provide an opportunity to buy. I am just giving couple of examples below but you can find many such stocks yourself using technical analysis tool.

 L&T: This stock struggled in the past to cross 1480 level multiple times and then gave a break out in Sept 2012. It then made a high of 1700 odd level and its coming down to 1480-1500 again. Expect good support as stock touches this level. It is definitely a buy call for L&T at this level. One can buy and hold this stock again for the target of 1700.

Tata Steel: Just look at the chart…Tata Steel has given a strong breakout when it crossed the falling Trend Line resistance near 400. The stock is coming down to retest the breakout line. Now the same resistance line will act as support and therefore 400 is a good level to enter into this stock with a target of nearly 20% gains in the near future.

 

 


NIFTY – Time to Book Profit @ 6180

NIFTY Technical Analysis 07/01/2013 – 11/01/2013

As expected January 2013 series has begun with positive bias. US Fiscal Cliff avert and RBI monetary policy hopes are driving the sentiments. Index closing above 6000 level for the week is an extremely bullish sign on Technical Chart. But the question is how far the rally can sustain?

If you look at the technical chart carefully then you will notice that MFI (Money Flow Index) has started giving  -Ve divergence. The NIFTY Index is pointing towards North but the MFI is heading towards South, which means “Smart Money” is flowing out of the market on every rise. In near term expect NIFTY index to face strong resistance at around 6180 level. This is the same top which was made in January 2011 and then Index had crashed from that level. Therefore expect huge profit booking as soon as Index touches this 6180 level. Derivatives data also confirms that 6200 is the limit for January 2013 F&O series as the highest open interest is at 6200 strike Call options. To conclude, it’s time to book profit when Index hits 6180 level and quietly start taking short positions!

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NIFTY - What to expect in Year 2013?

Just try to recall the day when we entered into 2012. The atmosphere in stock market was absolutely gloomy. Majority of the experts were skeptical about 2012 because the year 2011 had ended almost near the lowest point of the year for Sensex & NIFTY Index. It was then 2nd January 2012, the first trading day of the year… NIFTY Index entered into year 2012 by opening at 4640. It immediately broke sub 4600 level and sent sewer among the market participants. However by 3.30pm it had recovered from the day’s low and formed long legged Doji candlesticks on technical chart. On very next it formed a long green bullish “Morubozu” candlesticks signaling Bulls were back to dominate the year 2012. During the year we saw a spectacular bull rally for NIFTY index starting from 4640 in January till 5965 in December. A whopping 1300+ points with more than 25% rise! Though there were many ups & downs during this journey, the second half of the year have been a smooth ride for the Index with healthy correction and strong up trend.

With good memories of 2012, everyone is very optimistic about the market as we enter into 2013. The situation is exactly opposite to what was in the beginning of the 2012! However instead of going by sentiments, I would prefer to take a practical approach by considering the historical price movement on the technical charts. No doubt that NIFTY Index is in strong bullish trend however level 5940-6000 is a trend decider for the market going forward.

Let’s understand how? Please observe the given chart very carefully. It shows that NIFTY Index continued to trade in a perfect price channel for almost one year during September 2009 and September 2010. During this period it formed parallel support & resistance levels and then gave a bullish breakout by breaking the resistance line in September 2010. You will notice that the earlier resistance line provided support in November 2010 when index crashed after making high of 6336. Later the extension of resistance line of the same price channel acted as resistance in April 2011. Further you will notice that the support line which provided strong support to NIFTY index during 2009-2010 later proved to be strong resistance during 2011-12, whenever Index tried to bounce back. In early 2012 Index moved out of the falling channel when it broke 5200 level. However, the same support line of 2009-2010 price channels acted as strong resistance in February 2012. What is more interesting is the resistance line of falling channel provided strong support in June 2012 during correction phase. Considering the similar hypothesis based on historical price movement, we have already seen that NIFTY index is actually struggling at 5940-6000 range in December 2012.  Therefore level 5940-6000 is an extremely important for the continuation of current bullish momentum. Index will have to trade above this point in order to confirm the continuation of strong rally which has reached upto the current levels on back of several reform measures announced by the government in recent time. The current level also coincides with 76.4% Fibonacci Retracement of the fall from 6336 to 4531 and history shows that 76.4% retracement level acts as a major turning point for the index. Therefore failing to cross 5940-6000 band would mean Index will retrace back to the lower support line of the current price channel which is in the region of sub 5450 level. I feel that level 5450 is a strong bounce back point for the next journey toward the retest of previous high at 6300!

However, be aware of the fact that as we enter into 2013 majority of the experts are extremely optimistic about new high in this year. The history shows that market always proves majority wrong! We all know how market positively surprised everyone in 2012 and therefore ‘fingers crossed’ as we enter into 2013…

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