NIFTY Options unwinding on Friday signaling range breakout?
Technical & Derivatives Analysis: 07 Dec 2014
I had earlier written in this column that 8500-8600 level is going to be acid test for NIFTY. Considering exceptionally high NIFTY rollover, I had also forecasted the outcome of RBI policy and results are in front of you. NIFTY traded in a narrow range of 8500-8600 for the entire week and gave tough time for intraday as well as positional NIFTY traders.
However, those who are monitoring Call/Put Options build up must have noticed a dramatic change in the writing pattern on Friday.
GOLD | Watch out 38.2% Fibonacci Retracement Support @ 24800
Record high 76% NIFTY Rollover, RBI Policy on 2nd Dec...
What to expect next?
Technical & Derivatives Analysis: 01 Dec 2014
NIFTY Index witnessed record high rollover at 76% for December 2014 Series. After expiry, NIFTY index kissed 8600 level immediately on next day and closed for the week on Friday just near the top. Market is propelling higher on rate cut hopes when RBI reviews the monetary policy on Tuesday, 2nd December. Record high rollover number indicates extreme bullishness among market participants.
Level 8500-8600, an Acid Test for NIFTY Index
Technical & Derivatives Analysis: 24th Nov 2014
I was expecting a bit of correction in NIFTY from 8400 level but Index did not give up on the gains and kept marching towards 8500 till Friday. Everyone seems to be bullish in anticipation of RBI monetary policy but Technical and Derivatives data is giving a signal of exhaustion for the Index. NIFTY needs to undergo an acid test before crossing 8500-8600 levels.
Key derivative indicator PCR (Put/Call Ratio) has entered into overbought zone. You can see in the above chart that Index is crawling upwards but OI (Open Interest) is constantly declining. Money Flow index is also showing –Ve divergence. As per Options build up, it is unlikely that Index will correct before expiry but fingers crossed for the December 2014 series! Keep close eye on NIFTY Rollover on expiry day for the next cue for Dec 2014…
Expecting minor correction for NIFTY up to 8180
Technical & Derivatives Analysis: 13th Nov 2014
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Expecting NIFTY & Bank NIFTY to Fire in November Series!
Technical & Derivatives Analysis: Week Starting 31rd Oct 2014
As expected, NIFTY is continuing with its positive momentum. Today morning, It has opened very strongly with a gap above previous high of 8180. You can also see the Bollinger Band has opened after consolidation a long consolidation period.
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NIFTY: Critical Support @7800
Technical & Derivatives Analysis: Week Starting 29rd Sept 2014
As expected, Sept’ 2014 F&O Series for NIFTY ended within a consolidation range of 7900-8200. It did try to deceive the NIFTY traders with some intraday breaks but ultimately closed and sustained above 7900. We are now into October 2014 series and need to take fresh look at the Options insights. On Technical Chart the things are looking very straightforward. There is a Trend line support at 7800 which is ‘make or break’ level for the NIFTY Index for the new series.
NIFTY: Expecting consolidation between 7900-8200
Technical & Derivatives Analysis: Week Starting 22rd Sept 2014
The power of Derivatives is, it provides insights beyond what Technical Chart shows. On Tuesday, 16th when NIFTY index was witnessing a free fall, we flagged the Options buildup at 8000 strike price Put option and hinted about possible support.
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NIFTY: Opportunistic trading at 7700
Technical & Derivatives Analysis: Week Starting 28rd July 2014
Last week we saw how Derivatives Indicators were giving positive signal and we were expecting cross over above 7720 would take NIFTY Index to its first resistance level of 7800. During the week, NIFTY moved exactly as expected. It made a high of 7840 and closed at 7790.
What’s next? Coming week is the expiry week for July F&O series with only 3 trading sessions. Though Index has crossed critical mark of 7720, Call Option built up suggests that 7800 resistance likely to continue till expiry day. Technically 7700 level is now supposed to act as a support but we saw heavy unwinding of Put Options on Friday, which signals to stay cautious around this level. Considering an F&O expiry week, I would prefer to be opportunistic rather than having one sided view. I would keep close eye on 7700 strike price Put option Open Interest and would go short if unwinding continues. On other hand if I see accumulation of OI for this Put option then obviously make sense to go long.
Level 7720 – Make or Break for NIFTY Index
Technical Analysis: Week Starting 21rd July 2014
NIFTY Index is very near to its Make or Break Level. On Technical Chart shows formation of Head & Shoulder pattern in progress. The target for the Right Shoulder of this pattern is at 7700. Also, if you see the Fibonacci Retracement level of fall from 7809 to 7422, the 76.4% reversal point is at around 7720. Hence this level is very crucial for the coming week. However, the next immediate Technical resistance would be around 7800 which is its previous top. If Index is able to cross these barriers then the next target is straight around 8000 level. However, failing to sustain above 7720 would confirm the Head & Shoulder reversal patter and expect NIFTY to fall again to the Neck Line of this pattern at 7400.
NIFTY target for Union Budget: 8000 or beyond?
Technical Analysis: Week Starting 07rd July 2014
After 3 weeks of consolidation, NIFTY Index gave strong positive signal as we enter into most awaited union budget week. On Technical chart Index kept for forming Doji candles for previous 3 weeks and then closed the week with Bullish Morubozu candle. However, the question is how far NIFTY can continue to go up in anticipation of Budget event.
NIFTY – Expecting sharp fall if 7480 is broken
Technical Analysis: Week Starting 23rd June 2014
Last week, with the help of Technical Chart and Derivatives insights, we saw how NIFTY was showing a sign of exhaustion. During the week Index remained volatile and just survived above 7500. The close was below previous week’s low. Now, though index is showing weakness, one can’t ignore Jun 2014 F&O Series expiry on Thursday, 26th. Highest Put Option buildup at 7500 strike price indicates that Index may try to hold this level till expiry and any make or break move can be expected on or after expiry day!
Just look at the above technical chart carefully. It’s an hourly intraday chart, which clearly shows that level 7480 is extremely critical and break below this on closing basis can trigger a sharp fall with a target of 7250 and possibility of correcting till 7050.
NIFTY – Dark Cloud Cover!
Technical Analysis: Week Starting 16th June 2014
Post-election, NIFTY Index is first time showing a sign of exhaustion. Index did try to cross the election day high of 7625 on Technical Chart but the Derivatives data clearly shows that there is not enough strength to sustain above this high at least for June 2014 series. If you carefully look at NIFTY Future OI in the below chart, you will notice that though NIFTY future is trying to make new high, the OI is significantly low. This is an indication of NIFTY has reached near the top and it can either get into consolidation mode or start declining.
The key Technical Indicators are also confirming the overbought situation. Stochastic Oscillator is at the verge of confirming Sell signal. MFI (Money Flow Index) is showing divergence. NIFTY Future made new high during the week but MFI could not cross the previous high which indicates that Smart money has started flowing out of the market. Further, FII’s net long positions in Index future are sharply declining, which is an early warning for the market! The expected correction levels are 7200-7050
Result of Election special Options Strategy which was recommended on 13th May is as below-
NIFTY – Options Strategy for Election Results
NIFTY – Cautious stand ahead of Election results!
Technical Analysis: Week Starting 28th April 2014
Derivatives data is clearing showing that market participants are going extra cautious ahead of Election results. NIFTY Rollover for May 2014 series was just 59%, which is quite below the average range. NIFTY Future Open Interest is again below average and in fact it declined by 4.84% with fall in price on Friday. This can be interpreted as - participants are not willing to take new positions and they are trying to play safe with the current open position.
The Technical Chart is also not giving any encouraging signals for INFTY Index. Money Flow Index is actually giving negative divergence indicating that smart money is flowing out of the market. Now the immediate support is at 6650 and I expect market to trade in narrow range during the week.
NIFTY – FII’s Net Positions Signaling some dips!
Technical Analysis: Week Starting 15th April 2014
Last week we talked about 6800 level for NIFTY index, which was supposed to be the target for the breakout when Index crossed 6350 level. During the week Index made an unsuccessful attempt to cross this level. Prima facie it looks like NIFTY index is unstoppable but the technical chart and derivatives data is indicating something else.
NIFTY - Just 57% Rollover for April Series! What’s next?
Technical Analysis: Week Starting 7th April 2014
After consolidating in a range of 6400-6600 for almost 13 trading session, NIFTY Index broke this range one day prior to F&O expiry date i.e. on 26th of March. However, April 2014 F&O series witnessed just 57% rollover which is way below previous month’s average. NIFTY Future Open Interest buildup is also just average. These are clear indications of market participants are now trying to play safe by not adding new positions ahead of General Elections 2014.
NIFTY – Correction expected before pre-election rally continues
Technical Analysis: Week Starting 24th March 2014
As expected, the current pre-election rally has taken a halt near 6600. NIFTY Index made a high of 6575 and that seems to be an ultimate top for March 2014 series. Index is now trying to consolidate within a narrow range of 6400-6600. As Index is consolidating in the narrow range, the NIFTY Future total OI is constantly going up. This means Index is gearing up for another big move once it breaks out of this consolidation range of 6400-6600
What’s Next? Most of the Technical Indicators and Oscillators are hinting for some bit of correction. You can see in the given chart that Stochastic Oscillator is in the overbought zone and ready for the decline. MFI (Money Flow Index) is showing negative divergence.
The OI PCR indicator is gradually declining and has come near the threshold level of 1.2 ratio level. Drop below 1.2 will definitely confirm more downside for NIFTY Index from this point onwards. The only hope for Bulls is the options buildup at 6400 strike price Put options. Keep an eye on the OI for this Put option and any unwinding in this would confirm the downside break with the target of 6200. However, next week is March 2014 F&O series expiry and Index may try to hold 6400 level till expiry day on Thursday, 27th March 2014.
Market Gearing up for Elections
Technical Analysis: Week 10/03/2014-14/03/2014
I was expecting some bit of correction from 6250 before NIFTY Index starts gearing up pre-election rally. However, on Monday you would have noticed huge addition of OI for the 6200 strike price Put option along with panic unwinding in Calls. This was the first signal of Index forming a strong base around 6200 and ready to propel higher with a target of 6400. By Thursday it achieved the target of 6400 and change in derivatives Option’s Open Interest continued to give bullish signal. It was evident that Index will cross 6400 & 6500 levels considering further panic unwinding in Call options on Thursday and Friday.
On Friday Index has closed above 6500 level and still looks unstoppable. Most of the technical indicators and oscillators are in overbought zone but key derivatives indicator - OI PCR is at 1.46 which is still away from overbought zone. I expect NIFTY Index to keep moving upward with first target of 6600. Keep close eye on OI-PCR and call buildup at 6600 & 6700 strike price call options. We saw Call writing happening for these Call options on this Friday. If writing continues on Monday/Tuesday then only think of shorting NIFTY. Until then it’s advisable to stay on long side.
NIFTY – Opportunity to short NIFTY @ 6200-6250
Technical Analysis: Week 24/02/2014–28/02/2014
It may sound monotonous as am repeating the NIFTY levels for last few weeks but that’s how NIFTY is behaving. Index is now heading towards the upper band. You can easily see a Gap zone between 6188 & 6263. Obviously this is going to act as strong technical resistance. Tech Indicators & Oscillators are almost near Over Bought zone.
The Options buildup around 6200 and 6300 clearly show that Index can’t cross this band in February F&O series. The OI-PCR is almost in overbought zone. Therefore the conclusion is 6200-62500 is a level to short.
NIFTY – Upper boundary 6250-6300
Technical Analysis: Week 10/02/2014–14/02/2014
NIFTY index is trading exactly as per our predictions given in the first week for February series. Index made a low of 5933 which was just around our lower target of 5960. After touching the lower support zone, Index is now trying to move up towards the upper resistance. If you refer to my previous week’s chart, I have already highlighted how Stochastic Oscillator is giving positive crossover. However, I would like to reiterate that crossing 6250-6300 is extremely difficult considering the technical resistance as well as Options buildups.
NIFTY – Sell on Rise Market
Technical Analysis: Week 03/02/2014–07/02/2014
In previous article I had written that NIFTY Index would break the critical support levels. I was expecting lower level target of 5960 and index made a low of 6027. January 2014 F&O series expired with 72% Rollover which is significantly above average. What does rollover number signals for February series?
What’s next? You can clearly see on Technical chart that NIFTY Index is confined within a range of 5960 and 6350. Index has broken critical level of 6130 with Gap which is definitely a sign of weakness, technically. However, Derivatives insights are giving slightly different cues. Change in OI for 6000 strike price Put option indicates support in the zone of 5960-6000. The PCR is at healthy 1.33. Hence, I expect Index to go up during early part of February 2014 series. However crossing 6250-6300 is very difficult task and should provide good opportunity for NIFTY traders to go short!
NIFTY – Retest of Support at 6130
Technical Analysis: Week 20/01/2014–24/01/2014
During the week Index moved as expected. Considering Technical Indicators I had written in the last week that Index would go up but the upper side target would be only up to 6350. During the week it made a high of 6347 and started losing momentum.
What’s Next? For the coming week, expect NIFTY Index to once again retest the critical support at 6130. This would be the 3rd occasion since last month and I am little doubtful about holding the support this week. The reason why I am doubtful is because we saw huge unwinding of positions by Put Options writers on Friday. Hence, if Index breaks below 6130 (on closing basis) then expect a drop till 5960.
NIFTY – Critical Support at 6130 | (13/01/2014–17/01/2014)
At present Market is looking directionless. I was expecting NIFTY to take some cues from INFY’s result on this Friday but Index closed with Spinning Doji Candlesticks indicating indecision. Technically it has broken important Trend Line support but as you can see in the chart, it tried to consolidate near 6130 support line for last 4 days. Next week we have Index heavy weights ITC, RIL etc results. Hence, we need to keep close eye on 6130 on closing basis.
NIFTY – Ready for warm welcome to 2014
Technical Analysis: Week 23/12/2013 – 27/12/2013
Last week our market showed resilience to US FED QE tapering news. RBI kept interest rate unchanged in its policy review and market took this move positively. During the week NIFTY index confirmed the trend line support near 6100. It made a low of 6130 and closed the week at 6274, which was very near to week’s high. Index is looking forward to welcome the year 2014.
NIFTY – Is smart money flowing out?
Technical Analysis: Week 16/12/2013 – 20/12/2013
Last week on the back of assembly election results, our prediction was NIFTY index would hit new high between 6400-6500 and that could be the time to book profits on long position. The prediction was based on the Options build-up seen in the Derivatives segment. Once again our prediction turns out to be right as Index opened at 6415 on Monday morning and came under heavy profit booking pressure. It lost nearly 250 points from the peak and closed the week at 6168.
Its sustainability was anyway doubtful as market is expects US Fed to start QE tapering. The next big major event which will drive the market sentiments in the coming weeks is RBI monetary policy.
NIFTY – Set for All Time High but Sustainability?
Technical Analysis: Week 09/12/2013 – 13/12/2013
Once again Derivatives Analysis proved an edge over Technical Analysis. Two weeks back i.e. just before expiry time we saw in this column, how technical chart was laying a trap for bear and derivatives indicators were giving clearly bullish signal. NIFTY is on run since December series has begun and this Monday morning NIFTY is obviously expected to open up with a gap. However, the question is how far market can go up on back of assembly elections and its sustainability is doubtful as market expects US Fed to start QE tapering.
What’s Next? Technically speaking, NIFTY index has made 2 unsuccessful attempts to cross and make new all-time high till now and if on Monday it crosses this high and sustains above then it would be considered as a strong bullish breakout on a technical chart. For December 2013 series, the PCR is just around 0.96 which means enough room for market to scale up but the Put/Call build-up suggest that NIFTY index would hit new high between 6400-6500 and that could be the time to book profits on long position for December 2013 series
NIFTY – Time to go long?
Technical Analysis: Week 25/11/2013 – 29/11/2013
Wonder why I always give more weightage to Derivatives compared to Technical? As we saw last week, Technically NIFTY chart was showing strength till 6340 above 6100 level but Derivatives data was not confirming the same. During the week Index first deceived by crossing 6100 level on Technical chart, barely reached 6200 and floored back to 6000 level. Now though the technical chart is showing weakness, derivatives data is actually giving an indication of oversold situation and one can expect sharp bounce back once again.
What’s Next? The channel line support is at 5900 and most critical 200 EMA is at 5850. The OI PCR (one of the most reliable derivative indicator) has achieved its oversold target this week. Hence, I would not be looking for any new shorts and instead would prefer to go long in INFTY in the region of 5850-5900.
NIFTY- Support at 5850-5900!
Technical Analysis: Week 18/11/2013 – 22/11/2013
In my previous article I had cautioned bulls as Index was reaching towards the technical resistance at 6340. In fact Index kissed exactly this resistance zone by making high of 6342 on Muhurt trading day and thereafter corrected by 370 points without any pause and hit 5972 level. However, on Friday Index bounced backed sharply and closed the week at 6056. Does that mean correction is over?
What’s Next? On Technical Chart Index will have to close above 6100 for up move to continue. Above 6100 the index will try another attempt to touch and cross 6340 resistance. However, Derivatives data is still not confirming the end of correction. The November 2013 series started with record high Rollover but NIFTY Further OI is declining since the day one and no fresh long buildup till date. The OI PCR is at 0.97 which means there is some more room for NIFTY to slide down further. On downside the channel line support is at 5900 and most critical 200 EMA is at 5850. Hence, I feel that 5850-5900 level should be considered as an opportunity to go long.
NIFTY under Dark Cloud Cover!
Technical Analysis: Week 28/10/2013 – 01/11/2013
Last week I had cautioned Bulls as 6230-6340 was expected to be strong resistance zone. During the week NIFTY Index could barely reach 6252 and started confirming the bearishness.
What’s Next? Index is definitely ready for the correction now Decline in NIFTY Future OI near resistance zone confirms that smart traders are booking profits on their long positions. OI PCR seconds this assumption because it has already reversed after touching the overbought level and currently it is at 1.46 levels. Last we saw how MFI (Money Flow Index) was showing negative divergence and during the week it has started confirming the outflow of the smart money.
NIFTY – Bulls be Cautious!
Technical Analysis: Week 21/10/2013 – 25/10/2013
In previous article we had given an upper target of 6100 for NIFTY index but, to be very honest, were expecting Index to reverse from this level. During the week Index did reach to the 6100 levels but unwinding at Call options followed with huge Put writing gave an indication of further up move on Friday morning and Index closed near 6200. For the coming week, Index still looks bullish but it is already into cautious territory.
What’s Next? NIFTY Price Chart is showing the next resistance levels at 6230-6340.The unwinding of Call options on Friday suggest that Index may continue to move up further and hence can break the 1st resistance at 6230 but crossing 6340 is going to be an acid test! The OI PCR as on Friday closing is at 1.55, which means some more upside is possible but very soon it will enter into overbought territory. However, MFI is clearly giving a divergence signal which is an early warning for the Bulls. Another important thing is, on Friday Index went up by nearly 150 points but NIFTY Futures IO actually declined by -2.17% which is not a healthy sign for the market. Hence to conclude, we are very close to the strong resistance zone at 6230-6340 and be cautious if adding any long positions.
NIFTY – Trading Range for October series 5700-6100
Technical Analysis: Week 07/10/2013 – 11/10/2013
Last week I had explained why and how range 5680-5750 was going to act as support and NIFTY Index actually took support at 5700 which was exactly within this band.. The majority was bearish because of the US government shutdown news but as usual stock market proved that the majority is seldom right.
What’s Next? Candlesticks formation on Friday closing basis shows indecision on Technical chart. Index bounced back by 250 points from 5700 but the volumes were just average. The current Options buildup is confirming the NIFTY trading range between 5700-6100 and NIFTY index has closed exactly at the midpoint of the trading range. ‘Doji’ candlestick formation with marginal change in OI suggest wait and watch situation before taking any new positions.
From swing trading perspective 6050-6100 level will be good opportunity to go short and 5700 is an opportunity to go long for October F&O series. Level 5950 is very important as the next week begin. If Index is able to cross 5950 on Monday then it can easily propel right up to 6100, which is upper limit for NIFTY index for this series.
NIFTY – Intermediate Support @ 5750
Technical Analysis: Week 30/09/2013 – 04/10/2013
Last week it was clearly written that the correction was inevitable and index was unlikely to give any further bullish breakouts. In fact Candle Stick formation had already given the bearish signal and decline in OI was confirming the correction without any doubts. As expected, NIFTY index corrected from the previous week’s closing of 6012 to 5811 and closed at 5833 for the week.
Now index is very near to the support zone and expect some bounce during the coming week.
What’s Next? As you can see on the technical chart, 200 EMA for NIFTY is at 5750. The 38.2% Fibonacci Retracement of the rally from 5118 to 6142 also coincides with 200EMA. Further, there is a Gap zone between 5688 and 5738.
Hence, 5680-5750 is temporary support zone for NIFTY Index. However, any bounce back from this support zone would be yet another opportunity to go short. Below 5680, the next target is 5550-5450.
NIFTY – Correction looks inevitable
Technical Analysis: Week 23/09/2013 – 27/09/2013
Last week I had written that on higher side 6050-6100 seems to be the max limit for October series and should provide good opportunity to go short. As expected the week was full of excitements. First, NIFTY Index jumped by 200+ points on Thursday and hit 6142 level on the back of global cues as FED surprised the markets by announcing that it will continue with its $85 billion per month bond buying program. However, very next day Index dropped to 5932 on account of disappointing RBI Monetary policy. Though Index has managed to hold 6000 level on weekly closing basis, the correction for the current rally looks inevitable,
NIFTY – Cautious mode ahead of FOMC and RBI monetary policy
Technical Analysis: Week 16/09/2013 – 20/09/2013
Last week, we saw that there were multiple resistances on Technical Chart around 5750 but Derivatives buildup was not confirming the upper range as OI was way below the average and no distinctly high accumulation was seen at any strike for Call options. On Tuesday, NIFTY index opened just above 200 EMA @ 5738 with gap up opening and confirmed the breakout above 5750 resistance level, It then made a high of 5932 and closed the week at 5850.
Poor Options buildup indicates that market is in cautious mode ahead of US Federal reserve FOMC rate decision on Wednesday 18th September 2013 and then RBIs monetary policy on Friday 20th September 2013.
What’s Next? NIFTY Index is now very close to its next major resistance at 5960-6000, and it’s not going to be an easy task for the market to move up for this point onward. The Trend line resistance coming from previous two top is at 5980. If NIFTY Index is able to break this line then there is immediate Gap at 6050 and then 6100, which was previous high.
On higher side 6050-6100 seems to the max limit for October series and should provide good opportunity to go short. Index is already showing a sign of tiredness as Future’s OI has begun to decline. PCR already tested its overbought zone once and may make another attempt to hit this level during this week before it confirms sell signal. On lower side the support is at 5600 and if this level is broken then Index may slide back to 5300 by the end of the series
NIFTY – Multiple Resistances @5750
Technical Analysis: Week 10/09/2013 – 13/09/2013
Last week I had predicted that the bullish momentum will continue and the targets given were 5600-5720, which were 50% and 61.5% Fibonacci Retracement levels respectively. During the week Index first tried to achieve its 1st target at 5600 and tanked by 200 points on Syria rumor. However, it recovered from very next day and by Friday it reached very close to our 2nd target of 5720. Index made a high of 5689 and closed the week at 5680.
Index is now very near to the area where it is likely to face multiple resistances and coming week is going to be Trend decider for NIFTY Traders.
What’s Next? On Technical Chart, the 200 day EMA is at 5730. The 61.8% Fibonacci Retracement level is at 5720. The previous top made was at 5755. Hence, there are multiple resistances for NIFTY index around 5750.
The OI PCR is at 1.53 which means there is limited room on upper side. However, Call Options build is not yet confirming the upper range and OI is buildup way below average and no distinctly high accumulation was seen till Friday close.
Hence to conclude, at present the resistance zone is around 5750 but I would suggest to watch change OI for OTM Call/Puts for the confirmation..
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.
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!
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.
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
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.
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.
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.
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
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.
Can NIFTY Index hold 5600 till expiry?
Technical Analysis: Week 24/06/2013 – 28/06/2013
Dead Cat Bounce!
Technical Analysis: Week 17/06/2013 – 21/06/2013
NIFTY Traders, be ready if Index breaks 5850?
Technical Analysis: Week 10/06/2013 – 14/06/2013
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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.
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.
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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?
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.
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.
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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.
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.
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.
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!
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…
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.
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.
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.
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.
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.
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…