Flavour of d Day - Divergence in Nifty

Hi,
Today Divergence was perfectly spotted in Nifty. Best indication was on 1 minute charts. I'm posting both 1 min and 10 min charts. Its unusual for me to post my day trade Nifty charts but I still felt like posting it.....



Its amazing, charts can be traded in 'n' no of ways you just have to focus which technique to apply when. Patience and Discipline and results will be definitely yoursss.

Hope you loved reading it.
Happy Trading.

I wish I could Trade Dow Jones!!!

Hi,

Its been quite a long time since I posted nething about dow, but I confess I love dow and sometimes I wonder trading in dow would have been much easier than trading the dynamic and volatile Nifty. Honestly speaking I've been watching dow since a long time and my trade setup and technicals work perfectly with dow(ha ha when you paper trade dow you always claim big things like this). Ok jokes apart, watching dows movement is quite crucial for every world market as per my beleif its one of the leading indicator. Now the scene is dows movement are quite steady and working perfectly. I'm a big fan of Dows theory and Dow Jones, and I really mean it. Every t.a(technical analysis) technique has it roots linked with Sir Charles Dows theory, no doubt in that. Last post http://niftyswings.blogspot.com/2009/04/dow-jones-in-sync-with-dow-theory.html where I tried to reason out accumulation phase of 500 points range worked well. Again we are trading in the same kind of scenario. See the chart:

Amazing isn't it. Give me a break plz I want to trade on Dow............
Uncle Sam could you hear me!!!!

Hope you loved reading it.
Happy Trading.

Expiry Fest Again!!!!

Hi,
As promised back on the verge of expiry. Hey by the way nebody gone long on Tuesday. As I was expecting in the 22nd May post link market did retraced to 4100 line!!! actual low being made was 4092 not bad at all.


Well upmove got triggered on the note of FNO expiry and US market screaming enough of profit booking as dow shot overnight(honestly nobody can catch gap ups but yes I kept guessing as our market was nearing 4100) . As I was expecting something strong by govt but all we got is a note by our FM.

"Finance Minister Pranab Mukherjee today said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.

Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years."

So tomorrow is the expiry and I hope another 100 points rally is on for us. Anything above 100 points will be a fun watching also it will ensure that I win prize of guessing closing nifty lvl of May on iCharts ( ha ha winning is a real fun, its more than money for me).

Hope you loved reading it.

Happy Trading.

Me Off 4 Sometime......

Hi,
I'll be off from the market for some coming days due to some consolidation sort of things in my life(he he). will definitely join you probably at expiry of FNO or in June. Till than wish you a Happy Trading.
C ya.

Retracement Game Again!!!

Hi,

Everytime we make a new top everyone knows we go ahead for retracements. So we are heading you yet another retracements which as you know I always take lows from our historic body low of candles. This setup is again amazing and is giving retracement around 4050 lvls. Hmm so I guess we may see 4100(4100 being a long support line) to 4050 range for the coming days and that retraces our Big Gap up candle by nearly around 50% approx, not bad for profit booking after all Indian investors are getting chance to have some relief after a long time( One year a long time??? ehh) neways they might not be getting the stocks which are valued at 21 k historic highs but still some bottom fishing must have given them some averaging sort of things. All in all coupled with weak globel cues and still some time to form a government 4050 is not so far. Our Dow Jones too falling in a 3 days loosing streak so things are perfect for retracement untill some anouncements from government cheer up the market and may trigger some buying.

Hope you loved reading it.
Happy Trading.

Nifty Swings - Day Traders Delight

Hi,
So Tuesday was definitely the day traders delight as Nifty gave the wildest swings in the day giving almost 100 points in each swings and generating the largest turnover ever in the history. Nifty seems to be making all the records this may thatz why I said earlier its Heated and Promising May.
One more history which was repeated and was obvious too was its retracement. Read the post below I gave a 20% retracement rule ( sorry I couldn't gave example of what I was explaining earlier due to time constraint) which gave the perfect entry point to go long when Nifty opens with a big Gap up.


Its interesting to see if we could again get close to our perfect entry point again or not. Till then we are in may and its still heated and promising as well.

Hope you loved reading it.
Happy Trading.

Elections Results -- One of The Biggest Event in Our Markets History

Hi,
So Nifty is all set to make new records on Monday the 18th, afterall a clear n favourable verdict is there after a long time in Indian history. Targets like 3800 or 4000 looking very much achievable in this leg of bull run. Interestingly it will be dows turn to take cues from the Indian market on Monday as Dow seems to be stabilizing around 8500 its short term resistance line. Post election rallies historically are one sided and it will be interesting to see how much buying frenzy of people can be seen on Monday onwards. Opening targets of Nifty are guessed from 100 - 200 points. I'm expecting the opening gap up around 3800 lvls. It will be crucial to day trade after such a huge gap up coz most of the cream will already be taken up in the Gap up, but for further trades one got to look for some retracements lvls. As seen in all the similar gap ups Nifty alteast retraces (from the bottom to high of the green gapup candle) 20% approx. It may do the same today as well as selling at higher lvls can be seen in the market.
Road ahead will be guided by the momentum indicators. To keep the guesswork going before the opening how much Nifty will rally post Monday is quite crucial as Global Indices are slowing down and going into technical correction mode. It will be interesting to see either global market taking curs from Indian market and resuming their uptrend or our market correcting around 4000 or 4200 lvls. Lets hope we manage to decouple for sometime from the grim scenario and can set new records for our dear Nifty.

Hope you liked it.
Happy Hunting For Coming Dayzzz.

Butterfly Strategy - Rewards 4 No Movements in Scrip

Hi,
Options r the wonder instruments when it comes to stock. Strategies can be best worked out for Stock options given they got to be liquid and values are fairly priced for itm and otm options.
Among many strategies Butterfly is one of the beautiful strategy which gives maximum returns with minimum investment provided you know the range of the stock and at expiries it gets trapped in that range. The second beauty is that both extreme sides risk are limited. See how we can work it out:

Butterfly in its pure form can be designed by a simple thumb rule.
1st: Make sure you know the range of the stock.
2nd: Strategy is designed for expiry(u can square it off if u r getting better returns but tht too will happen near expiry)
3rd: Make sure you buy and sell options at fair prices, coz at times of day they are priced at weird prices which can upset ur butterfly setup.

Strategy is simple when u r expecting a stock in the range note down the extreme range which u r expecting at expiry. Now you have to sell 2 At The Money Call/Put, Buy 1 Out of the Money Call/Put, Buy 1 In the money Call/Put.

Here is the live example of DLF. I'm using butterfly expecting price will stay in the 210-250 range. Current Spot rate of DLF is around 235.



I'm making Butterfly strategy using puts, and same can be made through calls too.

Here:
At the money put will be 230 P.A.
Out of the money put will be 210 P.A.
In the money put will be 250 P.A.

Imp: Here I've selected 210 and 250 in anticipation that range till expiry should be within these two extremes. So you make a killing if it stays near your At the money put which you have sold.

Calculations:

Sell 2 ATM put of 230 strike: 2*22=44 ( You receive Rs 22 per lot, lot size of DLF is 1600)
Buy 1 OTM put of 210 strike: 14 Rs ( You pay 14 Rs per lot)
Buy 1 ITM put of 250 strike: 34 Rs (You pay 34 Rs per lot)

So your net investment is : 34+14 - 44(tht u received by selling put)
Net investment comes to Rs 4.

Now your payout on expiry:

Payout if DLF trades at 200 Rs. ( here is the problem coz it moves out of range.)

On OTM put 210, your profit will be: 210-200=10Rs
On ITM put 250, your profit will be: 250-200=50 Rs
On ATM put 230, your loss will be: 230-200= 30Rs*2= 60Rs.
Overall P&L=60-60=0
So overall the loss will be of the net investment of Rs 4 you made.

Payout if DLF trades at 220 Rs (now you are in the game, scrip is trapped in your range)

On OTM put 210, your profit/loss will be: 0 (all puts below the spot will be zero)
On ITM put 250, your profit will be: 250-220=30 Rs
On ATM put 230, your loss will be: 230-220= 10*2= 20Rs
Overall P&L= 30-20=10Rs

Net profit will be 10Rs - 4Rs(initial investment) = 6Rs.
1600*6=9600 on an investment of 1600*4=6400. Coooool isn't it.

Likewise you can calculate payout at every level in advance like at 230, 240, 250, 260.
You will notice the nearer the price stays to your ATM puts at expiry the more profit you'll make. Exciting thing is your investment is very low. While making strategy you can fine tune the rates of buying and selling puts during trading hours. You can make the same butterfly with calls too. See the problem in making strategy with call. In chart above 210 call is highly priced at 45 which can upset your whole setup. Ideally that call should be priced at around 30-33 Rs.

So one can make a killing if price stays very near to the put/call which you have sold. Optimum results can be achieved at expiries.

Hope you loved reading it.
Happy Trading.

Nifty in Correction Mode!!!

Hi,
So we all started on a sentimental note and it seems we are correcting again on the same sentimental notes. It may be too early to say that the top has reached coz I, like many had upper side targets of 3790. Till elections nothing can be ruled out, upside tgts are very much possible but Nifty is showing for the first time real weakness. Clearly on graphs weakness started on Friday, but since we are in trading range hopes were alive till today for pullback. But todays last moment touching of 3540 and a very weak pullback confirmed that for the time being bullish hopes are out of scene.

Bullish market has always been range bound breaking its range with amazing gap ups or fierce rallies. Similarity during these range is that they never breached their 200 points trading range on the downside.



Now for some time the range has contracted clearly, giving 100 points range(see the rectangle for 100 points range), and thatz the first signal for weakness (completely ignored by me). New thing this time is that earlier there was buying at every dips but today only nobody was buying at dips which is quite clear at the closing time of Nifty. One more point to notice is that range is always broken by either through gap up or through big green candle. This time we got big red candle breaking up this 100 points range.



Fundamentally speaking there was nothing wrong in todays market, we got a firm opening in cues with asian market. We got positive news for our two nifty heavy weights SBI and ICICI Bank which holded Nifty initially but lost due to heavy selling pressure. Only negative today was Dows future trading 90-100 points discount. Now this happened earlier too, but this time its purely sentimental may be because of election worries or traders not willing to give more premium to stocks at current lvls.


Interesting Gap Filling Coming Up

Trading Gaps are always fascinating and this time we got a big gap to trade. If you are familiar with gaps than you must know that Gap are excellent support. Gaps are never penetrated, and once if their range is touched then Gap filling is for sure, n thts what was seen at todays chart.


Red rectangle above is touched by todays candles and day closed very close to the Gap indicating that high probability is there that we can fill the gap tomorrow. Generally it is seen that price either reverts completely from the gap or fills it in coming sessions. So its a high time trading this Gap either we see a complete revert( most unlikely in current scenario coz we got enough time today and couldn't revert) or a complete filling of the gap. So a complete 100 points game from here. Btw Gap target is 3480.

Scenario 2

See current down surge is just due to hopes that lvls are highly overbought or at a very high premium. Nothing major has so far hit the market. Infact U.S jobless data has shrunk a bit and other stats are positive too. Coming to our Indian market picture will be clear by 17th of May and we might see some stable government coming into power which may lead to a surge again. If that will be the case then we are most likely to find support somewhere around our favorite fibs lvls. Also Nifty got a track record of finding support @ 23.6% retracement lvls (chk earlier posts), this time it can find support at the same lvls(its highly subjective but true so far, also fibs are one of my best lead indicators). And if you are some hardcore bear then for your kind info if Nifty retraces to a greater extent without any much fuss or major bad news, then it may find support @ 3280 which is the next fib retracement lvl or @ 3300 which is major support. One more interesting support might come from Trend Diviation signal line @ 1. On smaller tf TD has broken its signal line indicating weakness, but real test will be on daily charts, will be interesting to see in the coming days.


Hope you loved reading it.

Heated May!!! Volatile But Promising

Hi,
After we are done with our FNO expiry successfully on a bullish note, May is definitely a month that every trader is eying for. Now for May I'm surprised to see some bearish day dreaming. Seems like people are obsessed with shorting and everytime when market takes some breather or reacts to short term global cues for downside they got caught in the feeling of de ja vu. But the thing is that markets are not the same everytime. We've seen last quarter results they are almost the same or rather I see them improving, but the major weightage that market takes while determining prices are sentiments and this single factor is ignored by majority of us. Now if sentiments got some solid backing they become market drivers for the time being.

An extract from ET which I'm quoting here coz it looks more convincing to me:

"India’s chief statistician Pronab Sen said, “Keeping in mind the fact that a majority of the corporates have only deferred their investment plans and have not scrapped them altogether, I would say that if the global scenario improves, the growth rate in India will pick up at a fast pace.”

Going by a survey conducted among manufacturers, industry bodies like FICCI too share the optimism. In the current quarter, prospects look better for the Indian manufacturing sector, with six out of 12 sectors likely to witness positive growth.
These are textiles, metals and products, machinery, cement, FMCG and miscellaneous industries.
You can go through the article here



Above chart of Nifty suggests that this time there can be a possibility of breaking out of this range. Now most of analysts are arguing that we got a very stretched rally and it needs some correction. Really? On charts we have spent 13 days call it a breather or correction in the range of 3300-3500. Now assuming that we have formed a base in this range and scenario is bullish chances are fair for breaking upside given quarterly results of corporates are satisfying and global cues are supporting there is no reason for a emerging country like us going back to our month old bearish range of sub 3100.


A look at recent charts of DJIA gives fair indications that despite of their banks put through stress tests market is not willing to leave its 8000 marks rather we've seen surprisingly solid attempts to breakout upwards. The results from stress tests of the 19 largest U.S. banks are expected to be released on May 7, till than we can see the DJIA giving nice moves on both side, but looking at charts it seems that that banks are going to pass the stress :) Have a look:



Gold an Inverse to Equity



If we have a look at last quarter or the above 60 day gold prices clearly we can see that it is inversely related with equity or say people are parking their fund into equity by pulling out from gold. Atleast for the current scenario it holds true as exchanges are rallying upward nobody want to be left out. Lets pray gold dips further below 880 to keep bullish ticks alive!!!

Crude Bottoming Out


Crude is one of the major indicator for the world economy's health. Why? coz we can easily relate economic activities more better now than earlier. Analogy is simple major production activities are carried out on crude be it production or transportation, so if countries are really producing anything and trading their goods crude is the thing which they definitely need. So keeping an eye on crude if economic activities are beleived to be resuming we can see the demand of crude spike up in the coming months.


So finally Election season is ending in the May. It is interesting to see how much weightage does our stock market gives to it. Definitely untill results are out things are going to be volatile and money can be made in this 3300-3500 range through straddles. Keeping the scenario that we are again going to have an unstable government downside range can be fairly shifted to 3150. Rational being that if world economy is consistent enough, in no way we can go back to sub 3100 levels afterall it is unanimously beleived that whenever be the next bull run BRIC countries will be first to witness growth. So discounting the results of coalition government we still be in bullish channel. As per me a complete set back to bearish level will be in scenario if we fall in line with global indices and slump below 3150 level. That time will be interesting to see - "Abandonment of Hopes". Till the its wise to ride on Slope of Hope.

Hope you loved reading it.