Recent Nifty rally has been spectacular on the backdrop of FII buying, but surprisingly internals of market are quite week than ever. Clearly FII data in Nifty and Stock Futures are indicating strong inflow suggesting that inflows are in selected large cap stocks(specially Steel, Auto and Banks due to their PE expansions in Q3) but overall market breadth has been quite week.
AD has breached -8k, so broader markets are still underperforming with a wide margin ever. As the trend is up so either broader market catches up with Nifty in coming days in that case we must move above the red resistance line of -8k. (More about Advance/Decline line in the comments section)
In short term retest of 5280 is quite inevitable as per the current profile of Nifty. OI readings indicate that some shorts (as per my readings goes) have built up in options.
Clearly unwinding in 5300 call is quite pathetic and built up in 5300 and 5400 puts is quite heavy which is indicating that we may retest the Value Area Low of Nifty profile of 26 March. FII buying have been very marginal netting 220 cr in comparison to 238 and 538 crores in previous two sessions. Interestingly FIIs are net sellers of options in the last 5 sessions in Nifty.
In short term trend some scalping can be done in 5350-5280 range till further range develops.
Hope you loved reading it.
3 comments:
Dear Ashu
Good analysis
Many users are not familier about this Advance -Decline Graph study so can you explain briefly?
yes, sure. AD line is usually the figure derived by dividing No. of advances by No of declines. Basic underlying assumption is that when Indices are in uptrend Broader market should move in tandem. We track broader market either by studying different indices or simply by no of overall stocks gaining dividing by no of stocks declining. So when advances are more than declines, we have rising advance/decline ratio. Here we are having a major divergence between ad line and nifty, usually they should move in tandem. So in coming days either broader market (ad line) catches up with nifty and starts to rise or Nifty will take a huge blow.
A bit correction with respect to above comment, AD line is not the ratio but its cumulative net difference between no of advancing issues and declining issues. A cumulative sum of no of advancing stocks with previous days closing price is subtracted with no of declining stocks with previous days closing price. As this is done on cumulative basis you can get large figures like -8k. Historically observation is that at some point of time AD line and Index tend to move in tandem, either AD turns positive directionally with rising index or Index turns negative directionally with falling AD line.
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