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Bulls not willing to let go - Markets likely to rally further
Sensex (18241) / Nifty (5471)
In our previous Weekly report, we had mentioned that
for the past four weeks indices are trading in the range of
17786 / 5328 on the downside and 18673 / 5605 levels on
the upside. Any decisive break on either side would dictate the
direction of the trend. Further, we had mentioned that prices
are trading near the lower range of the band and any close
below the prior swing low of 17786 / 5328 level would confirm
the "Head and Shoulder" pattern. In such a scenario, indices
may test 17470 - 17296 / 5233 - 5178 levels. The week opened
on a pessimistic note and breached the prior swing low of
17786 / 5328 level. This confirmed the "Head and Shoulder"
pattern, making a low of 17314 / 5196 level, which was close
to the mentioned levels. However, a sharp bounce-back was
witnessed on the last trading session of the week, which negated
the "Head and Shoulder" pattern.
The Sensex ended with net gain of 2.1%, whereas the Nifty
gained 2% vis-à-vis the previous week.
Pattern Formation
On the Weekly chart, we are witnessing a "Hammer"
candlestick pattern near the support level of 17296 / 5177,
which also resembles a "Double bottom" pattern formation in
the making. This suggests continuation of the up move.
On the Daily chart, we are seeing a "Divergence" on the
slow-moving Stochastic and a downward sloping trendline
breakout as shown in the exhibit. This suggests continuation of
the upside momentum.
Future Outlook
With the F&O derivative expiry in the coming week, we are
likely to witness volatile sessions. In view of a "Hammer" on the
weekly and a "Divergence" on the momentum Stochastic
Oscillator, we are of the opinion that indices are likely to witness
an upside momentum. On the upside, immediate resistance is
at 18380 / 5520 levels. If indices manage to close above this
level, then they may test 18673 - 19025 / 5605 - 5720 levels.
On the downside, the upward gap area, which is at 17805 -
17755 / 5343 - 5331 levels, formed on June 24, 2011 may
act as a support for the week.
BANKNIFTY HAS RALLIED DUE TO SHORT COVERING. BE CAUTIOUS IN IT.
Nifty spot closed at 5471 this week, against a close of 5366 last week. The Put-Call Ratio is 1.28 against 1.09 last week and the
annualized Cost of Carry is positive 14.23%. The Open Interest of Nifty Futures increased by 4.19%.
Put-Call Ratio Analysis Implied Volatility Analysis
We have witnessed jump in PCR-OI from 1.09 levels to 1.28
levels. Significant increase was seen on Friday as major upside
move, triggered covering in 5200 to 5600 calls while huge
built up was visible in 5300 to 5500 puts. Infact 5400 put on
Friday added 81,457 contracts. We believe substantial part of
the open interest is buying. Even in July series this put added
21,630 contracts in OI.
There has been lot of volatility in implied volatility itself. IV's
have increased from 18.93% to 19.16%. Call IV's are at 17.08%
and for put they are 21.39%. On Monday it went to high of
22.17% while Thursday it was as low as 17.63%. Counters
where IV has risen substantially are GTL, LITL, GVKPIL, UNITECH
and HINDPETRO. Stocks where it has gone down were RCOM,
DCHL, IDFC, VIDEOIND and YESBANK.
From last weeks 13.70 points premium Nifty futures did slip
into discount of 3.80 points on Thursday but Fridays sessions
move was enough to bring it back into the premium of 12.80
points with four trading sessions remaining. July Nifty future is
trading with the premium of 23.50 points. Stocks with high
cost of carry are LITL, UNITECH, NCC, GVKPIL and JSWSTEEL.
Counters where discount is substantial are BAJAJAUTO,
SESAGOA, WIPRO, TITAN and RUCHISOYA.
Open interest of total market increased from `1,36,663 crores
to `1,46,341 crores. Stock futures open interest has decreased
from `34,841 crores to `33,976 crores. Liquid counters where
major unwinding was observed were YESBANK, TATASTEEL,
HDFC, NAGARFERT and IDFC. Stocks where fresh positions
were formed are GRASIM, KOTAKBANK, VIDEOIND,
TATAMTRDVR and SUNPHARMA. Bounce back in NIFTY did
see formation of long positions but BANKNIFTY has seen only
short covering.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bulls not willing to let go - Markets likely to rally further
Sensex (18241) / Nifty (5471)
In our previous Weekly report, we had mentioned that
for the past four weeks indices are trading in the range of
17786 / 5328 on the downside and 18673 / 5605 levels on
the upside. Any decisive break on either side would dictate the
direction of the trend. Further, we had mentioned that prices
are trading near the lower range of the band and any close
below the prior swing low of 17786 / 5328 level would confirm
the "Head and Shoulder" pattern. In such a scenario, indices
may test 17470 - 17296 / 5233 - 5178 levels. The week opened
on a pessimistic note and breached the prior swing low of
17786 / 5328 level. This confirmed the "Head and Shoulder"
pattern, making a low of 17314 / 5196 level, which was close
to the mentioned levels. However, a sharp bounce-back was
witnessed on the last trading session of the week, which negated
the "Head and Shoulder" pattern.
The Sensex ended with net gain of 2.1%, whereas the Nifty
gained 2% vis-à-vis the previous week.
Pattern Formation
On the Weekly chart, we are witnessing a "Hammer"
candlestick pattern near the support level of 17296 / 5177,
which also resembles a "Double bottom" pattern formation in
the making. This suggests continuation of the up move.
On the Daily chart, we are seeing a "Divergence" on the
slow-moving Stochastic and a downward sloping trendline
breakout as shown in the exhibit. This suggests continuation of
the upside momentum.
Future Outlook
With the F&O derivative expiry in the coming week, we are
likely to witness volatile sessions. In view of a "Hammer" on the
weekly and a "Divergence" on the momentum Stochastic
Oscillator, we are of the opinion that indices are likely to witness
an upside momentum. On the upside, immediate resistance is
at 18380 / 5520 levels. If indices manage to close above this
level, then they may test 18673 - 19025 / 5605 - 5720 levels.
On the downside, the upward gap area, which is at 17805 -
17755 / 5343 - 5331 levels, formed on June 24, 2011 may
act as a support for the week.
BANKNIFTY HAS RALLIED DUE TO SHORT COVERING. BE CAUTIOUS IN IT.
Nifty spot closed at 5471 this week, against a close of 5366 last week. The Put-Call Ratio is 1.28 against 1.09 last week and the
annualized Cost of Carry is positive 14.23%. The Open Interest of Nifty Futures increased by 4.19%.
Put-Call Ratio Analysis Implied Volatility Analysis
We have witnessed jump in PCR-OI from 1.09 levels to 1.28
levels. Significant increase was seen on Friday as major upside
move, triggered covering in 5200 to 5600 calls while huge
built up was visible in 5300 to 5500 puts. Infact 5400 put on
Friday added 81,457 contracts. We believe substantial part of
the open interest is buying. Even in July series this put added
21,630 contracts in OI.
There has been lot of volatility in implied volatility itself. IV's
have increased from 18.93% to 19.16%. Call IV's are at 17.08%
and for put they are 21.39%. On Monday it went to high of
22.17% while Thursday it was as low as 17.63%. Counters
where IV has risen substantially are GTL, LITL, GVKPIL, UNITECH
and HINDPETRO. Stocks where it has gone down were RCOM,
DCHL, IDFC, VIDEOIND and YESBANK.
From last weeks 13.70 points premium Nifty futures did slip
into discount of 3.80 points on Thursday but Fridays sessions
move was enough to bring it back into the premium of 12.80
points with four trading sessions remaining. July Nifty future is
trading with the premium of 23.50 points. Stocks with high
cost of carry are LITL, UNITECH, NCC, GVKPIL and JSWSTEEL.
Counters where discount is substantial are BAJAJAUTO,
SESAGOA, WIPRO, TITAN and RUCHISOYA.
Open interest of total market increased from `1,36,663 crores
to `1,46,341 crores. Stock futures open interest has decreased
from `34,841 crores to `33,976 crores. Liquid counters where
major unwinding was observed were YESBANK, TATASTEEL,
HDFC, NAGARFERT and IDFC. Stocks where fresh positions
were formed are GRASIM, KOTAKBANK, VIDEOIND,
TATAMTRDVR and SUNPHARMA. Bounce back in NIFTY did
see formation of long positions but BANKNIFTY has seen only
short covering.
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