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Pessimism is back - 4700, a hope for the Bulls
Sensex (16162) / Nifty (4868)
We had stated in our previous report that indices are likely to
face a "Horizontal Line" resistance at 17300 / 5177 level.
Also, we mentioned that the "Spinning Top" formation
mentioned in our earlier reports will remain intact until the high
of 17212 / 5169 has not been violated. Last week, markets
opened on a pessimistic note; but during the mid week, markets
showed some signs of breaking above the mentioned resistance
zone. However, concerns of a Greek default and the Fed's
statement that there are significant risks to growth, caused panic
across global indices. This pessimism dragged our benchmark
indices lower to break short- term support of 16374 / 4911
level. The Sensex ended with a massive loss of 4.56%, whereas
the Nifty lost 4.26% vis-à-vis the previous week.
Pattern Formation
�� The "Spinning Top" formation mentioned in our earlier
reports is still intact as the high of 17212 / 5169 has not been
violated.
�� The Daily chart depicts a "Symmetrical Triangle" pattern
breakdown on closing basis with higher volumes.
Future Outlook
Looking at the Weekly chart, it can be concluded that indices
have failed to cross the major resistance zone due to a
combination of the "Horizontal Line" resistance and the "Spinning
Top" formation. Consequently, indices drifted lower due to
immense selling pressure near their resistance zone which
ultimately resulted in the breakdown of a "Symmetrical Triangle"
pattern. This pattern indicates that indices are likely to head
towards the recent bottom of 15765 / 4720 level. Selling
pressure is likely to intensify on violation of this important point;
and if indices manage to sustain below 15765 / 4720,
then they are likely to drift towards the next support levels of
15650 - 15330 / 4675 - 4540. While the view is clearly negative
considering the Weekly charts, the Daily candle suggests
the probability of a temporary pullback rally towards
16490 - 16620 / 4960 - 5000 only if indices manage to cross
and sustain above Friday's high of 16368 / 4930 level.
Traders are suggested to trade with strict stop losses as volatility
is expected to increase in the coming week due to expiry of
derivative contracts.
NOT MUCH OF CALL WRITING VISIBLE; GO LONG IN NIFTY AROUND 4800
Nifty spot closed at 4868 this week, against a close of 5084 last week. The Put-Call Ratio decreased from 1.51 to 1.27 levels and the
annualized Cost of Carry is positive 3.69%. The Open Interest of Nifty Futures increased by 8.80%.
Put-Call Ratio Analysis Implied Volatility Analysis
There has been significant decline in PCR-OI from 1.51 levels
to 1.27 levels. This is mainly due to unwinding of puts in strikes
ranging from 5100 to 4700. We have also witnessed substantial
built-up in calls ranging from 4900 to 5200. Unwinding in
puts is combination of those who bought puts in anticipation of
fall and also writers squaring off due to significant fall. But call
built-up is mainly selling though the quantum of this built-up is
not significant.
Implied volatility (IV) has increased from 26.97% to 31.07%. It
made high of 32.75% in Thursdays fall. Interestingly the rise in
call IV's from 23.55% to 28.81% is more than the rise of IV's in
puts from 30.11% to 33.06%. Implied volatility has substantially
increased in counters like GTL, PANTALOONR, GVKPIL,
GMRINFRA and UCOBANK. Counters where it has declined
are ONGC, NHPC, PNB, RECLTD and ALOKTEXT.
Nifty futures of current month have closed with premium of
2.95 points against last week's discount of 3.35 points. Next
month futures are trading at a healthy premium of 18.20 points.
Positive CoC is maintained despite fall in market is due to cash
base selling. Stocks where CoC is positive are RUCHISOYA,
GTL, ABIRLANUVO, BGRENERGY and SRTRANSFIN. Stocks with
negative CoC are ABAN, ASHOKLEY, TATACOMM, PNB and
TATASTEEL.
Total open interest of market has decreased from `1,39,079/-
crores to `1,38,479/- crores. Stock futures open interest has
increased from `30,214/- crores to `30,711/- crores. In
frontline stocks, significant open interest got added in LT,
HDFCBANK, SESAGOA, ICICIBANK and BHARTIARTL. Counters
which saw decline in open interest were ONGC, NTPC,
RPOWER, CAIRN and MARUTI.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pessimism is back - 4700, a hope for the Bulls
Sensex (16162) / Nifty (4868)
We had stated in our previous report that indices are likely to
face a "Horizontal Line" resistance at 17300 / 5177 level.
Also, we mentioned that the "Spinning Top" formation
mentioned in our earlier reports will remain intact until the high
of 17212 / 5169 has not been violated. Last week, markets
opened on a pessimistic note; but during the mid week, markets
showed some signs of breaking above the mentioned resistance
zone. However, concerns of a Greek default and the Fed's
statement that there are significant risks to growth, caused panic
across global indices. This pessimism dragged our benchmark
indices lower to break short- term support of 16374 / 4911
level. The Sensex ended with a massive loss of 4.56%, whereas
the Nifty lost 4.26% vis-à-vis the previous week.
Pattern Formation
�� The "Spinning Top" formation mentioned in our earlier
reports is still intact as the high of 17212 / 5169 has not been
violated.
�� The Daily chart depicts a "Symmetrical Triangle" pattern
breakdown on closing basis with higher volumes.
Future Outlook
Looking at the Weekly chart, it can be concluded that indices
have failed to cross the major resistance zone due to a
combination of the "Horizontal Line" resistance and the "Spinning
Top" formation. Consequently, indices drifted lower due to
immense selling pressure near their resistance zone which
ultimately resulted in the breakdown of a "Symmetrical Triangle"
pattern. This pattern indicates that indices are likely to head
towards the recent bottom of 15765 / 4720 level. Selling
pressure is likely to intensify on violation of this important point;
and if indices manage to sustain below 15765 / 4720,
then they are likely to drift towards the next support levels of
15650 - 15330 / 4675 - 4540. While the view is clearly negative
considering the Weekly charts, the Daily candle suggests
the probability of a temporary pullback rally towards
16490 - 16620 / 4960 - 5000 only if indices manage to cross
and sustain above Friday's high of 16368 / 4930 level.
Traders are suggested to trade with strict stop losses as volatility
is expected to increase in the coming week due to expiry of
derivative contracts.
NOT MUCH OF CALL WRITING VISIBLE; GO LONG IN NIFTY AROUND 4800
Nifty spot closed at 4868 this week, against a close of 5084 last week. The Put-Call Ratio decreased from 1.51 to 1.27 levels and the
annualized Cost of Carry is positive 3.69%. The Open Interest of Nifty Futures increased by 8.80%.
Put-Call Ratio Analysis Implied Volatility Analysis
There has been significant decline in PCR-OI from 1.51 levels
to 1.27 levels. This is mainly due to unwinding of puts in strikes
ranging from 5100 to 4700. We have also witnessed substantial
built-up in calls ranging from 4900 to 5200. Unwinding in
puts is combination of those who bought puts in anticipation of
fall and also writers squaring off due to significant fall. But call
built-up is mainly selling though the quantum of this built-up is
not significant.
Implied volatility (IV) has increased from 26.97% to 31.07%. It
made high of 32.75% in Thursdays fall. Interestingly the rise in
call IV's from 23.55% to 28.81% is more than the rise of IV's in
puts from 30.11% to 33.06%. Implied volatility has substantially
increased in counters like GTL, PANTALOONR, GVKPIL,
GMRINFRA and UCOBANK. Counters where it has declined
are ONGC, NHPC, PNB, RECLTD and ALOKTEXT.
Nifty futures of current month have closed with premium of
2.95 points against last week's discount of 3.35 points. Next
month futures are trading at a healthy premium of 18.20 points.
Positive CoC is maintained despite fall in market is due to cash
base selling. Stocks where CoC is positive are RUCHISOYA,
GTL, ABIRLANUVO, BGRENERGY and SRTRANSFIN. Stocks with
negative CoC are ABAN, ASHOKLEY, TATACOMM, PNB and
TATASTEEL.
Total open interest of market has decreased from `1,39,079/-
crores to `1,38,479/- crores. Stock futures open interest has
increased from `30,214/- crores to `30,711/- crores. In
frontline stocks, significant open interest got added in LT,
HDFCBANK, SESAGOA, ICICIBANK and BHARTIARTL. Counters
which saw decline in open interest were ONGC, NTPC,
RPOWER, CAIRN and MARUTI.
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