Weekly Review Report - October 10, 2011 :Angel Broking

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The bulls are geared up...
Sensex (16233) / Nifty (4888)
In our last report, we had mentioned a broad trading range of
15756 to 17250 / 4720 to 5200. Also, on the daily chart, we
were observing a strong resistance of "20 EMA" and 61.8%
Fibonacci retracement level at 16670 / 5010. Last week,
markets opened with a significant downside gap and breached
a mentioned support level of 16316 / 4906. As expected, a
selling pressure intensified below this level and indices drifted
towards the crucial support level of 15765 /4720. However,
we witnessed a strong bounce on Friday's session on account
of optimism across global indices. The Sensex ended with a
nominal loss of 1.34%, whereas the Nifty lost 1.12%, vis-à-vis
the previous week.
Pattern Formation
􀂄 The Weekly chart depicts a Japanese candlestick pattern
which resembles a "Dragonfly Doji".
􀂄 The Daily "RSI" momentum oscillator has given a positive
crossover.
􀂄 The "20 EMA" on Daily chart is now placed at
16430 / 4940 level.
􀂄 On the Daily chart, we are observing a "Downward sloping
trend line" around 16430 / 4940 level.
Future Outlook
Last week, Indices moved in a trading range and made a couple
of attempts to break crucial support level of 15765 / 4720.
However, indices failed to break this level on closing basis and
registered a weekly close significantly higher from their lows.
Thus, we are now observing a Japanese candlestick pattern
which resembles a "Dragonfly Doji" at crucial support level.
The said pattern will be confirmed ONLY above last week's
high of 16348 / 4923. In addition, the "RSI" momentum
oscillator has given a positive crossover in daily chart. However,
a combination of the "20 EMA" and "Downward sloping trend
line" indicates immediate resistance at 16430 / 4940 level.
Therefore, looking at the above technical evidences, if indices
manage to sustain above 16430 / 4940 level then they
are likely to rally towards the downside gap area of
16800 - 17000 / 5050 - 5010 created on 22nd September
2011. On the downside, 16045 - 15745 / 4828 - 4720 levels
would act as support levels in coming trading session.



5200 call's open interest speaks volumes.
Nifty spot closed at 4888.05 this week, against a close of 4943.25 last week. The Put-Call Ratio decreased from 1.40 to 1.38 levels
and the annualized Cost of Carry is positive 4.38%. The Open Interest of Nifty Futures increased by 7.52%.
Put-Call Ratio Analysis Implied Volatility Analysis
Last week we observed that 4300 put has adding significant
open interest along with at-the-money puts and implied volatility
was increasing, indicating buying of puts was happening. Now
we are witnessing unwinding in this put with fall in IV. Also in
calls despite there being strong resistance of 5100-5150 we
are seeing rising activity in 5200 strike. We take this as positive
signal and refrain to suggest forming any short positions for
time being.
Implied Volatility (IV) has being constant to around from 29.57%
to 29.97%. It made a high of around 36% in last week for
at-the-money options. HV for BANKNIFTY is trading at 42.21%.
Liquid counters having very high Historical Volatility are KSOILS,
MOSERBAER, JUBLFOOD, IVRCLINFRA and RELCAPITAL. Stocks
where HV are on lower side are BRFL, GLAXO, BOSCHLTD,
ACC and NHPC.
Nifty futures closed at a premium of 10.55 points against the
discount of 8.95 points to its spot. Next month future is trading
with premium of 21.85 points. Counters where CoC is high
are ORIENTBANK, ONMOBILE, DHANBANK, TRIVENI and
SREINFRA. Stocks with negative CoC are TTKPRESTIG, IDEA,
VIPIND, ABAN and MOSERBAER.
Total open interest of market has increased from `95,373.48
crores to `1,09,346.70/- crores. Stock futures open interest
has increased from `25,065/- crores to `26,083/- crores.
Frontline counters which added considerable open interest are
HDFC, POWERGRID, HCLTECH, TITAN and GAIL . Open interest
was shed in big names like WIPRO, RELCAPITAL, MARUTI,
FEDERALBNK and TECHM

We reiterate that the selling pressure may intensify only if
indices manage to break and close below 15745 / 4720
level. In such scenario, they are likely to drift towards
15650 - 15330 / 4675 - 4540 levels.