Be brave hearted....Buy OTM April Calls...

NF made a low of 4667 on 8th feb 2010. Since then we have moved up by almost 500 points touching a high of 5145 on 8th March 2010 in exactly 30 days....Now we are witnessing a little bit of sideways movements with corrections in some heavyweights like RIL. But the overall breadth has been really positive and midcaps index is inching higher slowly.

Some other interesting facts which one should take note of....

1. FII buying figure in cash and futures market....

The above photo shows that FIIs been a net buyer of 7146.75 cr in cash in the 6 trading days of March 2010 alone as against 9160.14 cr of selling done in cash in Jan and Feb 2010.

At the same time, DIIs were a net seller of only 3201.51 cr in March as against 13533.98 cr of buying done in Jan and Feb 2010.

The above figures show that there has been an increase in net buy positions in cash segment over the last couple of months at lower levels.

2. Another intersting fact is the Retail Clients position....See the data in the above figure....While FIIs are buying in bulk and DIIs are adjusting their already bought positions, retail clients are slowing selling their losing positions which were taken at the peaks of 5300. In the last 6 days of trading, retailers have sold 2306 crs in cash. This shows the normal retail sentiment in the market which is in a pessimistic mood. Generally, under these circumstances, market do not fall....

Now, take a look at the following chart.

The mathematical indicators like Stochs are in the overbought zone but the last couple of days of sideways movement was followed by decreasing volume in the market. And during these 2 days, FIIs bought 3200 cr in cash market and ended with decent positive buying fugure in futures market (I am unable to provide the exact details of buying in Futures as I do not have a back up copy ready with me now)......Now please note the parallel downchannel drawn on charts. The upper band is at 5000 which is also the 34ema on daily charts. It may so happen that NF will fall to 5000 odd levels to correct the mathematical indicators. But the trend is positive and that is also reflected by the overall bullish signal shown in the bottom (The buy/sell indicator and the bullish/bearish zone are generated by SST). The weekly chart has also been positive and buy signal had been generated yesterday and is still holding today.

Options are also suggesting aggressive puts writing from 4300 to 5000 levels which again gives a strong support at 5000 levels. The current PCR is at 1.15.

All in all, I would suggest to stay hold on to your positions. If one has not bought afresh, then just wait till the 5111-5160 congestion is crossed. But do buy some OTM calls (buy the April ones as they have enough time value left). Be OPTIMISTIC when everyone is afraid.

Happy Investing....

SST gives BUY signal on weekly charts...

My last article on 19th Feb was written with an optimistic note. Out of the five charts which I had explained, 4 of them showed buy signal including my very own SST indicator. And we saw what happened since then. The bears were squeezed out of proportion and we rallied almost 400 points since then in Nifty.

Now there are a few hurdles around 5111 and 5160. Just be cautious around this zone. Once this hurdle is crossed, we might see levels of 5450-5500 in Nifty as well. One more good news for bulls is that SST has just given a weekly BUY signal on charts. Also there is a decent gap between the %D and %K lines on the weekly stochastics, which means that %D needs to do some catch up with %K, before they both stabilize above 80. By the time %D catches up with %K, if NF (Nifty Future) moves to a new high surpassing the previous highs of 5290, then the overall bullish sentiments will grow stronger. If not, then we will do some re-calculations.....

Till then happy trading and investing.......

Test your patience....

For the last 15-20 days, markets had been testing our patience. Every rise builds new hopes for both bulls and bears....Bulls hopes of recovering loses while bears get ready to smash again. But interestingly, no one could take the upper hand, since markets remained very silent in a small range with increasing fear factor. The fear factor ie. VIX rose to 31+ now.

What to do at this point? Should one buy or wait. Again wait for what? A dip or see the rally pass by.....Well, I will present a few graphs to explain it....

1. SST (Saptarshi Swing Trade)

Well, my own mathematical indicator gave a BUY signal on EOD charts 1 trading day back. The buy was generated in Neutral Zone. So reliability factor is 50-50.

2. Weekly Stochastics Indicator

The weekly Stochastics has turned positive from below 20 and has generated a BUY signal on the weekly charts. Generally, this is a strong signal since a broader trend is taken into consideration. Plus the weekly charts held on to 34 ema levels and the daily charts 200 dma level which are pretty strong levels.

3. Possible Reverse Head & Shoulder in EOD

The above chart shows a possible formation of Reverse Head & Shoulder in EOD Charts marked by S-H-S'. Now S' is not yet complete, which means that we cannot yet confirm whether this pattern is a RHS or not. If Mondays market does not fall below 4757 but most preferably below Friday's low ie 4797 (1st month futures level); then we can probably say that the RHS has been complete and any rally above the neckline level of 4920 will generate a clear bullish signal and a strong BUY signal.

4. Mirror Pattern on EOD (My own theory still trying to find way)

The current phase in the charts is probably the reversal phase of it formed in Jan-Mar 2008. The points in consideration is marked in circles between the blue support line and red resistance line.

5. Probable Bearish Wedge Formation in EOD

The only worrying factor in the market is the above chart. The above charts shows a possible bearish wave formation in place with the 5th point moving towards 4550 and then the upmove to 5000. So, if markets fall below 4750, one must exit the market at least once and then wait for the next signal.

Given all the above, I am currently going to stay hold, with fresh buying only above 4920-30 zone, if the market holds there. Please note the VIX might show the continuing trend to move upwards. Current PCR is 0.91 which shows more calls are being traded than puts but 0.91 really do not suggest anything.

The budget is only 4 days to go. So there will be interests in specific industry and specific stocks.

So stay calm and focused. Happy trading !!!

Can we bounce from here?

A difficult question at this point of time given that the global outlook is looking gloomy and the larger trend in the market is definitely southwards....Also the way Dollar index is rising and commodities are crashing is not a healthy sign for the markets. Huge outflow of FII money coupled with a bad FPO response in one of the prized companies of the government of India, NTPC at this point of time definitely turned down the sentiments....

Lets look at the following chart...

Right now, I wont go into much complications. Just observe the above chart and refer to my "Mirror Image" pattern explained in earlier posts. Somehow, I still find it to hold true.

I have encircled 2 points on the charts. The right point is the image point of the left one. Now, as per my analysis, if we hold on to the current levels above 4700, we might possibly move towards 5400-5500 zone from here on.

After that another crash and then the final rally; all of which I would explain in subsequent articles. Currently the market participants has discounted the level of 4640-4650 as support being that of 200 dma. I, personally, feel that market wont oblige everyone by allowing them to buy at their desired level. At least one important level ie, the 34 ema on weekly charts has been achieved for the first time since the rally began in March 2009. Also the bearish wave has been completed at around 4760. Even the daily stochastics is in process of making the 'W' pattern.

So I would suggest all to start buying at least in small quantities around these levels. If one remembers, I had mentioned of increase in volatility in coming months way back in Nov. And now we can see the effect. First the intraday volatility increased and now VIX has moved from 19 to 30. This is just the beginning and VIX might even move to 50-60 range in coming days and weeks.....

Happy trading and Investing.....

Views under current scenario....

Its been a tough past 1 week. Even though I was not expecting the correction at 5250, but then who cares for my expectations !!! Markets went down and down really fast...One by one all technical levels got broken....The only thing was what I expected to happen at 5400+ happened at 5250 only....

But still my "Mirror Image" pattern holds....If this correction sustains the levels of say, 4750-4830 zone, then there is a probability of massive rally ahead.....And that rally can take us past previous highs as well......I am still betting on the same and buying into large caps right now.....

On a contrary note, NF had corrected 75% of the 2003-2007 rally in 2008. And now in 2009, we have retraced exactly 75% of the 2008 falls so far before this current correction.....I really do not know which theory the markets would take now. So what one can do is probably buy into the dips right now and multilply positions only above 5085, above which the rally would get confirmed......

Lets see....