Derivatives Daily Update:22.09.2011

Derivatives Update:22.09.2011

SYMBOL	EXPIRY	OPEN	HIGH	LOW	CLOSE	CHG
NIFTY	29/09/2011	5010.1	5061.95	4898.15	4913.9	-227.4
BANK NIFTY	29/09/2011	9774.9	9774.9	9465.05	9494.4	-418.65

On price front it is evident from the above data that there was absolute blood on the street. Nifty after opening at 5010.10(fluke or small trade) actually opened around 5060 level made a moderate high of 5061.95, was not able to hold those levels, drifted straight down to 4898.15,finally closing weaker at 4913.90, down by 227.40 points. It was perhaps the largest fall in absolute terms since October 2008 and largest percentage fall since August 2009. Bank Nifty too sold off in a similar fashion and gave a close of 9494.40 down by 418.65 points.

SYMBOL	EXPIRY	OPEN INT	CHG IN OI	TR QTY	CONT	TRADES
NIFTY	29/09/2011	24022750	2251950	13890800	277816	73045
NIFTY	25/10/2011	4762500	823700	1992750	39855	20245
NIFTY	24/11/2011	566550	60500	43150	863	786

On volume charts, There is a huge amount of increase in Traded Quantity, No. of Contracts traded and No. of Trades coupled with humongous increase in Open Interest by whooping 2251950 shares. On a down day Increase in volumes suggest that Bears have aggressively shorted the Nifty Futures.What more confirmation one need that we are in a strong downward trending market.

On technical charts, my several days analysis as expressed in numerous earlier posts is being smartly vindicated today. I was constantly saying that Nifty is not able to surpass 5175 level from various days and it is the stiff resistance. Yesterday also it went up to 5173.90 but did not break those levels. Similarly Nifty was not able to break 4900 level and hence made a trading range of 4900-5175. Today it broke 4900 and made a low of 4898.15. Preciseness of technical level and its importance has once again been established.Volatility as expressed by India VIX was once again at its peak. It can be fairly construed that we are in a strong downward trending market as important resistance level(5175) attracts huge selling in the market making difficult for Nifty to surpass those levels. In addition to it intermediate support zones(4901) are being visited very fast and very easily breached. Now obvious question is where we are headed?. Some short term analysis shows that we have almost reached 4893(61.8%) of small trading range of 4901-5175 and held that range on closing basis. Once we break this in coming session probably we may test 4819 (200WMA) and after that recent low of 4718. Whether we form a double bottom at 4718 level needs to be closely watched. Any further analysis beyond 4718, we will do when we cross the bridge. Till that time ride on your short positions. Once again I remind you to be very cautious in trading as volatility in the market is at its peak which might puncture your pockets. Nifty to reverse this down trend has to correct to 5362 level in remaining sessions of this expiry. As said yesterday all the major down wave starting from 6349 and more importantly last one which started from 5760 and ended at 4718 took 34 sessions. It need to correct the major portion (61.8%) of this fall which is 5362 in 21 session(61.8% of 34). If it corrects in this stipulated time we can argue that both price wise & time wise it has passed the test and there is a case of trend reversal.

On Stock Futures front, Active counters by volume were Reliance Ind, State Bank, ICICI bank, Tata Steel and DLF. Top gainers were Indian Oil, Ruchi Soya, Hind Petro, Sobha Developers and Areva all were up by 0.5 to 1%. Top Losers were S kumars -11% Educomp -10% Renuka Sugar -10% JP Associates -10% Godrej Ind -9%.

On Stock Options front, Top five traded Option Series were State bank 2000 CE, Reliance Ind 800 PE, 800 CE 820 CE 840 CE. Change in Open Interest in Nifty Option Series was as under

 

NIFTY	OI CHG	OI CHG
SERIES	CALL	PUTS
5500	-248,200	-1,850
5400	-366,900	-2,950
5300	-528,100	-68,450
5200	-77,050	-1,804,400
5100	1,204,100	-2,566,350
5000	1,387,200	-2,346,350
4900	2,372,100	-760,650
4800	650,000	933,700
4700	-21,450	1,753,900
4600	-11,850	421,600
4500	-25,000	624,850

My prognosis that we are in a major down trend is vindicated today. I stick to my analysis as expressed in earlier posts, that we are in downward trending market and till we see any break out or other technical indication such as bottom formation around 4718 levels, one should short the Nifty. Volatility is at its peak so large swings are expected in the market. Don't loose your patience and consider all those pull backs as mere noise and ignore them. Technical Analysis is far ahead and any change in trend reversal will be visible on charts. So keep your cool and trade short till you see any other indicator on chart which suggests reversal.

Happy Trading

Atul Doshi