Will the breakout sustain?: Weekly Market Technical Analysis : July 19 2021

 

• Weekly bullish candle on Nifty & Bank Nifty.

• Nifty has 5 higher high candle formation entire last week.

• Nifty & Bank Nifty broke out from previous resistance zone. Bank nifty broke out of a inverse head & shoulder neckline.

• Latest nifty daily candle hammer-on uptrend at resistance

• Bank nifty has a open=high candle pattern on daily bearish

• Nifty & Bank nifty both shows beginning of Bollinger band volatility expansion from earlier narrow range.

• Nifty nearer to a rounding number psychological level of 16000 and resistances can be expected.

• Earlie resistances now could act as support and levels of  15750 - 15900 are support zone and then 15500-15600 levels below acting good previous swing low supports and 15000 level are seen if that is broken

• Bank nifty has 3 previous resistances to clear 36500/37700 and has 34300-34650 levels as next supports below.

• Nifty RSI momentum climbed to bullish zones last week and retains it. Also the medium to long term momentum is intact in bullish area,

• Nifty weekly has a bearish momentum divergence that could pull it back to 15450 levels if it works out.

• Bank Nifty momentum daily climbed into bullishness but could not sustain it and slipped slightly back into sideways zone on  daily  .Weekly and monthly momentum  maintains to be in bullish zones.

• Nifty & Bank Nifty ADX trend indicator are in  bullish areas on daily, weekly and monthly timeframes

• Open interest data for Nifty showing a long unwinding and Bank nifty showing short buildup based on the futures contracts which is bearish.

• Highest options call writing for 01 july expiry is seen at 16200 with 16000 also seen having more writing while 15900  levels shows highest  support point for nifty with 15800 support is close by.

• Bank-nifty options open interest data shows highest call writing at 36000 levels while highest put writing seen at 35500  levels that could act as support for the expiry

• Put call ratio for nifty accordingly is seen 1.03 which is bullish while 0.71  for bank-nifty is not bullish.

• India VIX  fall more than 20%  to historic lowest levels of 10.5  and settled at 11.7 last week.

• The Nifty IV 11.6 is above HIV 6.9  and  IVP remaining 2  levels which is at the new low volatility regime. 

• IT sector corrected more than 2% and later gave up some of it  but bearish divergence seen weekly can not be negated. 

• FMCG is consolidating sideways last week forming a weekly doji and at  previous resistance zone and therefore need wait for the momentum catch up.

• Metal has the bullish positive reverse divergence seem to be working and market ended green last week. Momentum on daily is now in bullish zones and could expect a breakout.

• Auto sector formed a bearish inside bar and consolidating on daily and weekly and may take time to turn bullish again.

• Pharma moved up 2.5% last week and broke out into an all time high levels. but weekly has a bearish momentum divergence that could pull it back a bit on weekly basis. sector is bullish on all timeframes.

• Last week FII sold> 2500 cr in cash.

• DII bought 3200 cr last that kept the market up last week

• The net longs on derivatives of FII/DII moved up last week.

• India VIX has fallen to lowest 11.4 levels and any spike could benefit Vega positive strategies on options like double calendar.

• Therefore Nifty calendar spreads hedged is always bad idea for coming week due to v shape moves often.

• Markets broke out from major resistance zone but lost momentum end of week and Bollinger band started expanding while bank nifty need catch up with resistances, with the improved momentum and trend overall bias is bullish with caution since weekly bearish divergence and FII selling concern.

• India vix are at difficult low volatile levels for option traders both buyers and sellers and non directional trades are only to be thought of. Will there be immediate mean reversion spike or will it remain at this for long is uncertain.

• Positional long trades would hold good until a clear signal of  breaking  of major support zones indicated earlier, there is no point in exiting or shorting as of now.

Narrow Range Market :Weekly Market Analysis : July 5 2021

 

• False breakout weekly bearish candle on both Nifty & Bank Nifty.

• Nifty & Bank nifty shows a trending down move entire week on 1 hr charts and given up 20 day moving average support.

• Nifty weekly bearish candle open=high pattern.June month shows a spinning top small body.

• Nifty & Bank nifty seen taken support at previous swing lows.

• Latest nifty daily candle hammer-could be slightly bullish, 

• Bank nifty has a spinning top  candle pattern on daily and June month also has a bearish candle.

• Nifty & Bank nifty both has Bollinger band squeeze into narrow range and showing clear volatility contraction /consolidation.

• Nifty at major resistance confluence of previous resistances tested 5 times and near an all  time high 15915 and rounding number psychological level of 16000 close by.

• It immediate support at  15600 and then 15500 levels below acting good previous swing low supports and 15000 level are seen if that is broken.

• Bank nifty has 3 previous resistances to clear 37700/36500/35800/35300 and currently take  support near 34600-34800 levels and has 34000 as next support below

• Nifty RSI momentum has fallen off from bullish into into sideways zone and seen falling on  daily.However medium to long term momentum is intact in bullish area,

• Nifty daily both  bullish positive reverse divergences failed.

• Bank Nifty momentum daily continues to be in sideways zone and bent up  .Weekly momentum also seems to be slipping into sideways while monthly momentum  maintains to be in bullish zones.

• The bearish monthly momentum divergence seems to have worked out and pulled down bank nifty in June.

• Nifty ADX trend indicator continue in  bearish areas on daily timeframe with flat strength while weekly and monthly trend remain bullish with flat strength.

• Bank nifty has ADX trend indicator last week crossed over back to bearish  zones  on daily timeframe. The trend continue to be in bullish side on medium & long term timeframes with flat strength.

• Open interest data for Nifty and Bank nifty showing a short covering based on the futures contracts which is bullish.

• Highest options call writing for 08 July expiry is seen at 16000 with 15800 also seen having more writing while 15700  levels shows highest  support point for nifty with 15600/15500 support is close by.

• Bank-nifty options open interest data shows highest call writing at 35000 levels while highest put writing seen at 34500  levels that could act as support for the expiry

• Put call ratio for nifty accordingly is seen 0.8  which is not bullish while 0.79  for bank-nifty also is not bullish enough.

• India VIX  fall to historic lowest levels of 12.1 which is more than 10% fall further.

• The IV is above HIV 11.5 and  IVP remaining 0.4  levels which is at the new low volatility regime. 

• IT sector is bullish with strength in momentum and trend on short/medium/long term charts. All time high ending with doji

• FMCG is bullish with momentum bullish divergence seen and could regain momentum to move further up.

• Metal is sideways on short term and need wait till momentum pickup.

• Auto sector weekly momentum range shifted and could move up in short term and need wait or some more momentum catchup.

• Pharma has now turned bullish last will with breakout as discussed previous week

• Last week FII sold>  5000 cr in cash did almost no buying net June month.

• Thanks to DII who bought all of last 12 day continuously in cash and June month had buying > 7000 cr that helps market form not crashing.

• The net longs on derivatives of FII/DII had dipped.

• US markets are bullish 

• Dollar Index rising up 92 level.

•  USD-INR currency pair broke out of at resistance zone and hit 75 levels but daily gravestone Doji show bearish pressure as well.

• Gold showing a hammer weekly candle and last week seen to be moving up from the support zone and probably good time to invest in for medium term.

• India VIX has fallen to lowest 12 levels and it could mean revert and therefore vega positive option strategies like calendar spread would be applied to benefit on it. 

• Therefore Nifty calendar spreads hedged is not bad idea for coming week.

• Markets at a narrow range bound phase and there is uncertainty as to how long it could consolidate here and also which side it would break down.Therefore trade with caution.

• India vix are at difficult low volatile levels for option traders both buyers and sellers and non directional trades are only to be thought.

• Momentum  is sideways and Trend is bearish for short term on both indices and bias is negative.

• Positional long trades would hold good until a clear signal of  breaking  of major support zones indicated earlier, there is no point in exiting or shorting as of now.

GOLD CUP AND HANDLE POSSIBLE BREAKOUT : INVESTMENT WATCHLIST

 

1. GOLD seems to be forming a cup and hand pattern on monthly charts. 
2. Currently resisting at the trendline channel on weekly and a short to medium term breakout can be expected.
3. Keep the charts on your watch out and a right entry could easily be found and on confirmation entry can be made for investment.
4. Wide range of investment and trading options exit for gold like Gold ETF(exchange traded funds),mutual funds, commodity futures, gold bonds like Sovereign Gold funds, gold coins etc.
5. GoldBees for example is liquid enough for short term trading also while long terms benefits from highly safe options like RBI issues bonds are highly. suitable for the long term investment.
6. Gold is a hedge to inflation and therefore is essential part of every investors portfolio in the long term and ideally allocation recommended by experts are half % of once age.

Heading further high without Banks? : Weekly Market Analysis : June 14 2021

• Nifty made yet another (6th consecutive weeks) all time high at 15835.55 and closed with a weekly spinning top candle while the last nifty candle is a Doji indicating indecisiveness.

• Daily candle had been walking on the or close by the bands of Bollinger band with enough volatility expansion.

• Nifty did a small correction to dip to 15566 levels last week before climbing back to gain the momentum in the rally.

• There is a support seen for nifty at 15600 levels from where is bounced up and where it also had a  previous resistance too.

• Fibonacci 23 retracement level of 15430-15330 levels is in confluences with 20 day moving average and also the previous resistance that has turned to be support now for nifty.

• 16000 would be psychological round number and Fibonacci extension resistance area for nifty.

• Nifty momentum on daily/weekly/monthly is intact within bullish zones.

• Nifty Momentum on daily had a confirmed 6 bar bullish positive reverse divergence and nearly met the targets too during last 2 days of the week. However currently momentum  has a bearish divergence on daily chart where price is rising and momentum slowing down that could potentially take it back to previous dip below 15600 if it works out.

• ADX trend indicator strength is rising again and is sufficiently bullish on all timeframes be it short/medium/long term.

• Bank nifty on the contrary o nifty , had 650 point from correction before it recovered 600 of it to still closing below previous close with a bearish near hammer weekly candle patterns. Except on expiry day bank-nifty had bearish candle on all other days.

• The momentum of bank-nifty daily dipped into sideways zone. However on weekly the momentum is showing a range shift from the sideways to bearish zone if it manage to bounce up in the coming week while monthly momentum  is  still taking support at 60 in the bullish zone.

• The ADX trend indicator has crossed over to bearish side on bank-nifty daily timeframe although the strength of it is not rising. The trend continue to be in bullish side on medium and long term timeframes with flat strength.

• Bank-nifty has taken a CIP(change in polarity) bounce from previous resistance area of 34300/34600 levels which is in confluence with Fibonacci 50 and currently taken support at the 20 day moving average at 34800 levels above FIB 38 .The 33500 levels near FIB 61 and previous swing low could be support if above levels are broken next week.

• On the upside Bank-nifty has first resistance at 35800 levels from where it dipped last time and above that we have resistance at previous swing high of 36500 and then all time levels of 37700 levels would be resistance points it has to break if it rallies.

• Open interest data for nifty showing a long buildup while bank-nifty is showing a short buildup based on the futures contracts.

• Highest options call writing for 17 jun expiry is seen at 16000 and then 15800 levels both of which could be major resistance point for nifty rally. call unwinding seen for 15700 levels.

• Bank-nifty options open interest data shows highest call and put writing at 35000 levels which could critical to watch on next week. Large call writing seen at 355000 levels too and supports can be seen below at 34500/34000 levels.

• Put call ratio for nifty accordingly is seen 1.35 which is bullish while 0.73 for bank-nifty is not bullish.

• India VIX fall 7% last week to reach yet another low level of 14.48.Implied volatility is above HIV with IVP remaining 0.4 levels which is the new volatility regime.

• Currently form the futures and options data and charts and indicator it is evident that Bank-nifty continues to be bearish and not supporting the nifty up move.

• Very low volatility regime is not much in favor of option seller while any mean reversion from these levels rising up could benefit option buyers.

• The IT/Metal/Energy/Auto/Infra/FMCG/Pharma are all roaring in bullish momentum.

• Metal sector shows a weekly as well as daily momentum bearish divergence and so caution when u try to be long when it is rally and a buy on dip could be done later on. Pharma has a bearish divergence on momentum currently while Auto has momentum positive reverse divergence on daily and a momentum range shift on weekly which could make bullish moves coming days or weeks.

• .In the cash market FII were buying 3 days except large selloff on Wednesday while DII were buying except on Monday and Friday and June has net near 3000 crore buying so far is positive. They are net long on derivative too.

• US markets are positive now .Dow Jones also taking a momentum support and heading up while S&P and Nasdaq in bullish zone and heading north.

• Dollar Index gained strength and taking momentum support above 90 levels and heading up. USD-INR currency pair taken support at 73 levels with 4 green candles last week and going long on it may not be bad idea.

• Gold is consolidating after the channel breakout on weekly and is at momentum support levels and is likely to move up next week if could hold above the 20 day moving average .

• To wrap up , Selling put options at nifty 16000 levels with hedged spread positions could benefit as swing trade for next week due to fact that nifty may find it not easy to cross it with little support from bank-nifty. However if banking stock especially HDFC kind of index stocks join the party then 16000 would be very close 200 point target that could be covered on any single day gap up itself and so caution and defined risk options strategies need to be implemented. Power sector stocks like ntpc/powergrid/pfc/coalindia are all having a result week and earnings trade on option could be planned .option sellers could benefit from the volatility crush after the event.

Bulls continues to be here : Weekend Market Analysis : June 7 2021

                                                             

• Nifty hit new all time high last Monday and then retraced couple of days but to again move even higher to make another all time high at 15734.Banknifty price action was similar but has resistance ahead before breaking all time high of February.

• The last candle on nifty is small body red candle similar to a spinning top on the top of a rally which normally is bearish but may be ruled out after the current long consolidation and breakout rally it has just begun.

• Immediate support levels are below at earlier resistance zones from where is broke out ie 15430-15330 levels and below that near 150000 levels and then50/100  moving average levels near  14800.

• A 15900 could be targeted as per FIB projections for nifty.

• Bank nifty has supports at 34300 levels and resistance are at 36500 and 37700 levels.

• Bank nifty closed with a bearish red candle after a momentum divergence on daily timeframe worked out on Friday and met the target levels.

• Nifty momentum is intact on bullish zones on all timeframes of short/medium/long term.

• Bank nifty currently has a 5 bar bullish positive reverse divergence that could take it to 35800 levels.

• Also make note that on long term monthly timeframe it has a bearish divergence that could cause correction to 30K levels if it works out along with the 100 day moving average continuing above 50 dma on daily timeframe.

• Trend indicators are strong bullish on all timeframes of nifty and trend continues to be rising and bullish for bank nifty as well.

• Nifty and Bank nifty futures data shows short build up on Friday. Nifty options open interest data shows highest resistance at 15700 followed by 16000 and 15800 levels and supports are at 15500 for the 10th June expiry.

• Bank nifty has highest call writing at 35500 followed by 36000 and 36500 levels while supports are at 34500.

• The put call ratio of nifty has dipped to 0.99 which is not very bullish while bank nifty has PCR of 0.65 indicating bearishness for the expiry.

• FII were buying last most  days of last week with good volumes is good news while DII did large selling on last day of week.

• India VIX fall 6.8% last and settled at 15.94 on Friday which is in favor of further up move.

• Implied volatility is above Historical volatility but IV percentile is lowest in recent times of 0.4 in favor of option buyers.

• Sectors of IT,Energy,Metals,Auto,Infra,Services,Midcaps are all in bullish zones.

• US market are rising after a correction and heading to bullish zones.US Dollar index has maintains 90 levels while USDINR pair also taking support at 73 levels. Gold continue to be bullish.

• To wrap up we could see that markets are in a bull run with  5 weeks of higher high and could continue doing same although it may not be doing it slowly that would mean interim corrections after making every new highs.

• So trend is clear and buy on dips is the way to go and with the volatility at lower levels directional trades using option spreads could work out well. Intraday can be played based on price action support resistance levels on options.

Market Analysis NIFTY FEB 10 2021 : Consolidation after a Rally?

•  Nifty hit the FIB extension target of 15250 ,made all time high and the reversed with heavy sell off in last one hour closing with a red small body candle closing below previous day low The pitch for top channel was hit as well.
• Gap support exist at 15015-40 levels 
• The fib retracement of last two swings a 23% support at 14850 and 14750 levels
• The upside targets could be another hit on last  pitchfork top 15300 and if that is broken coming days could rally towards 15770.
• Nifty futures data shows it is "long unwinding" where both OI and price decrease is seen which could be a slight bearish indication.
• Open interest for options data for upcoming weekly expiry has resistances seen highest resistance at 15500 and support at 15000 and PCR is bullish level of 1.11.monthly expiry large put writing seen at 14000K which may be worst fall expected while upside call writing seen at 16000 levels too..(can u believe it)
• VIX moved up more than 4% in last 3 days indicating greed fear that  could lead to volatile moves like today any time during day. IVP is 50% times fallen below during last one year current IV and is still below Historic iv  levels which may be still in favor of option buying
• FII buying continue and selling was more by DII's today.

 

How to identify on previous day that next day is a gap up/down?

Well !! this is a million dollar question but most traders do often seek the answer for this and the following notes are my thoughts on same

• A gap up/down typically means heavy bullishness/bearishness during opening of market that could be a continuation of the previous days trend or it could also be some overnight events that market gets excited upon. The second reason is outside our control and need be handled based on your judgment of situation at hand and your view on market knowing or without knowing about it.

• Gap-ups/down benefits you differently depending on whether you are intraday player or carrying forward a short swing trade or a positional trader.

• Make note that a gap-up/down does not mean just doing a trading for the day but they are supports/resistance for future days too.

• For intraday traders gap-ups/Down most times give very less opportunity as trending most times end after a gap-up/down and it remains sideways giving less opportunity for directional trades.

• Gap-ups could be "break away" getting outside of a consolidation phase or a "continuation" gap u could hold on or it could be "exhaustion gap" that could trap you or tells you to short a gap-up.

• As technical analyst we could try get clues on possible gap-up/down using a combination of the price, volumes, momentum, trend, volatility and then optimize our trading rules around it.

• Does the previous day lower timeframe candlestick patterns show bullishness/bearishness ?
• Does the previous day trendlines show any immediate resistances/support breaches?
• Do they show any breakout /consolidation patterns like flag/triangle/rectangle or a change in polarity?
• Is the momentum taking support or reverted or resisting or breaching the key levels?
• Do we have any divergences on momentum? How strong are they?
• Do u see any crossover of ADX? do u have it rising up/down? Do we have a ADX indicator bend seen?
• How good is the volumes traded previous day especially during second half? is it above 20 simple moving average?
• Do we have a volatility squeeze for a potential breakout?
• where are the highest open interest writing and supports? How close/far are last traded price from those?
• What was futures open interest buildup indicting? is it long-unwinding or short covering or long/short? Markets may have reversed end of previous day and there could be panic short covering/longunwinding moves?
• Monitor VIX and see if it has been rising or falling previous days or hours? when the VIX is rising most times it brings the market down.
• FII buying and selling spree can give clues as to if they are likely to continue do same or not?
• SGX opening green could bring positive or negative moves here too
• US/Europe markets performance also indices could being positive or negative moves here too
• Dollar/Euro /Crude Index movements overnight has impact on our market next day?

• As briefed earlier identifying gaps before hand is not just enough, knowing how to play the gaps is what matters. We could be doing both directional or non directional trades even with gap-up/downs as well. Having a trading plan as per your previous day view is what is important. Markets are random and our analysis may not work at times and what really matters is what is your plan B? and not just your plan A.