Update 4: Book Profits near 5600+ levels (03-03-11)
Follow this trade in context with the Update 3 posted yesterday below.
It has been a good 'long' journey since the Budget day Lows. One may book profits and enjoy the Weekend if the levels of 5600+ ( especially near 5620-30 and above) are traded tomorrow .
Next Week trading may be of consolidation/distribution between 5400+ and 5600+ levels. We will discuss the probabilities in detail on the Weekend.
Update 3 : Let 5475 be the New SAR (02-03-11)
As the Initial Balance range mentioned in the Weekly Strategy, has been resolved on up side ,The next couple of trading sessions can be traded as follows-
1. Change the SAR from 5415 to 5475 for the Week ,which is the High Volume zone in 5d Vol. Profile and approx VWAP of last session's upmove.
2. Tomorrow trading above 5475 will target 5560 (Fibo. No.) initially and below it will get support at 5440 level (Vol Profile and 20dema). Hourly charts are Overbought and some profit booking may come.The reaction at the supports will be the key to watch.
3. Above 5560, the target will be the touch of 200dma at 5630 level . Below 5440 will turn bearish to touch 5415 (apprx.5dema and previous SAR) and below.( the fall can be quite fast to reach 5300 level )
4. FII's are big buyers in the Derivatives section of the Index since the start of March series.
5. Puts are getting adding up at 5300 and 5400 (ya again!!) strike with low Call writing at 5600 ,5700 strike , indicating room for upmove.
6. Please check the detailed analysis of the Week, Strategy and Targets in the Post below .
Also check the Short Term Probabilities
Keep in mind during any upmove that the Larger TF is in Down trend, It should be respected by profit booking at important levels of Resistance.(One may keep SAR of 5415 if moves above it and manage it intraday )"
These were the two trading mantras to be followed as posted in the strategy after detailed analysis yesterday.The Hourly chart gave a good entry and when traded above 5415 shooted to the Resistance level of 5460-80 , again came back below the SAR 5415 triggering short trade.So a nice both sides trade making it a perfect daytrading session. Check the Hourly chart below.
We will discuss the Trading Strategy for the crucial Budget Week based on the Technical data . A followup of the Down trend or a Short term reversal is round the corner in this Week which will be triggered by the Budget.
Indicators as Stochs, Macd,Rsi, present a contrarian & inconclusive picture as some of them are in the Oversold region in the Weekly Chart and some coming down from the Overbought region in the Daily chart.
2. Volume Profile :
The 5day and 10day Volume Profiles are near identical in structure having the Highest Volume Node at approx. 5480 levels . This was the approx. average VWAP levels for the Expiry/ Rollover Week. It shows some positional selling during rollovers at higher levels.Taking out this level of 5480 will lead to good short covering and may be a quick upmove to 5600+ levels.
The important Trendlines are shown in the Charts below .One should follow the Hourly charts in realtime to check the break of the trendlines for a signal of the direction to come.
The circled area in the above chart is expanded below-
There is also a Support area coming from a Long term Trendline.
4. Moving Averages:
The Moving averages are Bearishly aligned . Trading above 5dema at 5365 level will be Bullish with Resistance coming at 20dma at 5410 level (apprx. 5Mlema) and 20dema at 5450 levels apprx. Above 5450 levels will try to target the 200dma at 5640 level.
The 5Wlema is at apprx. 5345 level and 5Wema at 5430 level.
5. Important Pivots:
Some important levels to take note of are apprx.- 5175 (Previous low), 5230 (Friday's low), 5260 (Feb. Expiry ), 5600 (Last pivot high) & apprx 4900 (fibo level of 38.2% of the total upmove since March 09 -6338)
6. Option Analysis:
The near equal build up of Calls and Puts from 5000-5500 in range of 40-50 lacs O.I. along with major volumes in far off strikes indicates no clear direction and hedging activities by smart money. It also signifies that even the short term one way downside is not expected as of now.The addition or unwinding in particular strikes after the Budget will only indicate direction to come. One should keep open probabilities of trade on any side as of now.One sided bias will be harmful for the trading a/c.
7. EW Analysis:
Check out the Post -Short-term-EW-Probabilities
Two Important targets come as 5650 on the upside and 5120 on the down side.
8. FII Action :
The FII's have been on the sell side whole of the last week emphasizing the Down trend. But they have been big buyers of all the segments of the Derivatives in the last trading session. It may be part short covering , part hedging and importantly are they expecting some short term reversal to be traded via derivatives??
So, correlating all the data ,we can conclude a Trading Strategy for this Week -
1. Initial balance of Price may be between 5260 and 5360.Hopefully it will resolve in first couple of days of the Week.
2. Trading above 5360 will target 5415 and 5460-80. Positional longs above 5480 may target 5600+ levels. 3. Trading below 5260 will target 5175 -5120 .The slide can further extend in alignment with the Larger TF Downtrend.
4. Extreme ends of the Trend may be marked by 5650 on the upside and 4900 levels on the downside ,where positional review will be required.
Keep in mind during any upmove that the Larger TF is in Down trend, It should be respected by profit booking at important levels of Resistance.(One may keep SAR of 5415 if moves above it and manage it intraday )