Monday, February 14, 2011

Is This Rally Sustainable ??


Those who went shopping on Friday , got their Valentine's day Gift by Mr. Market today.

1. The Probability #1 discussed in yesterday's EW post got nullified above 5420 and we now trade # 2 ., which means the upside range increases to 5690 levels .
 Pl see reference post - EW Analysis

2. FII were Buyers today to the tune of appx. 150 cr.

3. This Fibo chart  will be the reference chart in this upmove ,remember it also has 200dma at 5630 apprx. The 20dema is at 5500 level.


4. The Volume Profile is showing a high value node near 5430 level and today's VWAP is at 5415 apprx. So,this range 5415-5430 can be initial support in tomorrow's trading.Short term reversal below 5310 now.

5. For Range trading ,Stochs is a good Indicator ,time to catch up with it again after milking the Trend indicator,MACD. Follow the chart .



6. The data that catches the eye today is the huge build up at 5400 puts , 37lacs + (i.e. 65% + addition ), and the total O.I. for the strike moving above 90 lacs. This is one of the largest addition I have seen in single day's trading for any ' At the Money ' strike. (that too in such a Market trend !!)

Is the Smart money writing confidently in anticipation of a 'Reversal' in the Downtrend & corresponding big move ahead with 5400 or so levels as the base ?? Do they know something which we dont know now ,as usual ??

9 comments:

Life's Funny said...

There is heavy call writing at 5600 too.

venkatapathy l said...

Dear Sir,

Good evening. Excellent analysis. But one thing that is also striking is the addition of 5600 CE which is 14.7 lacs that is 20% This has to be explained before embarking upon the target of 5690. Further 5700 CE is being unloaded.

Can you please through some light.

With warm regards,

LV

venkatapathy l said...

On second thoughts I think that you have not given any time frame. This may occur at any time in March or April. So you need not give any explanation.

LV

AAR VEE said...
This comment has been removed by the author.
AAR VEE said...
This comment has been removed by the author.
AAR VEE said...

@Life's funny-
u r correct for 5600 calls.

what i implied was for 'at the money'option strike that too puts.one will write the out of the money calls here to get the benifit of fast eroding time value of the option.Its normal.but the put writing is not something normal in such huge quantity now in larger TF downtrend.

AAR VEE said...

@ venkatapathy l ,

Pl. see above comments for the 5600 call writing view.5400 put writing is apparently of more importance now in the bigger TF downtrend scenario.

Secondly i suppose u got it wrong.no way i am giving a target of 5690.please go through the link post on EW analysis.Yesterday i had taken a probable view that the markets may be stalled below 5420 itself .now we are trading the second one.rather than a target, 5690 is the point of invalidation for the second probability.

I request u to get my insight by reading that post first.

as for ur time frame comment ,u can get a probable time frame of the range trading of iv wave in the EW post too.

theprofiletrader said...

RV what if this downmove was an extended i of 3 ??
If so we are yet to see 3 of 3 !!
any takers ?

AAR VEE said...

Big ask Jazz:))

Some how i am getting convinced that a sucker 'B' up is what is required to trap traders (may be to 80% A level)as going long seems contrarian now.

Then we all continue to surf the elusive waves.

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