Tuesday 5 November 2013

Investment or Trading in the markets at High levels. Comparative Analysis & Low Risk ideas

In our last blog post we mentioned that Indian Indices are likely to relatively outperform the global indices and also shared some trading/ investing ideas to leverage this opportunity with lower risks
Here is a quick recap of the potential options to capture this opportunity  versus the global indices:

1.     Global futures specially Dow jones and FTSE are traded in NSE and can be used as a pair trading opportunity with our index( that is short in Dow Jones and Long in NIFTY)
2.     Similarly there are mutual funds which offer investing opportunities both in global markets and NIFTY ETF. If one is long on the former it may be a good time to switch into NIFTY ETF’s
3.     For those who want to stay to our markets, one can bet on relative upside and start picking stocks in a mixed manner. By mixed I mean pick up partly sectoral stocks that have outperformed since 2010 and pick up sectoral stocks that have performed mildly or underperformed since then


We received many feedback on this and expectedly lot of you want to try out option 3 ( that is keeping investment positions in the indian equity markets with a mix of opportunities
To take it from there we present here a comparative analysis of the various sectoral indices within Nifty.

NIFTY Sectoral Indices- Comparative Analysis


We have considered the following indices:
·         BANKNIFTY (NSE BANK)
·         CNXIT ( IT Stock indices)
·         CNX100 ( Top 100 CNX stocks)
·         MIDCAP Index (CRSMID)

The graph below presents how the indices have done against each other since the highs of 2010 was made.
It is clearly divided into three sections:

·         Outperformance: CNXIT
·         Flat performance: CNX100 & NIFTY
·         Underperformance: CNXMIDCAP & NSEBANK

Potential strategies in equity investments:

1.     Balanced Traders can Keep a mix of stocks especially from the top 2, that is CNXIT,CNX100 and NSEBANK. This way in case of a downward consolidation CNXIT stocks will ensure that the portfolio selection does better overall and in case of outperformance BANKING stocks may outperform the benchmark index
2.     Selective stock picking of not more than 10-20% from the mid cap sector. Look out for midcap banking stocks.

3.     Aggressive traders/investors can look at stock picking exclusively from NSEBANK & CNX100

Saturday 2 November 2013

Markets near All Time Highs? Is it Time to Rejoice??? Or Time For Caution?


Sensex already made the headlines with marking all-time highs and NIFTY followed close with just a few points of the highs?

Few sessions back we wrote that we Indian Markets are likely to outperform the global indices and we are well on track for that.

But we also discussed one more thing, a good measure of calculating highs is to see the relative performance and relatively we are yet some way to go to call it a real high.

A large part of Nifty’s move has been contributed with the IT index while the other indices like BANKNIFTY and CNXMIDCAP are still quite off the high.
Also markets have been very volatile last few months giving tough time to intraday players. How does one trade the markets from these levels?

Discretionary calls? Trading Tips? Traditional Trading systems? Well None of them have worked so far… is’nt it?

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Wednesday 23 October 2013

Comparative Analysis on Why Indian Market May Outperform Global Indices


A post after quite a time,
This time around we will discuss on how markets are poised to move from here and how we have done so far using a different parameter
While we wander around all time highs how are our markets shaping up to move from here? Performance is usually measured in  absolute terms. That typically means what is the absolute growth we have seen so far.
Which is a near 0% growth since the market tested the highs in 2010. Another refined way of measuring performance is on relative terms.
In relative terms it will be interesting to see how badly have we done against the developed economies? we have underperformed the developed markets ( for comparison we treat DJIA and S&P as reference indices)
Here is a chart to depict the magnitude of the underperformance. One chart as usual is worth many words.

NIFTY v/s DOWJONES RELATIVE ANALYSIS


While US markets have moved 40% since 2010 we have just reclaimed the top (0%).

Now since the degree of deviation is significant, this increases the chance that we will close this gap in the near future. This is a reason to believe that we may look to outperform the global markets in the near future?
This has also been confirmed with the short term move? Now have a quick look at the last two months data point.  Since the last two months we have moved 15% on the upside while Dow has moved about 4.5 %

NIFTY v/s DOWJONES v/s S&P: short term comparison


Note this just means we are likely to outperform. Which means that in case we  are likely to go up more than the global markets and when markets correct we are likely to go down less in percentage terms.
How to use this as an opportunity:
Yes the analysis is fine, but how do I capitalize on this.? Well there are a more than few ways to do so:
1.      Global futures specially Dow jones and FTSE are traded in NSE and can be used as a pair trading opportunity with our index( that is short in Dow Jones and Long in NIFTY)
2.      Similarly there are mutual funds which offer investing opportunities both in global markets and NIFTY ETF. If one is long on the former it may be a good time to switch into NIFTY ETF’s
3.      For those who want to stay to our markets, one can bet on relative upside and start picking stocks in a mixed manner. By mixed I mean pick up partly sectoral stocks that have outperformed since 2010 and pick up sectoral stocks that have performed mildly or underperformed since then

Wednesday 25 September 2013

Nifty Review of the market movement. Analysis of Options data

Here is a quick update on what on the trading charts that we have discussed two days back. It was spot on swing trade with respect to that level. Let us discuss what is in store for the upcoming sessions.

The other day we posted that Nifty Future has resistance around 5960 levels. We mentioned that all pullbacks to that level will be shorted.  Nifty on 24th September made a high of 5962. We also mentioned that Downside target emerges at 5810-40 zones. Market today found support at 5820 and retraced back from there.

Our swing traders were short at the break of the 5960 levels and exited at 5840 just in line with the trading levels posted.

Immediate hurdle lies now at 5905 levels and trading above that markets will try to retrace back to the trading levels of 5960 on the upside. On the downside it will be better to try pull back trades on dips with stops at 5810 levels.

Fresh short trades will again be active in case Nifty future manages to close below 5800 trading levels.

Here is also an analysis and review of what the options data are suggesting since we are nearing expiry options accumulation along with price point analysis provide good levels for low risk pull back opportunity and some fantastic break out opportunities.
Here is a look at the options chart:

NIFTY OPTIONS ACCUMULATION- 25 SEP-2013





Nifty has terrific accumulation at 6000 zones.  This suggests that it is the toughest resistance zones. Hence swing traders can look to short on pull back to that trading levels. Similarly support lies at 5700 and 5800 trading levels and this will offer support zones to the market on the downside. A breach of 5800 can trigger a slide to test 5700 levels in a short time.

Monday 23 September 2013

Nifty Outlook. Where are markets headed. Trading zones at these levels

Nifty futures have corrected sharply for the last few sessions. Some of it was triggered by a news based move and part of it coinciding with classical divergence patterns combined with price point analysis.

Here is a look at what has happened on the charts and where are we headed from here. NIFTY is approaching interesting levels here. Here is a look at the hourly charts of Nifty and an analysis of it.
NIFTY FUT SHORT TERM SWING CHARTS


Nifty has displayed a classical divergence pattern with RSI where RSI failed to make a higher high despite markets moving here. Once it failed to breach 6180 there was a look risk contrarian trade opportunity near that levels.

Since the crash that we witnessed post the RBI news NIFTY has been falling with a descending pattern across a channel. The channel low is now at 5840 zones.

The trading levels of 5840-5810 is also a support range to watch out for . swing wise this will be the key level to watch out for. This may provide a low risk contrarian opportunity.

A breach of that level can lead to a test of 5745 and 5640 on the lower sides. On the upside resistance remains at 5960 trading zones and any pull backs to that level will be resisted.

Only if NIFTY Fut manages to  close above that level can ensure a reversal of the down ward swing and a resumption of the upward move. 

Wednesday 18 September 2013

Gold critically poised. Where is it headed. Trend outlook for Gold

Here is a quick review and look at the gold charts and an analysis of where is it headed. A quick analysis here is to understand where is it trading and what can be the next potential major trend moves
One chart is worth many lines as always. Here is the chart posted below.

Gold Weekly Charts- Trend Analysis

Here we have analyzed the weekly chart of gold. XAUSD have been trading in between two major retracement levels for the past 11 weeks. This is in between the trading levels of 1450 on the upside and 1305 on the downside.  During the recent pull back a few weeks back it failed to clear the 1450 range on the upside basically keeping it restricted within the trading range.
Also that was a breakout from the downward channel (Highlighted in blue). Based on the above analysis two strategies emerge.
Pull backs: Trade a pullback within the trading range of 1350 on the downside and 1450 on the upside.
Breakout Trade: A break out trade can be initiated outside this trading range. Upside target emerges at 1550 and 1620 levels. Downside targets emerge at 1160 and 1100 zones.
The key part is here we are at a critical cusp of both a low risk pull back opportunity and a breakdown trade potential. Within the next few trading sessions.

Monday 2 September 2013

What was Unique About the August series. What Lies ahead For the Markets Now


August series for 2013 was a unique month in lot of ways.  This will also go down as one of the trading outlier months for more reasons than not.
What happened in August that made it unique?

Point No 1: Well for starters markets showed tremendous amount of volatility with more those acceptable volumes. We witnessed major index futures moving to the tune of 5-8% on some of the days. This is something that we don’t hear often in advanced market. Do you remember when was the last time Dow jones or S&P moved to that extend
The interesting part was that we witnessed a gradual downside trend despite this move and more that acceptable volumes.

Point No 2: Most days in August saw a gap up or gap down of 2% plus on the major indices and yet on many days we didn’t see a follow up move on the side of the gap. This is something unusual for major indices. While our markets are known for this. The frequency was staggering.

Point 3: Our long time readers will recall that way back in Jan-Feb 2013 we had written that Weekly ATR was at its all-time lowest value and we should see volatility increasing over the next few months. This is what we exactly saw in the last few months. With Volatility peaking to a unusual high levels in August. This was in expected lines, but at the same time now the daily ATR stands at very high non sustainable limits.

Point 4:   In august thanks to increased volatility we saw India VIX peaking to its highest values since Mart 2011. VIX jumped significantly clearing indicating decreased risk appetite and confidence in the investor segments.

Now what lies ahead for September:


NIFTY FUT CHARTS-2ND SEPT -2013




Since the volatility indicators have deviated significantly chances are they will consolidate here. But even then since they are at such high values we expect a moderate consolidation to come through. This only co relates to the rate of market move and not the market levels.

Trading levels wise Critical swing hurdles lie near 5530 levels and clearing that we are all set to test 5605 levels on the upside. It will be important to see if we manage to close above those zones to indicate any signs of trend reversal on the charts.
While on the downside 5450 and below that 5300 will form a strong base for the series.  From a swing trading point of view it may be good to trade reversal within these zones both at upside and downside and look for a break out trade outside this trading zone.

Tuesday 20 August 2013

Analyzing Options Distribution Data to identify market range for the series

As we near the end expiry of an extremely volatile month with a little more than a week to go. Options accumulation zones from here on can be a key indicator to identify where markets are headed.
Often combining one’s trading systems with options accumulations zones can give very good low risk opportunities of more confirmed trading levels.

Rules for understanding options accumulation:
1.    The significance of options trading zones accumulation will increase more towards the series expiry so consider this as an input only during the second half of the trading monthly cycle
2.    Identify highest zones of PE accumulation by volume. The higher the volume indicates more PE writing at those levels. This forms the base and is an indicator of support levels.
3.    Identify the highest zones of CE accumulation. Similarly they represent the CE writing levels and forms the ceiling or resistance for that series.
4.    Mark these levels in your charts and use them with your existing systems to take more confirmed entries.

So what is the current situation for Nifty Futures for August series
As always let the charts tell you lot more than the words:

NIFTY OPTIONS Accumulation data- 20th Aug-2013 View




Charts data interpretation:
1.    The highest PE accumulation is at 5300 trading zones indicating that this is a strong base and we may not go below this level on a closing basis for this series. Hence it can be used for pull back contrarian longs
2.    CE accumulation is distributed evenly around 5500-5700 zones indicating that at every level we will face resistance on the upside and at the same time this doesn’t present a clear picture at this stage for upside levels. The highest CE accumulation is at 5800 levels almost confirming that we may not breach that level on the upside and it will form a good SL swing wise for rises upto near that level.

The same technique can be used to analyze other index futures and stock futures for a ready reference and will help in one’s trading decision making.

Tuesday 13 August 2013

Mastering Nifty Fut with Trading Trend lines & Price channels

NIFTY FUTURE- Review of 13th Aug and Update for Next session

We all use various kinds of analysis and technical tools and techniques like( Fibo, gann, price point analysis, Trendlines etc) to find out patterns and making projections for the next move.  At times we use multiple tools or techniques. They give a dual advantage. One is many a times one of the techniques seem to work well during phases and secondly also that a confirmation of a level on multiple techniques serve a double confirmation for trades.
Now the fun part is most of the times the simplest of the techniques work best.  Trendlines is one of the classic and time tested techniques in the markets. TRENDLINES along with price channels form a very good combination and give a strong idea where price can be headed. They can also be utilized to get an idea of stops when one wants to trail the trades.
Let us review NIFTY charts based on price channels and trend lines. Today 5635 levels formed multiple trading confirmations to ensure a clear breakout and once NIFTY FUt managed to trade above that range it gave a clear confirmation. Let the picture tell the rest of the story..

NIFTY Future Charts-13th Aug. Price Channels and Trend Lines


So where is it headed from here. Longs will hold good until NIFTY fut manages to trade above 5665. Managing to trade and sustain above that can ensure NIFTY Fut goes on to target the levels of 5765 and 5830 on the upside price channel trends. On the downside a breach of 5665 will ensure a re test of 5635 and lower levels. 5635 will form the downside pivotal level on the downside a breach of that will ensure a confirmed renewal of the downtrend.



Trading levels for the day:

POWERTRADE BEARS LAST STAND POINT OF THE DAY ----- 571  0-15  sustaining above which it will target 5735, 5765,5830
POWERTRADE TREND DECIDER OF THE DAY ------- 5665-70
POWERTRADE BULLS LAST STAND POINT OF THE DAY------- 5635-40
Breakdown and sustaining below POWERTRADE BULLS LAST STAND POINT OF THE DAY will open target for support of ---- 5610,5570

Thursday 1 August 2013

NIFTY FUT handle volatility with money management and agile trading

NIFTY FUTURE- Update for 2nd August


NIFTY Fut had a terrific volatile day where we saw a gap up move and at the same time it cracking to break across yesterday’s low and barely managing to close above the critical 5755 trading levels.
One more interesting thing to observe that markets failed to make a sustained move above 5835-40 trading levels. Regular readers of the blog will recall that this was a critical levels that we have discussed many a times.
An important thing to observe is that markets failed to close above the 5770 trading levels.
For the next session the levels of 5770-5755 will be extremely critical to watch out for and any break of this level can resume another leg of downside.
On the upside markets need to pull back above 5800 to show any signs of strength else all rise will be challenged.
Coming back to the volatility. During volatile times markets range increases, we generally tend to see  this during results season or times when we have a high impact news. A way to handle risk here is vary the lot sizes based on the stops that you see. The stop loss range tends to increase because of increased trading range.  Reducing lots with increasing stop loss is a way to go. This is aptly compensated with increase target ranges as well.
Also one should be agile enough to switch positions if the trading range demands so A classic case was today when we saw a positive sentiment for first couple of hours and then the trend reverse significantly.




Trading levels for the day:

POWERTRADE BEARS LAST STAND POINT OF THE DAY ----- 5800-05 sustaining above which it will target 5830,5860
POWERTRADE TREND DECIDER OF THE DAY ------- 5755-60
POWERTRADE BULLS LAST STAND POINT OF THE DAY------- 5730
Breakdown and sustaining below POWERTRADE BULLS LAST STAND POINT OF THE DAY will open target for support of ---- 5700,5665

Monday 29 July 2013

NIFTY FUT tests Critical Averages on the downside. How to trade it at these levels

NIFTY FUTURE- review of 29th July and Update for 30th July


NIFTY Fut today cracked through 5900 trading levels today closing at 5870 odd zones. What is important about this level is that this is exactly the 100 day moving average for Nifty Fut. If not for anything just another psychological level for the markets.
 On the downside a break of this level can lead to a test of 5845 on the downside and below that Nifty Fut can slide to 5810-15 levels where it might find some swing support and show signs of pull back and profit booking for shorts.
A crack of that level on swing basis can lead to another leg of downside move.
On the upside immediate hurdle lies at 5900-05 levels and only clearing that we can see a positive bias in the markets. Until it trades below it expect bears to be in control and short on rise will be a preferred option.
Trading above 5905 NIFTY fut can head to 5930-35 levels on the upside where it will face severe resistance and may not just cross in a jiffy. Swing bulls will only be back above that levels.




Trading levels for the day:

POWERTRADE BEARS LAST STAND POINT OF THE DAY ----- 5930-35  sustaining above which it will target 5965,6005
POWERTRADE TREND DECIDER OF THE DAY ------- 5900-05
POWERTRADE BULLS LAST STAND POINT OF THE DAY------- 5870-75
Breakdown and sustaining below POWERTRADE BULLS LAST STAND POINT OF THE DAY will open target for support of ---- 5845,5810