Market update for 06/06/2012

Nifty Hourly Chart

Today's trading session was volatile, but Nifty has closed at 4863 up by 15 points. Capital goods,Banks and Automobile sector are leading the pull back in market. SBI,HDFC Bank,LT,BHEL,Maruti Suzuki, and M&M are some of the top gainers in Nifty.

Nifty has managed to breach another trend line in hourly chart. Even though Nifty came down in the afternoon you can see in the chart that Nifty has taken support right at trend line. So the trend line which was acting as resistance is now acting as support.

The expected target 4955 will remain the same and reversal is closing below 4800. Since Nifty is trading in a narrow range short strangle is contributing profit. The prices of both 4800 put and 5000 call are down by 1% and 3% respectively.

Nifty Daily Chart

There is no significant change in daily chart of Nifty except that nifty is marginally up compared to previous day's close. MACD has not indicated sell so far and 4800 is still a demand zone. Many trades are asking 'when Nifty will come out of the range?'. Frankly speaking I don't have an answer for this question.

 

Bank Nifty Daily Chart

Bank Nifty is up by 1% today. Technically Bank Nifty has closed above 20 DMA which is at 9366. It may face resistance at 200DMA at 9560. As long as Bank Nifty stays above 9200 the trend is expected to be positive. The expected target for bank Nifty is 9600 and above.

The numbers which are indicated above are spot Nifty/Bank Nifty numbers.

 

Nifty Short Term View

Nifty Short Term Trend	Down
Targets	4780-4680
Reversal if closes above	5090

If you are trading based on above information trade with right hedging strategy and also trade with strict stop loss. 

Open Positions

Scrip	Type	Qty	Price	CMP	P/L
Nifty 5000 CE	Short	50	78.85	50.25	1430's
Nifty 4800 PE	Short	50	86.6	101.5	-745
BPCL	Long	120	708.5	704.3	-504
Bank Nifty Fut	Long	25	9428	9398	-750
Bank Nifty 9400 PE	Long	25	269	285	400

Today Trades

Scrip	Type	Qty	Buy Price	Sell Price	P/L
Bank Nifty Fut	Long	25	9428
Bank Nifty 9400 PE	Long	25	269

Thought For The Day

I believe that anyone who is intelligent, conscientious, and willing to put in the necessary time can be successful on Wall Street. As long as they realise the market is a business like any other business, they have a good chance to prosper - Jesse Livermore

Market Update for 05/06/2012

Nifty Hourly Chart

In today's trading session Nifty tested the previous bottom 4788 and bounced back to 4848. Today's low was 4770 which is near to 78.6% retracement which is around 4760. In the first hour of trade Nifty closed below 4788 on hourly basis trapping the bears and gave a sharp bounce back. So we are again in the consolidation range which is 4800-4950.

In coming trading session Nifty may face a minor resistance at 4860-70 levels and once this range is crossed we can expect Nifty to reach 4955 again.

Nifty Daily Chart

Nifty has tested 4800 levels many times before and also has managed to give a sharp bounce back. Traders should remember that support is not a precise point  (for example 4800)  it is a region (4760-4800). Moreover descending trend line support is clearly visible in daily chart. So based on the above observation I can say that Nifty may hold 4800 levels . If Nifty closes below 4760 then we can expect Nifty to reach 4600 levels.

BPCL Daily Chart

 BPCL was one of the top gainers in today's trading session. It was up by 3%. So far the secondary trend of  the BPCL was down and now 50 DMA as well as ascending trend line is supporting BPCL. Today we have recommended BPCL to subscribers at the rate of Rs.708.50 and the expected target is 725-735 and above.

Nifty Short Term View (1 to 2 weeks)

Nifty Short Term Trend    :    Down

Nifty Short Term Targets  :    4780-4680

Reversal if closes above    :     5090

*If you are trading based on above information trade with right hedging strategy and also trade with strict stop loss.

Open Positions

Scrip	Type	Qty	Price	CMP	P/L
Nifty 5000 CE	Short	50	78.85	52.75	1305
Nifty 4800 PE	Short	50	86.6	98	-570
BPCL	Long	120	708.5	716.5	960

Today's Trades

Scrip	Type	Qty	Buy Price	Sell Price	P/L
SBI Fut	Long	125	1990	2037	5875

Short position was executed yesterday at Rs.2037.

Thought for the day

Holding on to anger is like grasping a hot coal with the intent of throwing it at someone else; you are the one who gets burned - Buddha

Market Updates For 04/06/2012

Nifty Hourly Chart

First half of the Friday's trading session was flat. However market gained momentum in the later half and Nifty closed at 4841 down by 82 points. Global market looks weak and we all have noticed blood bath in wall street.

The breakout above 4955 was short lived and closing below 4955 was the first sign of weakness and closing at 4841 gives an indication that Nifty is likely to test at least its previous low 4788. RSI in hourly chart is in oversold region but let us not try to catch a falling knife let us wait for the reversal indications to appear on charts. Always remember that it is not necessary to identify the exact bottom and many traders fail in doing so. The objective should not be 'buy low and sell high but it should be buy high and sell higher or sell low  and buy lower'.

Nifty Daily Chart

Nifty was range bound from past few trading session. Even now Nifty is in a narrow range of 4800-5000. Nifty is likely to touch 4788 and 4760 which is 78.6% of the rally from 4525 to 5623.  Below 4760 Nifty can go back to 4600 levels.

Short strangle strategy was suggested based on the anticipation that market may remain sideways. But Nifty is looking weak and if Nifty closed below 4760 then we have to exit short strangle.

Nifty Weekly Chart

We have been discussing about the  descending trend line which is supporting Nifty.  Nifty has tested this trend line nearly thrice but managed to stay above it. If Nifty closes below 4800 in coming weeks then we can notice further fall in the market.

Nifty Short Term Targets

One of the readers of this blog has asked me to provide information about short term direction of the Nifty (I am referring short term as 1 to 2 weeks) as it can help many of us in our trading and investment decisions.Here is the expected target :

Nifty Short Term Trend      :   Down  

Nifty Short Term Targets    :   4780-4680 and below

Reversal if closes above*    :   5090

* Please note that reversal levels will be changed periodically.

Open Position

Scrip	Type	Qty	Price	CMP	P/L
SBI June Fut	Short	125	2037	2017	2500

Intraday Trades

Scrip	Type	Qty	Buy Price	Sell Price	P/L
BPCL Fut	Buy	500	690.5		2500
BPCL 700 CE	Sell	500	19		-1000

Thought for the day

Losses are inevitable, losses will occur, losses are necessary. BUT losses must be kept small and we must not allow them to become unmanageably large.

Dear Traders,

I am reading a book called 'Market Masters'. I thought of sharing some interesting conversations presented in this book.

Mr.Jake Bernstain says :

During my years as a futures trader, I have made perhaps 10,000 to 15,000 trades in the market.Yet I am still learning. Every trade is another lesson no matter how small the lesson may be,every trade is a challenge and every trade is likely to be a loss as it is a profit. It's not that I haven't learned a great deal as a trader, but rather that there is so much to learn, it makes what I have learned seem small in comparison. I often wonder whether this fact of market life means that the skill of trading can never be totally learned or that the process will never end. For many years, I refused to accept the possibility that  trading would be a life long struggle. No trader is immune to the possibility of a psychologically motivated error in judgement. No trader can constantly win,rarely lose or live his or her trading life in an eternal uptrend.Trading is a stepwise proceed that generally proceeds two steps forward  and one step back fashion.

Option Trading Strategy

Short Strangle

Nifty is range bound and the trading range is 4800-5000. Even the news about GDP couldn't break the range. Nifty may continue in this range for some more time. To take the advantage of decay in premium we can initiate short strangle.

The short strangle, also known as sell strangle, is a neutral strategy in options trading that involve the simultaneous selling of a slightly out of the money put and a slightly out of the money call of the same underlying stock and same expiration date. The short strangle option strategy is a limited profit, unlimited risk options trading strategy that is taken when the options trader thinks that the underlying stock will experience little volatility in the near term.

Here is the strategy:

Short 5000 Call option at cmp Rs.78.85

Short 4800 Put option at cmp Rs.86.60

Pay off chart

Maximum Profit     : Rs. 78.85+86.60 = 165.65

Potential Loss         : Unlimited

Lower Break Even : Lower Strike Price - Total premium

                                 4800-165.65=4634.65

Upper Break Even : Upper Strike Price+Total Premium

                                 5000+165.65=5165.65

Maximum profit will be attained if Nifty expires between 4800-5000. If Nifty trades below 4634 and above 5165. Traders are advised to exit both call and put option.

Traders should remember that this is a strategy of limited profit and potential unlimited loss.