Thursday, March 27, 2008

Less Volatility with Upward Direction

In spite of Dow Jones closing in the negative territory with near about 1% down none of the Asian Markets have intraday lows of even 1% that speaks strength. Nifty should open gap up at 4880 and then try to move towards 4920, I think it might even break 4920 and try to show the figure of 4980. Nifty 5000 Call could be bought in the range of 125 - 135 for a target of 180 and if 180 is substantially broken then 220 stop loss could be placed at 110.
Now coming to Nifty options strategies for April, as I had said in my earlier post that Nifty would be heading towards 5200 or 4200 with the probability of 5200 significantly more than 4200, Nifty is moving towards 5200. As of yesterday when Nifty was at near about 4800 with both be the targets being substantially far, buying Nifty Put and Call Options with same value and waiting for breakout towards one direction would have been the strategy but now with Nifty close to the top target if gap up opening happens, Nifty Call and Put options should be bought in such a way that If Nifty 5000 Call is bought then hedge should be Nifty 4500 Put.

Wednesday, March 26, 2008

Volatility Yet Again

The Nifty Index might just open gap down towards 4800 and then might try to get into positive territory, once it has spend some time in positive territory, volatility might show it effects and drag it in the negative. As for closing I am still maintaining that 4740 or 4780 might be the closing, but since short term view is that Nifty should head towards 5200 a closing of 4740 might be just ignored leaving us with 4780, Now Considering 4780 to be closing Nifty 4900 Put Option could be bought at around 90, if the Market behaves exactly as said before then at around 75.
Now For the Next Month series I think 5200 or 4200 might be achieved in this month (high probability of 5200) so Nifty Out of Money Calls along with equally priced Nifty Put Option could be bought and then both could be sold once any target is hit.

Made it wrong

Ok I got it wrong and I accept that, but now as said in the earlier post that Nifty could target 4980 by thursday closing if the Nifty doesnt loose big view is being changed to Nifty Targeting the close of 4750 - 4780 (becuase nifty is loosing big). It was difficult to digest the change but you have to move around the market and not the other way round.

Tuesday, March 25, 2008

Has Intraday bottom formed

Well Today’s Bottom maybe behind us, But are we going to build a rally or the market would in a trading range is the question now. It would be better to buy dips and sell rallies of 20 -30 points. If 4720 is broken in a hurry (within an hour from here) then it might rally towards 4980.

No One Side Affair Expect Volatility

Today is not going not be as bullish as yesterday but it may not be bearish either, A Gap up opening could drive the Nifty up towards 4920 but it would not be one sided bullish as yesterday, volatility would be the theme today. So any big rises of 30 -40 points could be used to sell while the drops could be used to buy. Trade hourly, if any hour as given big rallies sell expecting dips but don’t trade for big shots a small 0.5% profit on any side could be used to exit.
Now Coming to F&O, I expect Nifty to close at 4980 this F&O closing unless it drops big today so Options could be bought with that target in Mind. Nifty 4800 Call could target 160 if bought near about 120 – 130.
Would try to update at 10.30 and 11.30

Monday, March 24, 2008

Going Long is good for today

Should the Gap Up opening sustain and even add in more gains as the day progresses as of today the answer could be yes.
Yes the Nifty might just open at 4720 and head towards 4820. Intraday Corrections to the major intraday trend that most likely would be bullish would occur but that should be taken as an opportunity to go long.
Nifty 4600 Call yet again could be bought in the range of 128 – 136 (near about) and target could be 180 and if still bullish 220.

Sunday, March 23, 2008

What Lies Ahead Today

Is decoupling going to move the other way round
Bulls must be remembering the good old days when on any given day the
US Markets would close down by a big negative, next day Emerging Markets too would open gap down but fill in the gap by the time market closes and even post some gains minting in gains for the bulls who bought in at any point of the day, now the table seems to be turned in favour of the bears, US markets post handsome gains, Next day Emerging Markets (in Asia) Open Gap up but by the time market closes all the gains are given up and the bears who shorted the Market at any point of the day gain handsomely.
Now that the US Dow Jones has closed on Thursday with 262 points gains can the Indian Markets open Gap up and maintain the gains, as of now it quite difficult to try to predict the Markets as of today so taking a break.
Some Rough thoughts
Nifty 4600 Put might yet again trade in a range of 60 -80, only if it sustains above 90 for 10 – 15 minutes it is likely to move up and target 120.
Nifty 4600 Call too might trade in a range of 60 -80 and any sustainability above 90 can take it towards 120.
Lastly its better to avoid trade as of today.

Saturday, March 22, 2008

Dow Jones Industrials 1929 Pattern

There are some patterns which almost all Major World Indices have followed in Bull Market has well as Bear Market, since my opinion is we are in a bear market lets elaborate on the patterns in Bear Market.

Pattern of US Dow Jones Industrial Average in the Biggest Bear Market ever, the era of Great Dep 1929 -
The Dow Jones topped out at 386 in Sep 1929, it is said that this was an era when everybody believed that markets are made to rise forever, be in the green always, never drop and go in the red. The bottom was at 41 in Jul 1932 breakdown of more than 80% in 3 yrs.
Now let’s look at the big downfalls, rallies and consolidation phases that happened in this bear market
The Dow Jones fell from 386 in Sep 1929 to 320 in Oct 1929 app 16.6% from the top which everyone might have thought is a correction to the major trend of the bull market, as the Dow Jones gave a pull back rally that took it at 359 (app 13.3%) within 14 days. The mother of all bear runs took over here wherein the Dow Jones dropped from 359 in Mid October to a low of 195 in Mid November a drop of app 45% within a month’s time frame. Again a pull back rally of somewhat less magnitude took the Index at 267 in Dec app 33.3% within a month. Consolidation Phase kicked in wherein the Index rallied upwards to 296 in April 1930 app 3% gain per month, downtrend followed immediately and the Dow Jones fell to 208 by June 1930 a drop of 88 points making app 30% drop in 2 months, consolidation phase emerged over yet again with the Dow Jones rallying to 248 in September app 7% gains per month. Downtrend took over and Dow Jones dropped to 154 in Dec 1930 a drop of app 40% in 3 months time frame. Pull back rally took the reins which saw the Index rally towards 197 in Feb 1931 averaging a return of 12% over 2 months. As usual Downtrend took over the proceedings and the index dropped to 120 in June again app 40% down from the previous top followed by a Pull Back Rally driving the Index towards 158 in June giving a return of 33% in 1 month time only. Consolidation Phase took over and with small ups and downs the Index remained at 140 in August after which a fresh downtrend bought it to 86 at the start of Oct and the downtrend too gave a negative return of 33% in 1 month time frame only. As Usual a pull back rally carried the Index to 120 in Nov again gains of 33% in one months timeframe only followed by a similar magnitude drop which bought the index to 70 in Jan 1931, Consolidation Phase took over and the Index was trading at 90 in March 1932. Final Blow saw the Index drop to 40 in July which was the low of the era.

Conclusions
1) The First big Downfall could be followed by a pull back rally of somewhat less magnitude as short covering and value buying pulls the Market up.
2) Bullish think tank is convinced that the storm is behind while the Bearish camp looks for opportunities to go short as consolidation reins.
3) Big expectations built up during the Bull Run which in reality are worth nothing pull the market even down.

Tuesday, March 18, 2008

Options Strategy

Options Strategy for 19th March 2008

Nifty is likely to gap up at 4720 but would it able to hold up there as to be seen,
Going by the situation right now I opine that post gap up opening it would correct to 4670 and would not break down to give up all the gap as of today.
a) Nifty 4600 Call could be bought at 120 -130 range for a Target of 180. Stop loss could be placed at 110, ideally what one can do is if it drops below 120 (by any chance) sell off and buy at any rise above 120.
b) Nifty 4600 put could be traded in the range of 60 – 80, stop loss could be placed at drop below 60 and any rise above 90 (by any chance) could lead to 120.

Now Options Strategy for Short – term with minimal losses and minimal profit but high probability of Profit
a) Nifty 4600 March Put Could be sold at 60 -70 and Nifty 4300 April Put could be bought at near about 80, while Nifty 4900 March Call could be sold at 30 -35 while Nifty April 5200 Call could be bought at 60 -65. If Near months Options Remain out of Money Next month Options would be near about free of cost.

Thursday, March 6, 2008

Can Sensex Compared to Hangseng

Sensex topped out at 21207 on Jan 10 2008 (uptil now top) and then bottomed out at 15332 (the recent low from the crash), now to make some money I am just trying to solve the mystery of what lies ahead for that purpose I am using history of other Major World Indices and drawing comparisons with the Sensex
So lets start the Journey
In this post lets have a look at Hangseng
(sorry I am not posting any images as of now due to some problems)
Hangseng reached a major top of 3949 in Sep 1987 then crashed to a low of 1894 in Dec 1987 app one can say 50% correction, after 6 years in Jan 1994 it made a new top at 12599 in Jan 1994 the new top was app 3 times the previous top of 1987, now it again broke down to a level of 6890 in Jan 1995 app 45% correction. Then in Aug 1997 it again went upto 16802 and corrected upto 6708 in Aug 1998, this time round the correction (I prefer to say correction you may call bear market) was a whopping 60% app.
Now Lets Compare the Hangseng Journey to the Sensex
Sensex Formed it first Major top at 6150 in Feb 2000, then crashed to a low of 2594 in Sep 2001, a correction of app 60%. Now my feeling is that at 21206 in Jan 2008 we have formed a major top after 8 years and app 3.5 times the previous major top.
I have concluded this by comparing hangseng history this way
Hangseng Sep 1987 say 4K
Hangseng Dec 1987 say 2K
(correction was big but low was targeted in a small time frame)

Sensex Feb 2000 say 6K
Sensex Sep 2000 say 2.5K
(correction was bigger and low was targeted in bigger timeframe)
Hangseng July 1991 say 4K
(previous top was captured 4 years down the line)
Sensex Jan 2004 say 6K
(previous top was captured 4 years down the line)
Now from here some divergence takes place in my views
While Hangseng reached trippled from previous top of 4K (1987) to achieve 12K in 1994, 7 years down the line and sensex too achieved the same feet ( a little bit more 3.5 times) in 8 years, I feel the situation is comparable to Hangseng 1997 wherein the hanseng was at 16K i.e app 4 times 1987 top in 9 years
the reason being
1) One Emerging Market Mexico IPC has achieved same feet by quadrupling from 2000 highs and then is breaking down
2) In 1994 Hangseng breakdown was comparatively slow, it took its time and also the rise was faster compared to breakdown, while in 1997 the fall was quite fast and big example being August 7 1997 Hangseng was 16820 on Oct 28 1997 Intraday low was 8775 app 50% fall in just 2.5 months with the most terrible fall being from an high of 13473 on Oct 20 1997 to a low of 8775 on Oct 28 1997 i.e a fall of app 33% in just 8 days.
So now if we suppose that we are going to mirror Hangseng of 1997 then 5500 or max 5700 should not be pierced in midterm while in extreme short term 5200 -5250 should not be pierced on the Long side while on the short side one cant time the fall, Best case option than would be to sell 5200 or 5300 call option for this month has and when Nifty approaches 5100+, stoploss could be placed if nifty trades above 5400.