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Market Outlook 17 September 2014               some interesting links >


Nifty (7932.90, -109.10, -1.36%)

This is verily a breakdown signal. If you consider this intermediate uptrend to have begun from the low of 7422.15 on July 14 then this is the 3rd time we see that the index testing the support of the 34-day EMA—as we all know that this EMA supported the index quite ably since we saw the onset of the medium term uptrend from Feb 04 low of 5933.30. Now, as at the end of yesterday, the 34-day EMA is at 7917.91 (as calculated by MetaStock 9.1 software). The end-of-day chart pattern seems to suggest that, as it is likely to be a major support area, there could be a strong bounce back—as is indicated by the SGX Sep Nifty reading of 7992, which roughly corresponds to 7962 for spot Nifty reading in our market.

This early morning reading of 7992, albeit on a low volume, by the SGX Nifty augurs well for the bulls since it points to a feverish short covering in the opening hour. This is more so because of the huge addition in open interest in Nifty September call options for the strike prices of 8100, 8000 and 7900. Together, they added nearly 4.2 million units in OI in yesterday’s session while the bulls liquidated Sept put options a total of 1.8 million units for strike prices of 8000, 8100 and 8200. However, they added 476200 units of put options for Sept, which closed at a price of 39.75. Thus, we get some sort of a Nifty significant support range between 7920 and 7860. On the other hand, once the initial flurry of short covering is through the broad range of 7970 through 8040 (derived through various call option prices) is likely to act as a supply zone that the bulls need to take out decisively if they expect to put any significant rearguard action.

  • Most critical level for the day: 7992 – 8002 on the upside and 7917 on the downside

  • Strong resistance: 7967 – 7992 – 8002

  • Major resistance: 8032 – 8035 – 8043

  • Strong support: 7925 – 7917

  • Major support: 7860 – 7827


Bank Nifty (15844.10, -323.45, -2.00%)

This index needs to take out the levels of 15886 through 16009 if the bank bulls were to truly get back their upward momentum. Getting past 16065 decisively on the upside would be an indication of its first sign of gaining its strength back. However, only when you see the Bank Nifty clearing 16111 through 16134 we would know that the bank bulls has shrugged off yesterday’s fall—however, as of now, expecting that much appears to be a tall order while we would surely be happy to see that happening. It is the banks that can propel the market on a recovery path since other sectors have outstretched themselves wee bit too much. Now, in case, selling pressure reemerges and the index slides down below 15886 and stays there then we should be prepared for where a test of 15606 – 15595 could well be in store.
  • Most critical levels for the day: 15886 – 16009, its immediate resistance

  • Strong resistance: 16111 – 16136

  • Major resistance: 16239 – 16368

  • Strong support: 15725 – 15688

  • Major support: 15606 - 15595

 




Note (1): Either on the long side or on the short side if at any moment a counter is not moving beyond an initial or interim target to the final target book profits. Once initial target is crossed, you can use that as your trailing stop-loss level.



Rajat K. Bose
Notes (2): (please read).
* All prices relate to the NSE, unless otherwise mentioned.
* Calls are based on the previous trading day's price activity.
* The call is valid for the next trading session only unless otherwise mentioned.
*

Stop-loss levels are given so that there is a level below/above, which the market will tell us that the call has gone wrong. Stop-loss is an essential risk control mechanism; it should always be there.

*

Book, at least, part profits when the prices reach their targets; if you continue to hold on to positions then use trailing stops to lock in your profits.

*

Don't chase a stock, if you are unable to buy a stock because it hits circuit levels on successive days, don't buy that.

* The analyst and his clients may or may not have positions in the securities mentioned above.
Trading involves considerable risk. Trade at your own risk to the extent you are comfortable. The analyst shall not be responsible for any losses incurred for acting on these recommendations.
Rajat K Bose
 

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