 "8,380 key target on the upside")
The market has range-traded through the last week. The Nifty and Sensex have been close to their respective 200-Day Moving Averages (200-DMA) but unable to decisively establish a trend. There was some nervousness evident in trading leading up to the settlement and sentiment could depend on the noises coming out of the US FOMC meet.
Nobody expects a policy rate hike on the dollar but even threats of a hike in the near future could also cause some panic. In the meantime, China has made another rate cut and Mario Draghi has reiterated the European Central Bank's determination to do what it takes. This should keep liquidity up. If the FOMC is also dovish, the risk-on sentiment will return in the short-term at least.
The Indian indices are in a twilight zone. The Nifty and Sensex have climbed above their own exponential 200-DMA Averages but failed to break above the simple 200-DMAs. The trend is best described as indecisive. The Bank Nifty has gone negative following poor results from Axis Bank, among others. The last few weeks have provided a rare example of a time period when the financial index has underperformed the broader Nifty.
Other technical signals are puzzling. Advances have marginally outnumbered declines in the past fortnight. The net institutional position is positive in October with the FIIs being net buyers, while the domestic institutions have sold. Retail attitude seems positive. The rupee has maintained its position above 65. The forex market is liable to stay very volatile. So far, results and guidances don't seem to have pleased the market much but investors were braced for poor results and they have bitten the bullet.
The Bank Nifty is hovering in the 17,300-17,400 zone. Volatility through November is quite likely. A long strangle of long November 17,000p (242) and long November 18,000c (216) costs 458. Breakevens on this positions come at about 16,540, 18,460. Either end could be hit in three big trending sessions.
The brave trader may consider selling this, if he thinks volatility will not rise. As of settlement, there could be some short-covering giving a temporary impetus. If the FOMC outlook is indeed dovish, the Bank Nifty would receive more impetus.
The Nifty's put-call ratios are on the negative side but the PCR is not a good indicator close to settlement. The call chain for November has high peaks at 8,300c-8,700c, with a peak at 8,500c. The November put chain has an open interest (OI) peaks at 8,000p, with ample OI till 7,500p.
The Nifty traded at 8,171 on Wednesday. The trader can look at a bullspread of long November 8,300c (99), short 8,400c (62) with maximum payoff of 63, with a cost of 37. It's 130 points from the spot. A bearspread of long November 8,100p (100), short 8,000p (72) costs 28 and pays a maximum 72, at 70 points from spot.
As usual, a brave trader could sell these spreads with a two-three session perspective, intending to reverse them since premiums usually fall just after settlement. Clarity from the US could help define the trend.
Nobody expects a policy rate hike on the dollar but even threats of a hike in the near future could also cause some panic. In the meantime, China has made another rate cut and Mario Draghi has reiterated the European Central Bank's determination to do what it takes. This should keep liquidity up. If the FOMC is also dovish, the risk-on sentiment will return in the short-term at least.
The Indian indices are in a twilight zone. The Nifty and Sensex have climbed above their own exponential 200-DMA Averages but failed to break above the simple 200-DMAs. The trend is best described as indecisive. The Bank Nifty has gone negative following poor results from Axis Bank, among others. The last few weeks have provided a rare example of a time period when the financial index has underperformed the broader Nifty.
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In technical terms, the Nifty would need to move above 8,190 to breach the exponential 200-DMA and it would need to cross above 8,380 to break above the Simple 200-DMA. On the downside, it has already given positive signals. There have been higher lows since early September when a recent bottom of 7,545 was hit. But the rally has hit heavy resistance at 8,200-plus. If it cannot climb past 8,380, this might have to be written off as an intermediate rally within a bear market.
Other technical signals are puzzling. Advances have marginally outnumbered declines in the past fortnight. The net institutional position is positive in October with the FIIs being net buyers, while the domestic institutions have sold. Retail attitude seems positive. The rupee has maintained its position above 65. The forex market is liable to stay very volatile. So far, results and guidances don't seem to have pleased the market much but investors were braced for poor results and they have bitten the bullet.
The Bank Nifty is hovering in the 17,300-17,400 zone. Volatility through November is quite likely. A long strangle of long November 17,000p (242) and long November 18,000c (216) costs 458. Breakevens on this positions come at about 16,540, 18,460. Either end could be hit in three big trending sessions.
The brave trader may consider selling this, if he thinks volatility will not rise. As of settlement, there could be some short-covering giving a temporary impetus. If the FOMC outlook is indeed dovish, the Bank Nifty would receive more impetus.
The Nifty's put-call ratios are on the negative side but the PCR is not a good indicator close to settlement. The call chain for November has high peaks at 8,300c-8,700c, with a peak at 8,500c. The November put chain has an open interest (OI) peaks at 8,000p, with ample OI till 7,500p.
The Nifty traded at 8,171 on Wednesday. The trader can look at a bullspread of long November 8,300c (99), short 8,400c (62) with maximum payoff of 63, with a cost of 37. It's 130 points from the spot. A bearspread of long November 8,100p (100), short 8,000p (72) costs 28 and pays a maximum 72, at 70 points from spot.
As usual, a brave trader could sell these spreads with a two-three session perspective, intending to reverse them since premiums usually fall just after settlement. Clarity from the US could help define the trend.