Markets In Profile 2016 – Part 1 – How Nifty, Bank Nifty and other Sector Indices performed during the 1st 30 trading sessions of 2016
The markets started off 2016 with 1st day positive and later getting sold off and we never visited the highs of the 1st day for the entire 30 trading sessions till 12th February 2016. Nifty went down to test the Value Area low of the May 2014 General Election Results day balance where we were expecting the Other Time Frame players to step in and continue with their buying and it happened so when it tested the value low for the 1st time and instantly rejected.
#NF #MicroComposite #AMT reference from May 2014. https://t.co/j0p50G0lKC
— Justfintech (@justfintech) January 20, 2016
It gave a pullback which looked like a trend change but later when it tested for the second time it could not hold the value even though it gave a sharp pullback but failed to reject it completely and the very next day the huge sell off started. The fall is attributed to Global markets turmoil but then Indian Indices have underlying of their own and as and when the constituents of the Index move up or down, the Indices will move accordingly so the charts of Indian Indices showing selloff are enough to go short on them.
Have been lazy to regularly post the Daily FII activity posts regularly but they were selling Index Futures continuously and buying Puts which pointed to this massive selloff. To remove emotions completely from trading is a state of Meditation and I am not an exception yet. Was lucky enough that the buy at 7227 i had entered did not get traded and even in the pullback the low it made was 7227.10 so again no fill and I refrained from buying at market else would have been an extremely bad emotional trade just by assuming things that were still not evident on the chart.
Higher VIX added to the pain as the Option IVs went on increasing and the PE writers who were having a wonderful time also got a sudden blow with the massive down move.
Lets have a look at the Market Profile Charts
Nifty Futures Micro Composite Market Profile Chart – 12-02-2016
As we can see in the above chart we have auctioned in the range of the Trend day of 12th May 2014 ( Range marked in grey area on the right side ) and rejected the LVN of 6910 swiftly. Its early to conclude that we have reversed the trend but early indication is shaping up as we auctioned above the day high on Friday and held on to the DPOC and the VWAP at close. Will be using the MC Value areas for further clues of a trend reversal and ideally acceptance within the upper balance required for a trend change ( positive reversal).
Nifty Futures Monthly Composite Market Profile Chart – 12-02-2016
As we can see in the above Monthly composite Market Profile chart, the distributions are spread across the range of the month in parts and can get a clue that the auction is not time bound to enter balance or imbalance just in a particular day or week or month. Its the Price that dominates the fair value and the Market participants react accordingly to the fair and unfair prices. September 2015 is the only month in the above chart where we can se almost a balanced distribution and then a breakout towards the earlier upper distribution and a failure there leading to this massive sell off. We have entered the long term demand zone from where this rally started in May 2014 and very likely to see a reaction from the long term buyers in the coming days. The primary hypothesis going forward is to find buying interest either at the Fridays close or above the Friday’s high and auction upwards towards 7070 7155 and if does not meet selling then carry the trend up towards 7250 and 7375. Secondary hypothesis is to find buyers and try to push up but get rejected and drift down towards Friday’s low and below. The 3rd and the least preferred hypothesis is to find sellers either near friday close or lows and drift down and push towards 6780 and later 6545.
For Short term trend trading I prefer to follow the MC Values marked at the right side of the above chart.
Bank Nifty Futures Micro Composite Market Profile Chart – 12-02-2016
Similar to Nifty futures, Bank Nifty futures probed into the trend day range of 9th May 2014 and gave a swift rejection from that zone and is giving an early indication of a trend reversal around the corner.
Bank Nifty Futures Monthly Composite Market Profile Chart – 12-02-2016
There is a wide range demand zone below friday’s low and the auction just dipped into that zone and found pretty decent responsive buying which points towards the auction catching up with the Micro composite values of the upper balance. So again similar to Nifty futures expecting some buyers to step in and push the auction towards 14790 and if the buying interest continues then auction further till 15600 levels. The secondary hypothesis is to drift down below Friday’s low and find responsive buyers there and push upwards towards 14790. The least preferred 3rd hypothesis is to find selling at the Friday close and continue to get selling pressure and drift down lower towards 12680.
In the Market In Profile year end post we saw that the PSU Bank and Metal Index were the worst performers in 2015 and not much has changed in 2016 as the PSU Bank Index has lost more then 30% in 30 trading sessions while the Metal Index again joins the losers standing 2nd at 18%. Rest of the Sector Indices have lost between 7 to 18% with the Pharma performing the best. We can have a look at the chart below for percentage gain/loss in 30 trading sessions from 1st Jan 2016
NSE Sector Indices Relative Strength 12-02-2016
Will continue with more parts of this post as and when a bigger move happens and get a broader perspective of the Markets.
Wishing everyone profitable trading days ahead.
Disclaimer :
The above charts are for educational & reference purpose only. Trading in derivatives has high risk involved and not suitable for all investors. The above levels are not a recommendation/offer to buy or sell any or all of the above derivatives. Any person trading or making buying or selling decisions on the basis of the above mentioned levels should do so at their own risk. Justfintech.com / its affiliates / staff will not be responsible for any profits and/or losses arising from the trades executed on the basis of the above levels. It is advisable to consult your personal financial adviser/consultant before entering into a trade. The usage of the charts is subject to Terms of Use, Risk Disclosure / Disclaimer and Privacy Policy of Justfintech.com
