Nifty Weekly Technical Outlook for 02 Nov’15

Tough challenge for small time traders…

From last Friday NSE has increased the lot size of most of the contracts, resultant we need to pay higher margin then what we use to pay. Still I don’t understand what is the logic behind increasing the lot size of Nifty from 25 to 75 (not 50 which was earlier when Nifty was trading near 6000-7000 levels). I feel it’s one of Freebie marketing strategy of NSE, wherein once trader get used to with trading in Nifty, now by force they are asked to pay higher margin or stay away. I was talking with couple of my trader friends and they are really feeling the pain of such move, and at the same time if we see condition of brokers (which is deteriorating day by day), they are further tensed about the business. There are some pros as well, where overleveraged positions by default will remain in control. Anyway, we need to stay in market and will be dictated not only by market movement but by this regulators as well. Lets analyze how to approach market in this week.

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weekly range of nifty

The week passed by…

It was disappointing week for longs and shorts must have enjoyed the ride, as in all five days markets closed in red. At the same time it was really tough time for intraday traders as market corrected but if we see Intraday opportunity remained almost nil, one need to carry the position then and then only one would have made money. Week on week basis Nifty was down by almost 230 points.

  • Technically once again Nifty drift below its 200-DEMA, which is not so healthy sign, and expected Golden crossover of its 50-DEMA also came to halt for now.
  • Nifty retraced almost 38% of rally started from 7540 level to 8336 level, if fails to hold here then 62% retracement support comes near 7850 levels.
  • NF has filled the gap of 8060-8225 and closed above it, and on moving above weekly high, it will target for another unfilled gap near 8322-8360 levels.
  • As depicted in attached chart 14-period RSI has trendline support above 40-level, lets see whether falling momentum got arrested or not.
  • In the last week biggest surprise or disappointment came in from AXISBANK, so as BANKNIFTY which dragged the market lower. However chart structure of BNF and NF remains moreover same.
  • Barring CNXPHARMA most of the Indices gave up their gains, while CNX PHARMA managed to hold little bit, so one may expect some positive momentum in the coming week, which may be used for Index rebalancing.

Derivative Insights

  • In the month of October FII’s have infused almost 3000 crore of capital, whereas DII’s remained net seller to the same tune if we just exclude last Friday’s buying which 1560 crore, so DII’s sold 1509 crore. The game changed in last week of the month were FII’s taken out 1289 crores from the market otherwise their net figure would have been much larger.
  • Week on week basis FII’s have not only reduced long & short position in Index  future but also in options as well.
  • I think FII’s data in respect to Index & Options needs to be reviewed in the coming week, because change in lot size needs to be adjusted. So we’ll be keeping watch over next week.

Last week’s reviewIn the last week I had not released the report but let me put previous week’s commentary here- allow NF to hold and sustain above 8250, if it does then stay put with long position and target for 8325-8350 levels.. area of confluence between 8350-8400, and my anticipation is that, this area will not be taken out so easily, so in the first go I would prefer to take the profit on table, and then evaluate for next move.

Current chart structure indicates underlying weakness, and again Bihar Election result will remain in focus. Nonetheless, immediate support for Nifty is placed at 8025-8050 levels which happens to be 38% retracement of last up move and where again NF will get some psychological support as well. What if it’s taken out, then I will be watching for 7850 to 7720 area. Look for long position if NF sustains above 8120 levels and again game changes on close above 8250 levels. As supports are placed near to current level, I don’t find lucrative to go short in the market, look for short on closing or sustenance below 8000 mark, keeping stop loss near 8050. At the same time long only above 8120.

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