Page 3 - Derivatives Strategies

A 200-point move on Nifty in either direction will set the trend

The trend looks unclear with the stock market swinging in both directions in the past few sessions. Expiry considerations are having an effect in pulling down premiums. Traders can afford to take long positions very close to money. However, it's possible that premiums have dropped too sharply and implied volatility is under-stated.The latest corporate data is reasonable but the macro-economic data is poor. Politics in the form of assembly elections, geo-politics and FII attitudes are all likely to influence movements. There could be some clarity by the weekend.The Nifty continues to hover close to its own 200-Day Moving Average (200-DMA). It has moved above and slid below without a decisive swing in either direction. This volatile behaviour makes it very hard to definitively call the long-term trend. However, breadth and volume indicators look positive.Ideally, the Nifty should move, say three per cent (200 points or so) above the 200-DMA (the simple 200-DMA is at around 7,820). But, t

More gains needed to confirm an uptrend

Sentiment seemed strong where Indian stocks were concerned, with a surge on Monday. Q4 results are looking good so far, with quite a few positive surprises. However, the global situation still seemed to cause concern with weakness in China and signs of slowdown in the US also. India-investors are also focussed on politics where the logjam continues, what with the Agusta scandal, the Uttarakhand imbroglio and assembly elections are also in progress.The Nifty continues to hover quite close to its own 200-Day Moving Average (200-DMA). It moved above briefly and then it slid below and it has just about moved above the 200-DMA again. This volatile behaviour means that it is still hard to definitively call the long-term trend bullish. The long-term trend does seem to have turned up since volume and breadth indicators look positive.But, this cannot be confirmed until the Nifty moves, say three per cent (200 points or so) above the 200-DMA. The Nifty has so far failed to cross resistance at ar

One decisive session in either direction could define the trend

Global sentiment weakened after the Bank of Japan stood pat and refused to indulge in further easing last week

The long-term trend may have changed to bullish

Profit booking has caused resistance above the Nifty 8,000 levels

200-DMA breach indicates positive trend

The IMF downgraded its estimates for World Economic growth and that was interpreted to mean more liquidity from central bank action

Short-term signals are bullish

Global sentiment continues to look reasonably strong and investors are now focussed on earnings season. Information technology (IT) bellwether, Infosys kicks off the earning season with its results due on Friday. The expectations for Q4, 2015-16 are not high and that could paradoxically, mean gains. The indices picked up due to late buying on Monday.The minimal rate cut at the Reserve Bank of India (RBI) policy review last week left some bulls disappointed but it is seen as a positive step. This week features key meetings such as a meeting between various Opec nations and Russia, which could influence crude prices. There is also a meeting between the IMF and the World Bank in Washington. This coincides with a long holiday in India with markets closed from Thursday.Some short-term positions may be closed out on Wednesday because Monday April 18 will be expected to be a big swing session. As of now, the sentiment is mildly positive. A reduction in GDP projections by the IMF could mean th

Uptrend likely to last till RBI policy meet

The uptrend continues with stronger global sentiment as well as some pickup in domestic outlook. The Nifty has moved above 7,700 and the uptrend looks likely to last till the Reserve Bank of India (RBI) policy meet (April 5) at least, in terms of time. A test of resistance between 7,850 and 7,950 could be on the cards and that is crucial. Breadth has been good and there's been high volumes. Domestic institutions (DI) have sold into the rally but foreign institutional investors (FIIs) have been big buyers. The rupee has gained substantially.The US Federal Open Markets Committee left rates unchanged but it produced an advisory, which is being interpreted as positive. Consensus suggests that the Fed is not likely to hike rates more than twice in 2016. The Bank of Japan (BoJ) also chose to leave rates unchanged. So, did the Bank of England (BoE), while remarking on pressure caused by the possibility of Brexit. The BoJ and the BoE will continue with their respective Quantitative Expansions.

Big resistance at current Nifty zone of 7,500-7,650

Domestic institutions sold into the rally but foreign institutional investors have been big buyers

Nifty faces big resistance between 7,450 and 7,600

The market has gained nine per cent since it hit a new low on Budget day. There are some signs of the uptrend running into resistance but the current sentiment still seems bullish. The Nifty hit a new 21-month low at 6,825 before it turned around. By Friday, it had tested the 7,500 mark and settled at 7,485. The breadth has been good and there's been high volumes. Domestic institutions sold into the rally but the FIIs have been big buyers through the week. Global volumes have also improved, after China applied yet another round of stimulus and strong US employment data came through.However, the major market trend could still be down. Many traders and FIIs were net short going into the Budget and some of the momentum has come from covering. On the downside, the low to beat is now 6,825 (February 29 low).On the upside, the Nifty faces big resistances between 7,450 and 7,600. A move beyond 7,600 setting up higher highs would be very encouraging. As the Budget was well-received, a bounce t

Enormous resistances at Nifty 7,250-7,300 levels

Although it ended Budget session in the red, there was a big bounce on Tuesday, as the index moved up by over three per cent and nearly 250 points

Further bearishness seems much more likely

The market slid through the last seven sessions, despite the proximity of the Budget. It may need an extraordinary turnaround in sentiment to cause a trend reversal. Overall, global volumes have improved, after the Chinese markets re-opened. There was a mild recovery of sentiment after the Saudi-Russia freeze on crude production. But, crude has fallen again. Forex markets remain in complete disarray with unpredictable movements in major currencies.In India, the major trend is clearly down. FIIs have been consistent equity sellers since November 2015. Retail investors have been forced out after January. Domestic institutions remain net positive, but they have not stemmed the tide.The Nifty bounced from its latest 21-month low of 6,869 on February 12, but it was unable to move past resistance at the earlier low of 7,241 (January 20). On the downside, the low to beat is therefore 6,869. Assuming the bear market stays in force, even if the 7,250 resistance is broken, the rally could termin