Why Nifty should be sold - because FIIs say so!! - 13-Mar-2013

Nifty- India's benchmark financial markets index is bracing for another fall after making a positive turnaround post budget correction. But what are the rationale behind the same, let us find out:

1) On 13th March, 2013, FIIs bought Index options worth 4000 Crores. Where this buying has arrived, let us find out in FNO Bhavcopy data released by NSE that evening.

2) Given below is the breakup of FIIs Derivative Trading:

3) While looking closer to some Nifty Put Options strikes (5500, 5600, 5700, 5800 and 5900), it is observed that considerable amount of new positions have been added and premium values were up from 11% to 63% for various strikes.

4) Even today at around 2:00 PM, we again picked out data for these strikes and found that the Open Interest is continued to be added and premium value too is getting increased.

5) The charts for few strikes too show the way open interests have been added. Sell below:

5500 Put Options Chart

Nifty Options 5600 Put Strike

Asian Paints is a sell on rise - 11th March 2013

Asian Paints - India's premier paint manufacturing company becomes a candidate for sell due to following reasons:

1) In 5Day chart, the stock is reaching another peak around 4830 from where it is likely to correct. (See Chart 1). The support in that case arrive either at 4725 and then at 4625. Also, RSI close to 80 indicates overbought levels.

2) In the daily chart, one may see that the chart is rising steeply from 4250 levels (28th Feb) with virtually no correction (Chart2). On joining the peaks, one may perceive another peak at around 4830-4850 Rs range. The support in that case comes at 4450.

3) Open Interest is up by 21% and price is up by 2% on day-to-day basis which is a bullish sign for the stock. But we are taking the bet to sell on rise because we have a view that it will soon enter into its resistance zone around 4850 from where it is likely to correct to 4650 Rs.

4) Hence, one may recommend selling stock around 4830-4850 Rs with stop-loss at 4950 and target levels of 4650 and 4400 Rs.

Sell Union Bank on rise - 10th March 2013

Union Bank of India is Public Sector Undertaking bank. The reasons why it becomes right candidate for "Sell on Rise"

1) After steadily fall from 280 Rs levels from 01st January, it found some support around 210. From these levels, it has risen sharply to 233. 

2) Around 236-238 Rs levels, a resistance is seen. Also the recent rally is not backed by strong volumes which indicate it is more of a short covering rally. (See Chart 1)

3) One may sell the bank stock around 236 with stop-loss placed at 243 - above 241 Rs resistance. One may place target price around 228 and then 224 where it is likely to find some support.

Sell PFC on rise - 10th March 2013

PFC (Power Finance Corporation) is India's premier Power Finance company by Govt of India. It is among Navratranas (Most precious companies by Govt of India). The reasons why these are marked as "Sell on Rise".

1) The stock after re-testing the highs of 222 on around 8th Feb has fallen steeply to 190 where it found a good support. It has revived since then but finds a strong resistance around 206 (Chart 1).

2) The stock is into multiple phases of resistance now- 206, 212 and then 222 Rs (Chart 1).

Chart 1

3) Open Interest has increased by 12% on day-to-day basis. The stock has depreciated by 1% even during favorable market conditions on Friday. 210 Feb Call has seen its premium down by 15% on rising Open Interest which again is a negative trigger for the stock.

4) The only grace factor for PFC is that the decline in stock is not supported with rising volumes which indicates that it could be just a stop-over before the next rise.

5) One may sell PFC around 208 with stop-loss can be placed above 212 Rs resistance levels. The first target can be placed at intermediate support of 196 and second one may be placed at the strong support of 190 from where it bounced back last time around.

Wishing you a great trading week ahead :)

Buy Heromotors - 26th Feb 2013

Hero Motors is India's leading two-wheeler manufacturing company. We recommend buy in the stock due to the following reasons:

1) Open Interest in the stock has gained by 11% in today's trade. Its March Futures added 4 Lacs new shares. 

2) Open Interest of 1700 Call Feb has decreased which indicates short covering and hence, put the base around 1690-1700, for now.

3) Trading Volumes have increased by 35% which is a bullish signal, though, delivery volumes have declined which is a bearish signal.

4) The stock has rebounded today from its support trend line (See Chart 1 below). Also, it has closed above its previous short term top at 1695. No near term resistance seen around 1760.

Chart 1

5) On the short term chart (Chart 2), the stock looked overbought and hence, we may see some consolidation around 1700 before it resumes its upward journey.

Chart 2

6) Hence, we may recommend buy around 1690-1698 with stop-loss placed at 1660 and near term target of 1760. The risk to reward ratio is 1:2.33

Best of luck friends :)

PFC is Sell on Rise - 25th Feb 2013

PFC - govt owned Power finance company is a sell on rise recommendation for next week.

1) Open Interest in the stock has risen by 9% on Friday. The share fell down by 2.5%. Both the indicators together indicate bearishness in the stock.

2) Call Writing in 210 Feb calls were seen which is a negative sign.

3) Technically though, the stock look oversold in the short term (see chart 1 below)

Chart 1

4) On long term chart (Chart-2), the stock has fallen from its long term resistance levels of 220-225 Rs. It has now reached its support trend line from where it may rebound a bit. It has to break 215 Rs levels on closing basis to confirm rebound which can enable it break 222 Rs resistance.

Chart 2

5) The combination of Open Interest Data and Technical Charts make it an attractive trading opportunity to sell on rise.

6) One may sell the stock around 208-210 Rs if it tries to take support around those levels with stop-loss of 217 and short term target of 196 and 190. (Risk-Reward Ratio at 1:2 and 1:3)

7) Those who can wish to take long term view risk can sell around 210-212 with stop-loss of 225 on closing basis with target levels of 190 and 175. (Risk-Reward Ratio at 1:1.83 and 1:2.83)

Best of Luck :)

Buy Jindal Steel as it looks oversold - 20th Feb 2013

Buy Jindal Steel as it looks oversold.

1) Jindal steel has been on downward trend. It fell down from 425 Rs to 370 Rs in two weeks time. The stock looks oversold now.

2) The technical chart indicates that it has a support around 375 Rs.

3) Open Interest has increased by 8.5%. Around 6.5 Lacs shares have been added today.

4) 380 Call and 400 Call for Feb has seen maximum increase in Open Interest, which indicates the upside limited for the stock.

4) 360 Feb Put has less build up which indicates support around these levels.

5) Thus, we recommend to buy Jindal Steel around 375 with stop-loss of 367 and target price of 386.

Sell Bharti-Airtel on Rise - 20th Feb 2013

Sell Bharti-Airtel on Rise

1) Bharti Airtel has seen massive correction from 370 Rs levels to 308 in the last one month. Today, as well we have seen the stock under pressure, despite markets rebounding in the last one hour.

2) Open Interest for the stock has increased by 9% on Day to Day basis. Around 14 Lacs shares have been added.

3) 4.6 Lacs shares have been added in 320 Feb Call and Premium too down from 5.05 Rs to 3.45 Rs. It indicates strong resistance around this level.

4) On the technical charts, one may see some support at 297 Rs.

5) RSI too looked a bit oversold and hence, we may see some short covering coming in the stock in the next 2-3 days.

6) Thus, advice is to sell Bharti Airtel on rise around 311-312. One may put Stop-loss at 323 as 320 seems good resistance to overcome.

Happy Trading :)

Straddle Strategy in Reliance Industries

Reliance Industries on Friday signaled out strategies which may result in more volatility for the stock. Here are these:

1) Open Interest is up 12% (around 20 Lac New shares).

a) In Feb Futures, Open Interest added by 6% (5.7 Lacs new shares).

b) In Feb 540 Call, 560 Call and 580 Call, Open Interest of around 8 Lac shares have been added.

These are negative signals for the stock as it indicates call writing.

2) But on the technical charts, a long term support is seen at around 820-840 Rs levels, which is a bullish signal (See Below)

3) RSI is close to 30 now. At 20, it indicates oversold.

So, traders can go for Straddle strategy of buying both 840 Feb Calls and Puts with combined outflow of around 25-26 Rs (Rs. 6500 per pair).

One may put stop-loss at around 20 Rs. Traders can come out of the strategy, once any one of these reach 25 Rs.