Technical Picks | October 27, 2012

Traders await clarity of trend...

Sensex (18625) / Nifty (5664)
We had a great start for the week, as the bellwether indices bounced back sharply after testing the '20-day EMA' and rallied more than 1% to close above the 18750 / 5700 (Sensex / Nifty) mark. Nonetheless, the indices once again failed to break the stiff resistance of 18886 / 5729 and eventually pared down their nominal gains to close marginally above the 18600 / 5650 mark. As expected and mentioned in our earlier reports, the indices are still experiencing a 'Time Wise Correction'. Hence the trend in the short term still remains uncertain. During the week, the most dependable sectors like, consumer durables and FMCG showed tremendous weakness. The realty counters too remained weak whereas the capital goods counters were among the major gainers. The Sensex ended the week with a very nominal loss of 0.30%, and the Nifty lost 0.35% over the previous week's closing.
Source: Falcon

Exhibit 1: Nifty weekly chart

Exhibit 2: Nifty Daily chart

Pattern Formation
The '20-day EMA' and the '20-week EMA' are placed at 18650 / 5667 and 17986 / 5456 levels, respectively. The monthly 'RSI' oscillator is moving higher from the 50 mark and the positive in the ADX (9) indicator is intact. The negative crossover in the weekly 'Stochastic' oscillator is still intact. At present, the value of the Daily 'RSI' oscillator is 52.58. The RSI trading above the 50 mark shows strength of the current up trend. The 38.2% and 50% Fibonacci Retracement levels of the rise from 17250 to 19138 / 5216 to 5815 are placed at 5515, 18416 / 5586 and 18194 / 5515 respectively.
Source: Falcon

and the 'RSI' oscillator is still above the 50 mark. As long as the 'RSI' oscillator stays above the 50 mark, the probability of the market breaking out of the upper range of the 'Channel' i.e. 18886 / 5729 cannot be ruled out. In this scenario, we may see a rally towards 18973 - 19138 / 5757 - 5816. A move 5816 beyond 19138 / 5816 would attract immense optimism in the market and as a result, the up move will get extended towards 19542 - 19812 / 5850 - 5945 levels. On the flipside, the weekly 'Stochastic' is still negatively poised. The impact of this technical tool would be seen if indices sustain below 5633. 18535 / 5633 This may trigger near-term pessimism in the market and as a result, the market may slide towards 5515, 18416 / 5586 and 18194 / 5515 which are 38.2% and 50% Fibonacci Retracement levels of the rise from 17250 to 19138 / 5216 to 5815, respectively. Traders are advised to trade with 5815 strict stop losses as we expect the volatility to increase post announcement of the RBI monetary policy.

Future Outlook
The boredom continues in the market as prices are reluctant to move out of the narrow trading range. It's been nearly 10 - 12 trading sessions that we have been experiencing a range-bound activity. As a result, the hourly chart now depicts a 'Channel' pattern. Hence, we would continue to await the sustainable breakout on either side from the trading range (breakout from the 'Channel' pattern) of 18886 to 18535 / 5729 to 5633 The 5633. '20-day EMA' continues to provide decent support to our market

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Technical Picks | October 27, 2012

Weekly Pivot Levels For Nifty 50 Stocks

SCRIPS
SENSEX NIFTY BANKNIFTY ACC AMBUJACEM ASIANPAINT AXISBANK BAJAJ-AUTO BANKBARODA BHARTIARTL BHEL BPCL CAIRN CIPLA COALINDIA DLF DRREDDY GAIL GRASIM HCLTECH HDFC HDFCBANK HEROMOTOCO HINDALCO HINDUNILVR ICICIBANK IDFC INFOSYSTCH ITC JINDALSTEL JPASSOCIAT KOTAKBANK LT LUPIN M&M MARUTI NTPC ONGC PNB POWERGRID RANBAXY RELIANCE RELINFRA SBIN SESAGOA SIEMENS SUNPHARMA TATAMOTORS TATAPOWER TATASTEEL TCS ULTRACEMCO WIPRO R2 18,920 5,756 11,766 1,440 215 4,006 1,279 1,831 811 279 249 362 347 374 367 213 1,783 374 3,488 629 783 650 1,956 117 583 1,130 166 2,427 303 418 99 646 1,785 591 927 1,394 176 284 857 121 555 830 524 2,308 174 712 713 273 109 416 1,350 2,091 353 R1 18,773 5,710 11,638 1,422 211 3,965 1,255 1,809 787 273 246 355 341 365 361 208 1,727 369 3,449 619 771 644 1,913 115 568 1,104 162 2,378 294 402 95 631 1,747 578 904 1,380 172 279 803 118 540 815 507 2,241 172 696 699 267 107 408 1,332 2,067 345 PIVO PIVOT 18,665 5,676 11,528 1,406 206 3,904 1,222 1,779 774 268 242 345 337 359 356 204 1,694 361 3,414 610 757 634 1,832 114 558 1,077 156 2,350 290 391 92 619 1,682 567 862 1,364 169 276 774 116 531 803 498 2,201 169 687 690 263 105 402 1,318 2,029 340 S1 18,518 5,630 11,400 1,388 203 3,863 1,199 1,757 750 262 238 338 331 349 350 199 1,638 356 3,375 600 744 628 1,789 111 542 1,051 152 2,301 281 375 88 604 1,644 555 838 1,350 166 272 720 112 516 788 481 2,134 167 671 676 258 103 394 1,301 2,005 331 S2 18,411 5,596 11,291 1,372 198 3,802 1,166 1,727 736 258 234 329 327 344 344 196 1,605 349 3,340 590 730 619 1,708 110 532 1,024 146 2,273 277 365 86 592 1,578 544 796 1,334 162 268 691 110 506 776 471 2,094 164 661 667 254 101 389 1,286 1,967 326

Technical Research Team

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Derivatives Review | October 27, 2012

Market below 5630-5640 quite likely

Nifty spot closed at 5664.30 this week, against a close of 5684.25 last week. The Put-Call Ratio has increased from 1.01 to 1.07 levels and the annualized Cost of Carry is positive 6.63% The Open Interest of Nifty Futures decreased by 28.09% 6.63%. 28.09%.

Put-Call Ratio Analysis

PCR OI has increased from 1.01 to 1.07 levels. Compared with last series of consolidation phase, in this series we do expect some volatility to come in the market at least for the first half of the new series. On options front we have observed significant amount of buildup in 5200-5300 put option, while in call option 5900 strike price has seen decent buildup in open interest on weak on weak basis. Maximum open interest in put option interestingly is in 5300 strike price and in call option 5900 strike price has the maximum open positions as of now.

Implied Volatility Analysis

Implied Volatility (IV) for NIFTY has increased from 12.80% to 13.57%. Historical volatility (HV) is at 15.62% and that for BANKNIFTY is trading at 22.83%. Liquid counters having very high HV are SUZLON, IRB, CESC, UNITECH and IBREALEST. Stocks where HV are on lower side are TATACHEM, IOC, ASIANPAINTS, HDFCBANK and MCLEODRUSS.

Open Interest Analysis

Total open interest of market has decreased from `1,60,861/crores to `1,09,145/- crores. Stock futures open interest has increased from `36,991/- crores to `31,133/- crores. Some of the liquid counters which added open interest are DABUR, LICHSGFIN, NHPC, PFC and WIPRO. Open interest was shed in large cap names like AMBUJACEM, CAIRN, HEROMOTOCO, STER and TCS.

Cost-of-Carry Analysis
Nifty futures closed at a premium of 35.00 point against the premium of 36.00 points to its spot. Next month future is trading with premium of 65.20 points. Liquid counters where CoC is high are WELCORP RENUKA, GRASIM, DRREDDY and ARVIND. , Stocks with negative CoC are SUZLON, HINDUNILVR, JPASSOCIAT, CAIRN and STER.

Derivative Strategy
Scrip : NIFTY View: Mildly Bearish Buy/Sell BUY
BEP - BEP - 5550

CMP : 5664.30

Lot Size : 50

Exercise Date (F & O) : 25th. Oct. 2012 Expected Payoff

Price Closing Price (` (`) Expected rofit/Loss Profit/Loss

Strategy: Long Put Scrip NIFTY Strike Price 5600 Series NOV Option Buy/Sell Rate Type (`) PE 50

Qty 50

5300 5400 5500

`250.00 `150.00 `50.00 (`50.00) (`50.00) (`50.00)

Max. Risk: `2500/If NIFTY closes at 5600 or above on expiry.

Max. Profit: Unlimited Profit:

If NIFTY continues to move below BEP .

5600 5700

NOTE TE: NOTE : Profit can be booked before expiry if NIFTY moves in the favorable direction.

5800

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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