Observations & Ideas

#11
Observation Log: 6th May 2014

06 May 2014

Nifty opened with a 20 point gap up today. This was in line with the SGX Nifty which was trading at +30 odd points before the opening session in India.
Bulls started strong in line with our inverted hammer outlook but the bearish pressure was too high throughout the day and finally the Nifty closed just 16 points more than yesterday at 6715. Bulls lost by 4 points or so. A rather dull day but I sense a lot of restlessness amongst the participants. This is only my opinion which needs to be discounted.

Monthly
No change as per last log observation

Weekly
No change as per last log observation

Daily
So our inverted hammer did not get a strong confirmation as we would have liked. Neverthless the support at 6660-6680 looks sturdy.
The match looks equipoised between the warring parties. The chart has completely flattened out and we have entered a congestion zone most probably. I think this is the time for option traders and not futures!

Hourly
The chart is a downward extension after a gap up. We are in a congestion band as per last log.

30 Min & 15 Min
The intraday charts indicate a downward market. We had a SH in the downward extension and if its a flat opening tomorrow then we will continue downwards for a while in the day till sentiments change.

Overall
A hard battle between the bulls and bears is in progress. Someone will give way sooner or later but who will is the question. I am not able to answer this (which is natural). US & EU are all in red and this might have a cascading effect on the Asian opening early morning tomorrow.
 
#12
Ideas: Social media and its worth for traders

The twitter share price prompted me to make this small post. Here is what has happened today!



A couple of months ago we heard of the Whatsapp deal. One of the best articles I came across was by Aswath Damodaran here

He has beautiful points on the deal from the viewpoint of an investor and a trader.

The valuation of these companies are solely based on the number of users and I am certain this will be one of the let downs in this industry when 'monetization' starts being questioned in the future.

Prof Damodaran says
"If you are a trader, play the pricing game and stop deluding yourself into believing that this is about fundamentals. Rather than tell me stories about future earnings at Facebook/Twitter/Linkedin, make your buy/sell recommendation based on the number of users and their intensity, since that it what investors are pricing in right now."

His closing comments are beautiful
"My experience with markets has been that no one has a monopoly on virtue and good sense and that the hubris that leads to absolute conviction is an invitation for a market take-down. To investors who view deals like the Whatsapp acquisition as evidence of irrational exuberance, remember that there are traders who are laughing their way to the bank, with the profits that they have collected from their social media investments. Similarly, for traders who view fundamentals and valuation as games played by eggheads and academics, recognize that mood and momentum may be the dominant factors driving social media companies right now, but markets are fickle and fundamentals will matter (sooner or later)."

If I could add and say technicals will indicate when the 'fickle minded' markets have changed their view.

Have a great trading day tomorrow!
 
#13
Observation Log: 7th May 2014

07 May 2014
A solid red candle day. In line with our 30 Min & 15 Min analysis we had a weak opening. SGX Nifty indicated the same in the morning. We have penetrated the SR levels. Close today was at 6652.

Monthly
Downward extension in progress

Weekly
Downward extension in progress

Daily
As noted price action is in the support area. Volume was a bit up compared to the last four days, this could mean that longs liquidated. We can have a 'TST: Test' of the SR level and a bounce back up or a 'BOF: Break out failure' and a resumption of the upward trend. In my view this will continue to be downwards and sideways due to indecisiveness of the participants. Will have to study the participant wise positions to understand how players have taken their positions.



Hourly
It was a one steep fall downward with an inverted hammer in the last hour. The last two days combined is a big downward extension. Bears would have taken money home.

30 Min & 15 Min
30 Min chart is the same as the hourly. In the 15 Min chart we see the bulls struggling intermittently but being pinned by the bears whenever they tried to fight back.

Overall
Strongly believe this is an options traders market at this time. Kids in my house see a downtrend on the daily chart but are sure this will 'zoom up'! Will study volatility and option strategies over the weekend. Office does not give ample time to read and study but need to be disciplined. Wonder why my employer's share price is in a downward motion even after posting a strong result :D
 
#14
Observation Log: 8th May 2014

08 May 2014
The support holds on at 6660. Morning gap up of 20 points was correlated with the SGX nifty opening. Close at 6660. Globally all major markets in the green today after the Twitter and AIG debacle.

Monthly
No change as per last log observation

Weekly
No change as per last log observation

Daily
Nifty got support at 6660 as expected. Price action flattening out even further. We might have an 'up' day tomorrow after the long series of red days.

Hourly
A small upward extension in the overall downward movement

30 Min & 15 Min
There is a downward trend but with a weak bullish pressure. Maybe this bullish pressure persists to take the price upwards.

Overall
Another grinding day where price remained at the support levels. No breakout or test seen at the moment. Someone's going to give way. And the option sellers enjoy theta decay :)
 
#15
Re: Observation Log: 7th May 2014

07 May 2014

In my view this will continue to be downwards and sideways due to indecisiveness of the participants.
Will have to study the participant wise positions to understand how players have taken their positions.
Hello

Nice Thread :thumb:

Can you tell us more about how you go about it . . .

Happy :)
 
#16
Re: Observation Log: 7th May 2014

Hello

Nice Thread :thumb:

Can you tell us more about how you go about it . . .

Happy :)
Hi Happy!

Thanks.

The data is available. We need to draw inferences for the same. I have picked it up from two other members - Options.Trader and Healthraj. I apply their ideas. I will probably write down my thought process over the weekend. Busy in office at the moment. Sorry.
 
#19
Observation Log: 9th May 2014

09 May 2014
And the kids were right. It indeed did zoom up! Not able to put any rational behind this except that the 6660 support held on. FIIs are sitting on 2+ lakh of long positions on the nifty with less than 1 lakh of shorts. Our markets have reached its life time high but not because of any fundamentals but out of emotion. God save India if the 'made in chandauli' man comes to power.

Monthly
The trend has changed due to the day's 3% up move. Its a hammer in an upward move (though not a perfect one).

Hammer candlestick in Japanese is called 'Takuri' meaning 'trying to gauge the depth of the water by feeling its bottom'. I guess the meaning conveys the significance. A true hammer has little or no upper shadow, a long lower shadow and a body which could be red or green. It has both bullish and bearish meaning depending on 'Takuri' and the trend.

Weekly
The week's candle has 'bullishly engulfed' last weeks losing candle.Will begin tracking volatility soon.

Daily
Clean swipe of the last 9 days of downward extension. Guess lots of intraday traders would have made money. Not really able to put any analysis into perspective because of limited experience of such a move.

Hourly
Looks like the Sydney Tower! We have a small inverted hammer at the top. That was perhaps for the intraday long profit bookers.

30 Min & 15 Min
Same as hourly.

Overall
I would really enjoy next week's market dynamics. Will dare not enter a trade though.

p.s. I would love to trade in shorter time frames at night. But kind of enjoy following Nifty. Will need to find a way to do so. If members have any suggestions you are welcome. Thanks.
 
#20
Re: Observation Log: 7th May 2014

Hi Happy!

Thanks.

The data is available. We need to draw inferences for the same. I have picked it up from two other members - Options.Trader and Healthraj. I apply their ideas. I will probably write down my thought process over the weekend. Busy in office at the moment. Sorry.
Hi Happy

Sorry again for the delayed reply. I will briefly try to cover the points which help us in knowing what the volumes of different participants were in the market and what kind of positions they are holding onto inferring from the open interest of derivatives.

SEBI records all trades for every participant. The same can be found on SEBI website as well as on NSE website here. This is the daily numbers. We also have the historical data.

What do these files tell you?
They tell us the volumes and trades of four types of participants in the market - FIIs, DIIs, Clients & Pro.

What data does it cover?
It has:
Index Future Long & Short
Index Option Call Long & Short
Index Option Put Long & Short
Stock Future Long & Short
Stock Option Call Long & Short
Stock Option Put Long & Short

Do these positions tell us the upcoming move in the market?
No they do not but they give us an indicative idea. It is like getting a glimpse of other's cards. We cannot conclusively derive the market moves. For instance FIIs on 9th May have 2+ lakhs long positions in the index but at the same time their long puts and short calls are over 11 lakhs. There will be a lot of hedging and strategies which might have been implemented. For your reference purpose you can see the spreadsheet screenshot below for the futures contract which expired in April 2014. The clients and FIIs are the biggest players. We can clearly see that clients were short for the whole month (they have larger positions and volumes than FIIs) whereas the FIIs were long. Their volume varied and we cannot conclusively infer any pattern but in the long run know who is bullish and who is not.


What can we do?
We can monitor and see when changes happen. I got some guidance from Options.Trader last year and had a small dashboard on excel which helped me have an overview. You can also work on something. A screenshot of an older version (ignore errors please)


I was reading Lance Beggs blog and he was a little saddened when his young kids said something to the effect that dad's job is 'guessing'. I think the world sees us traders as 'guessers' rather than 'risk managers' who observe, infer and act decisively.
 
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