Some facts and some questions for you as I do a round-up of the week’s action in the Nifty as well as the US Futures the ES.
First the facts :
You and I trading between 1-40 lots of the Nifty Futures constitute only 3 % of the Volume generated at the exchange.
97 % of the volumes goes to mutual funds/DII’s, FII’s, P-notes, and institutional houses like UTI and LIC in that order. These guys have got professional knowledge,institutional analysis and uncanny execution styles.They plot every trade and scan the volume charts and the volume patterns.They don’t have magic indicators only a keen understanding of price and volume, backed with a strong knowledge of how the market operates.
Now the questions :
a)Are you as a trader aware and make use of these facts?
b)Do you spend time searching buyer/ seller patterns on a chart or is the time spent on looking at what your favorite indicator is doing on that chart?
c)Is your search for knowledge of the markets qualified as a search for knowledge of an indicator/system ( holy grail?) or that of the price-volume relationships of the markets?
There are no bulls and no bears only buyers and sellers- you have to be the right one at the right time.
Institutional level analysis should include knowing who is in control of the tape, when this control begins to change, where the volume is concentrated and where it starts thinning down.
I’ll leave you to hunt for the answers.
Let’s focus on the charts and the message they are giving :
First a look at the ES chart which broke down yesterday
The chart is that of the SPX futures for the past 5 days.As you can see from the high volume at the top of the chart, the seller tried repeatedly to break below the 1083 level and finally managed to break it on Friday.Notice the high volumes ( yellow ovals) on the breaks.
Sellers have again regained control now over this entire high vol zone between 1074-1096.This zone becomes a resistance point for that market going forward.
Let’s look at the Nifty Future.
This is a chart of the developing monthly value of the future for the july series.
The chart clearly shows a double distribution pattern developing with price currently at the upper high or above the developing value at 5375 levels.
A break below the developing high can mean a quick move to the point of control currently at 5308.This level should provide the first level of support.Below this price can make a move to 5251-5231 ( yellow ovals) which should be the second line of support, below which things turn decidedly bearish.
Purely the fact that we auctioned above value high all through this week, kept our bias positive for the week.
However the markets were on ‘hold’ mode all through thursday and friday, awaiting new information.
With the decline in the US markets, I feel market participants would get the impetus to come out of the “neutral” zone.
5355 on the hourly and 5367-5375 EOD continue to be our reference lines to the downside. 5411 will be the reference level to the upside for Monday action.
Bank Nifty :
Here is the weekly profile of the Bank Nifty future :
This one seems to be forming a P shaped profile with the point of control for the weekly shifting right near the top and large volumes in the 9970 region.
It points to sellers right at the top.
In my post last weekend here we had mentioned 9715-9756 as a reference level for the seller. Once that was overcome it was a straight one way march to 10024 reached this week.This next week, the profile shows that it will be not as easy and sellers should exhibit control early in the week.
Daily value areas are 9989-9969-9949.It’s clean sell below 9940 for 9840 and the previous consolidation region of 9765.
Enjoy your weekend.