The week ending 23rd August was one of the more volatile markets seen at the NSE with wide ranges seen in Nifty, BankNifty, USDINR and even the Vix.
The Vix went to 30plus and fell back towards 25 inducing a move in the Nifty below 5500 towards 5250 and back.
The downtrend which started from 6093 reached 5254 this week with signs of the 5200 and 5300 puts from higher levels showing covering during the middle of the week. The Fall which was led by the Banknifty also showed signs of short moving out mid week.
The above 2 charts are 60 minute longer term view of the downtrend and we are tracking it through the same intruments we use in the trading room which is vwap and profile.
Being below the vwap line the seller is clearly dominating and anything upto 5600 spot in Nifty will be used to sell into the market.
5600 is the vwap of the decline.
In BankNifty the declining vwap is seen at 11130 which would mean that any rise upto vwap is a selling opportunity.
The above 2 charts are near the 2SD line which means that there won't be any sharp sell-offs in the near term but the market remains a sell on rise.
In the charts posted on the blog on Thursday we noticed a huge short interest buildup in the Nifty especially below the 5500 level. The earlier part of the fall from 5900 to 5480 was through long puts and shorts in the banknifty. The recent fall all of last week through short index futures would be reason to believe that the market is churning again and we may be in the middle of a move away from the 5450- 6000 band the market has traded for this year.
Let's focus more on the shorter term or the activity for next week.
Here are the weekly profiles
The Nifty weekly profile shows a close at the weekly value high and a buying tail at the lows.
In confirmation of the move expressed above through the 2 SD touch and the profile, this shows a pause in the down trend.
A movement above the weekly high would mean that the Nifty starts trading above the weekly VAH which is a short term bullish parameter.
In that case we would expect a move to last week's POC at 5584 in the chart and then VAH at 5688 if it sustains above 5584. These are future levels.
However failure to cross VAH would mean a trip back to VAL or near 5280 to consolidate in the profile.
Like the Nifty chart above the BankNifty also shows a buying tail and a close above the weekly value high.
However there is a minor selling tail also near 9760 which was last week's POC in BNF.
The possibility in BNF from the chart above then seems to be a trade between 9760 and 9300 to cover the single prints and the low volume zone or a move within the value area 9000- 9400.
Option Math is going to decide most of the moves in the coming week. A vix rising higher than 25 next week would mean more OTM puts being bought which would point at more downsides in Sept. The August 5300 put traveled a distance from 3.3 to 114 from 14th of Aug to the 22nd. Considering the downtrend we are in some Sept Puts taken OTM during next week would be handy,