FII flows strategy: Buy on dips

The FII and DII are large movers of the Indian markets.

Their recent buying/selling figure can be of some idea in this range market.

The FII have been buying the India equities after two months of selling. They have bot more than $1.1 bn till now. The DII on the other hand have been buyer for last 3 months and have bot about $60 mn till now.

The Nifty till now is 3.7% up this month.  Going further lets see when has FII buying w.r.t market.

I have considered the close and open change as that can correctly indicate the buying and selling pressure.

The above chart clearly shows that FII have been aggressive by buying on dips.

And that’s the only strategy right now. I mentioned it in my post that indices are covering the losses intraday.

India futures: Range trading: Timeframe trend

Indian Indices are trading in a range. The indices though have slightly bullish till they hold 5470 levels.

Lets see how the different timeframe trend is:

As can be seen that the trend is alternating in the time frames which is typical of confusion state.

Its time to relax and learn something and trade light.

India Futures showing momentum: Resistance nearby

Nifty and Bank Nifty futures are still in buy mode on daily charts. The indices are covering the losses intraday.

The resistances though are very close so that can decide that will they turn back from 5600 and 11100 levels or close above them.

The daily bollinger bands are still flat so can expect some more range trading here.

Nifty IV moving higher

Nifty IVs cooled down after the budget and from the last update on 26th Feb. The current IV is higher than the 30 Day and 60 Day HV's.

The IV are not only higher than average but also highest among major stock indices of the world. Here the snapshot:

Worth noting is that the 1 month IV for the Asian Indices are higher than the 3 month IV's.

Looks like funds are bearish for near term but see the indices bullish for next 3 months.

Nifty Bearish Death cross: Breadth following: Is it time for a rise?

Nifty had cross of 50 SMA and 200 SMA. The last such occurrence was in March 2008.
The cross signifies the bearish momentum which has been in place for last 3 months.

Last time the cross took about 2.5 months from the peak and this time it took roughly 3.5 months from the peak.
The 200 DMA though is still rising which is the only bullish sign as of now.

Just a quick observation: The markets after the bearish cross ends higher for next one month. The previous probability is at 70%.

The Bank Nifty cross came last week which shows the banking sector weakness.

Doing such a analysis on F&O stocks shows that 75% of the stocks have bearish cross as of yesterday.

This is clearly a bearish breadth of the market. More details about this in the State of Market report later.

For futures the 5600 and 11100 are resistance for Nifty and Bank Nifty with support at 5400 and 10700 levels. Looking for more range trading here.
In time like these the ladder options strategy is a good one to adopt.

India Sectoral Trend Weekly 4 Mar

Last Week all the sectoral indices rallied with Nifty itself up 4%. This was more of the Budget rally we witnessed.

Since the recovery more or less stalled at Feb highs indicates that the market trend is bearish.

The color of most of the sectors though still remains in Lev Sell or Sell mode.
Not a single sector is in Neutral or Buy mode.

The Bank Nifty and BSE Bank Index is now in Sell mode recovering from Lev Sell mode.

Here is the complete sectoral picture.

India Futures: 5600 is the bulls barrier

Nifty is not crossing the 5600 levels. The close below opening levels on Friday indicated that sellers are looking for higher levels for sell.
The fall came near the 200 DMA (exponential.) Now bullishness will come on close at 5600 above levels.

The sell came at today's open below 5500 levels.

The Nifty bollinger bands are flat and Nifty reversing direction on touching the lower and upper band. The upper is at 36.8% retracement adds more to the resistance at those levels.

All this indicates that the market will be in range mode for some time. Can look at options trading for range behavior now.

HFT: The rise of the picosecond

Today let me share a news article on High Frequency Trading where the trading in near future can be even faster than millisecond. The term of breakup of second is "picosecond." i.e. one trillionth of a second.

How will this affect the traditional trading is yet to be seen?

The article:

Just when you thought high-speed cash equities trading could not get any faster, trading geeks have thrown a new concept into the mix: the picosecond.

 

A second is a long time in cash equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds.

A millisecond is one thousandth of a second or, put another way, 200 times faster than the average speed of thought. In the time it took your brain to tell your hand to click on this article, a broker or market-making firm trading in milliseconds could fill hundreds of orders on an exchange.

Milliseconds, however, are now ancient history. In the past two or three years, trading speeds have been shaved down to inconceivably tiny increments: from milliseconds to microseconds, and more recently to nanoseconds.

But in recent weeks trading geeks have started to talk about picoseconds in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. Put another way, a picosecond is to one second what one second is to 31,700 years.

Speaking at a London conference on Tuesday, Donal Byrne, chief executive of Corvil, a high-speed trading technology company, caused a ripple of audible incredulity throughout the room when he suggested that trading speeds could be reduced to picoseconds in the not too distant future.

Read complete article at  The rise of the picosecond.

India futures change in color

Nifty daily color is now Buy after today's open. If the index closes above the 5600 it will be considered bullish sign and the weekly color will change to Sell mode from Lev Sell mode.

The hourly charts have been in buy mode from 5410 levels and Bank Nifty from 10700 levels.

Today we have got the bullish confirmation in Daily charts. Attached are hourly charts.

Quanting India: What does a 3% rise of Nifty means?

Nifty moved up 3% with the day open being the low and the close the days high. Single side session.

These kind of moves are rare and has a probability of 1-3% which is quite extreme. They are outliers and make the fatty tails.

Anyway what does these kind of move implies going forward. Lets dissect it.

There are many ways these moves can be analysed. I used the following criterion:

1. Is its a bull or bear phase?
2. What is the color of Weekly charts? (Buy/Sell or Lev Buy/Lev Sell)
3. When the nearest bottom (or top for bullish phase) occurred?
4. Previous instances of such 3%+ moves.
5. And lastly the volumes on that day.

The main theme that came out is that in Bull phase these moves come mainly at the top formation while in the bear phase these kind of moves do break the otherwise decline while further upside is not always there.

The top (Close) of such moves do offer resistance while bottom (Low) does not give much support unless it is the first lowest low. In bear phase the move after such days does become more range bound than trading (going by occurrences in past.)

Also there is remarkably more such instances in bear phase than in Bull phase unless the market is recovering from a major bottom. This shows short covering moves in bear phase.

Since we are already in bear phase, I feel that we can expect some sideways trading here with 5600 to be resistance. The trading from here will be erratic with lesser trend trading opportunities.