Signs of Bulls on the NIFTY?

Chaos is not dangerous until it starts to look orderly. The job description of Technical Analyst is to find order in chaos.

Guest post by Deepak Singh Market Analyst, State of the Market

Last day of Series Expiry

The breakout above 4800 persists and bulls can take comfort from the fact that Nifty has been able to hold on to its gains above 5000. Even the non performing sectors like Real Estate and Banking made a good move this week to cover up for mild weakness in Technology and Oil and Gas Sector (For details, See State of the Sector below). But last few trading session behaviour on frontline stocks and indices does not smack of great strength. Reason - There are too many event risks in next few days and Nifty is just few points below strong resistance levels.

In last few days, Nifty has become completely trendless and choppy and with expiry day, this trend may persist today. Today, I thought let me do a study on Nifty behaviour on expiry day and post expiry.

This is what I came up reading last six months of series expiry

 Nifty generally closes flat (+/- 1%) on expiry day.

 The true range compresses by 40-60% of the average on expiry day. It means expiry days are not volatile.

 Nifty generally makes a directional move one day after expiry (first day of Jan series was an exception)

 Average True Range as of yesterday = 122. A 40% compression means a Nifty range of 70-75 points today. Does that mean - Nifty will move between 5000-5010 and 5070-5080 today? It is highly probable...no guarantees.

 It is best to avoid trading Nifty on expiry day as moves are choppy and less volatile.

As the data in table suggests, nifty makes a directional move only post expiry. With inflation data tomorrow and monetary policy on Tuesday - the event risk is also pretty high over next few days. All this will make Nifty trading very difficult. It is much better to buy tea and sugar stocks and relax than get trapped in two way moves in Nifty.

Read the complete State of the Market Trading Notes –

Your feedback is important to me :-)

Happy Trading

Cheers

Deepak Singh Market Analyst, State of the Market

YAHOO IM - stateofthemarket

All Charts have been published with permission from www.chartalert.com

Disclaimer - The trading notes is Deepak's perspective on the market. The stocks listed here have been selected based on recent performance, and have probability of success in near term. But remember, it's still a probability, and chances are that stock may still not perform as expected. The column is purely for educational purpose. Please use your own discretion in trading. Trading Futures and options involves significant risk. You must consult your own financial advisor before trading to determine if it is suitable for you. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers.