Thin volume rally may prove unsustainable. Bearish bias intact in NIFTY.
- Arup Nag
- Dec 30, 2016
- 1 min read
The unchallenged up move of NIFTY in the last 4 sessions amid very thin volumes is a common phenomenon in the last trading week of the year. In the absence of smart money in the market these moves are mostly deceptive in nature. The most probable scenario is NIFTY going to fill the gap at 8235 (9th Dec Low) and reverse from there.
The SMT is still indicating a bearish bias and within the first 2-3 sessions in the New Year we may witness a vigorous reversal. This is also supported by the narrowing spread between spot NIFTY and January futures. Also, the CFD product for this market, the IND 50 has closed at a heavy discount (at 8158 vis a vis spot NIFTY at 8185) confirming the weakness observed via SMT.
However, the anticipated bearish move may not be a big one and in that alternative scenario we might see the SMT falling too much (compared to NIFTY) and ending up in a hidden bullish divergence. If that happens we have to close the bearish hedge with a loss and create bullish position accordingly.
The 7900 puts reached a delta of 0.20 at NIFTY spot 8170 and hence they were squared off with a profit of 40 points. The hedge is being continued by writing fresh 8100 puts.
Tags: hidden divergence, custom indicator, divergence, proprietary trading, futures, trading, smart money tracker, smart money, nifty, indian stock market, forecasting, regular divergence, derivatives, finance, prediction, options, market analysis