The premium on the Nifty January futures with respect to the Nifty spot close widened sharply to 33.35 points on Wednesday, the penultimate day for December futures, due to short covering and also on creation of fresh long positions. The premium of 12.45 points for Nifty December future is quite high considering that it is expiring on Thursday. Nifty January series saw a rollover of about 74 per cent.
The overall rollover of derivatives contracts gained momentum with about 70 per cent of positions being carried forward to the next month. However, CNX Nifty Junior saw sharp rollover of about 93 per cent indicating lot of interest in Nifty Junior stocks. Trading volume also picked up sharply to Rs 91,144 crore, which is the highest so far in this month. Stock future accounted for Rs 67,695 crore while index futures witnessed a turnover of Rs 18,538 crore. e activity was mainly centred around on R-pack counters, thanks to the sharp rally in the last couple of days. Reliance was the most active among them, followed by Reliance Energy, Reliance Capital, Reliance Natural Resources and Reliance Communications.
However, the star performer among them was Reliance Capital, which gained 7.35 per cent. It saw rollover of about 68 per cent to January month contracts.
After remaining on the sell side for quite sometime, foreign institutional investors turned net buyers in the last couple of days. They were net buyers to the tune of Rs 1,986 crore. They were net buyers of Rs 1,760.76 crore in index futures and Rs 275.6 crore on stock futures though they offloaded about Rs 50 crore in index options.
Securities under ban
The NSE has banned six securities – Adlabs Films, Aptech, Arvind Mills, Gitanjali Gems, JP Hydro and Tata Tele Maharashtra – as open interest positions have crossed the maximum 95 per cent of the market wide position limit.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
The premium on the Nifty January futures with respect to the Nifty spot close widened sharply to 33.35 points on Wednesday, the penultimate day for December futures, due to short covering and also on creation of fresh long positions. The premium of 12.45 points for Nifty December future is quite high considering that it is expiring on Thursday. Nifty January series saw a rollover of about 74 per cent.
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