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A warm regards from Krishnamohan Chivukula. The notes are presented to you so that you can look at the way the analysis is being done. Thank you, Kris.(One of our oldest readers)

FnO Datasheet April Series - A primer

By Kris on Sun, 04/01/2012 - 11:23

1. March series expired rather listlessly. It did touch the lows of the month on the expiry day. However, recovered a few points in the last hour to close at 5178.
2. The first day of the series provided some massive bullish fireworks. Call it the bounce from 200DMA, or monthly trend asserting itself, or April series holding its low auction zone point at 5230 - the bounce did materialize.
3. It is surprising to note that, on a day when we have a 100 point bounce on NF on the first day of the series, there has been a reduction 4.6L contracts in the total OI - clearly first round of short covering. Is it weak shorts or smart shorts? At least a 10 million dollar question- if your stake is a million dollars. :)
4. The April series starts with a total OI of 2.09 crore which is generally an average number. However, I am quite intrigued by the FII OI number - which is 3.88L - one of the lowest I am watching, after I started observing this data closely. Are the FII concerned about the GAAR? I guess the key to successfully trading April series lies in solving this low FII OI riddle.
5. The first day of action in April series enhances the suspense around the low OI number further as they have reduced their further by 24K contracts after net selling another 19K contracts. Generally, OI reduction with price rise suggests long liquidation. Did they? :)
6. Let us look a bit more closely at how the April series OI has built up. Between 23rd and 29th March - in 5 trading days, the April series OI has increased by 1.4 crore contracts when NF was trading between 5230-5330. Now, are these longs or shorts? I dont know - but I am sure of one thing. They will not like the price to stay at 5230-5330. Expect price to repel from this zone quite violently.
7. Let us observe the FII OI built up as well for the April series. It is interesting to note that in the last 8-9 trading days, FII have net sold 1.4L contracts in Futures. I guess that is reason enough to believe that they have accumulated shorts. However, I would like to point to the action on 21st March. It is a rather listless day in terms of Action in April series OI - a mere 2L contracts are added to April series. However, FII have net sold 36K contracts that day - and on that day NF rallied from 5330 to 5450. So, is this the top end where they have accumulated shorts?
8. FII OI being very less makes them very nimble. That leads me to believe that, there will be some wild moves this month. Let us watch things as they unfold.
9. We have closed Friday at 5333 - the top end of the range where the entire rollovers happened. Any move further away should cause panic if it is shorts which are rolled over. So, the action in the next week should clear our doubts.
10. Where do we go from here? The FII OI SAR that we track is at a decent 5309. If you are long, use this as your trailing SL - below that, bears will get renewed energy.
11. You can find the entire data sheet here.