This is list of 10 strong futures:
Nifty is in Up trend
 | 4997.05 | ( 0.17 %) | 8.45 |  |
| 1 | 2 | 3 | ||
| Resistance | 5040.25 | 5083.45 | 5111.95 | |
| Support | 4968.55 | 4940.05 | 4896.85 | |
 | 16810.81 | ( 0.13 %) | 21.07 | | |
| 1 | 2 | 3 | |||
| Resistance | 16956.65 | 17102.50 | 17198.22 | ||
| Support | 16715.08 | 16619.36 | 16473.51 | ||
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 23-Oct-2009 | 2731.87 | 3210.67 | -478.8 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 23-Oct-2009 | 1352.82 | 1179.83 | 172.99 |
Market participants straggling in to trade last Tuesday were shaken out of their festive stupor by stocks doing a volte-face and heading southwards. Sensex ended the week below 17,000 while Nifty closed below 5,000. Investors should brace themselves for a roller-coaster ride next week as October derivative contracts roll into expiry against the back-drop of the RBI's monetary policy review and the continuing flow of earnings announcements.
Attention shifted from equities to commodities last week as a weakening dollar sent most commodity prices sky-rocketing. CRB Index that tracks the movement of commodities rose above 470 as crude topped $80 a barrel and gold climbed above $1,060 an ounce again. We retain the view that the CRB index can rise to 480 or 518 before this leg of the rally terminates. The implication for equities would be that the global funds can start chasing commodities again, allowing stocks to take a breather.
Volumes were tepid and breadth too was indifferent through last week. FIIs were net sellers in the second half of the week while domestic institutional investors were net sellers all through.
Interestingly, though the Sensex moved beyond the 61.8 per cent retracement of the previous fall at 16200, BSE 500 has only just reached this level and is facing difficulty moving beyond it. BSE mid-cap index has retraced only half of last year's losses while the small-cap index has not even reached the half-way mark yet in recouping its losses. Oscillators continue to advise caution. Three consecutive down closes last week resulted in the 14-day relative strength index declining below 55. Weekly momentum indicators continue to exhibit negative divergence, but they are moving sideways since August. The Sensex has alternated monthly gains with losses since June this year. October appears set to continue this pattern since the index is already down over 300 points this month.
A five-wave pattern did come to an end last week and the Sensex is currently in a corrective mode. Since the up-trend that has been in place over the last two months is currently being corrected, the decline can persist for a couple of weeks more. But possible levels where this correction can halt are 16,650 and 16,419, which are not very far away.
A rebound above these levels can make the correction take the shape of a sideways move between 16,400 and 17,500.
The move outlined above will retain the bullish medium term perspective and keep open the possibility of a surge to the 17,800 or 18,000 before the rally from 13,219 terminates. Close below 16,000 is needed to signal the end of the medium term up-trend.
A rocky ride is expected next week as the presence of a slew of supports in the vicinity will provide the platforms from where bulls can stage a recovery. The Sensex can decline to 16,650, 16,482 or 16,419 in the early part of the week.
A rebound is possible from either of these levels. But a decline below 16,419 will take the index to the key medium term support of 16,230. Resistances will be at 17,198 and 17,500. Bears will have the upper hand as long as the index trades below the first resistance.
The Nifty declined from the peak of 5,182 recorded on Tuesday to end the week 3 per cent lower.
The short-term trend in the index is down and traders can initiate short positions in rallies with a stop at 5,100.
Move above 5,100 will turn the short-term view neutral again. It, however, needs to be borne in mind that there might not be a deep decline in the near term since the index has the immediate targets of 4,926 and 4,862.
The 50-day moving average at 4,805 will also be a reliable support in declines and traders holding short positions need to be extra vigilant of reversals from these levels.
As explained last week, one leg of the up-move from August 19 low could have ended in the Muhurat session and the correction that follows is expected to last at least couple of weeks more. The cut can however be shallow and halt in the zone between 4,850 and 4,900.
The intermediate term view for the Nifty stays positive as long as it holds above 4,700. But a sideways move between 4,800 and 5,300 is envisaged for a few more weeks as the move that began in July completes itself.
Dow appeared a trifle nervous at the 10,000 mark and closed the week marginally in the red. But the short and medium-term trends in the index continue to be up.
Close below 9,830 is required to turn the short-term outlook negative for this index.
If this level holds, medium-term target remains between 10,350 and 10,500.
Since crude oil has moved beyond the resistance at $75, next target for the commodity is $90. 1:1 extrapolation of the move from February lows makes even $100 a barrel possible soon.
Pivotals: Reliance Industries (Rs 2047.3) 
Muhurat session on the Indian exchanges saw the RIL stock whizzing up to a high of Rs 2,304 but it could not sustain there for long and closed the session at Rs 2,224. The slide that followed in the stock reiterates the importance of the resistance at Rs 2,200. We retain a cautious medium term view for this stock and the downward targets for this period stay at Rs 1,727 or Rs 1,667. We need to get an emphatic close above Rs 2,200 to mitigate this view.
The short-term trend in the stock is down and it has closed below its 50-day moving average as well as the previous trough at Rs 2,070. Traders can go short in rallies with a stop at Rs 2,115. Downward targets are Rs 1,930 and Rs 1,880.
SBI (Rs 2,353.8) 
SBI moved past its previous life-time high of Rs 2,395 to record an intra-week peak of Rs 2,500. The evening star pattern seen in the week ended October 9 turned out to be a failure and the intermediate term up-trend appears set to unfurl to the second target at Rs 2,553.
However, failure to hold above the previous high at Rs 2,395 and a weekly close below this level is a negative.
The medium-term trend will reverse if the stock closes below Rs 2,050.
The stock is currently in a short-term decline. But it is halting above the first support at Rs 2,330. Traders can hold their longs until this level holds. Decline below this level will imply that the stock is heading towards Rs 2,278 and Rs 2,225. Resistances for the week would be at Rs 2,430 and Rs 2,500.
Tata Steel (Rs 531.0) 
Tata Steel made a false break-out above the medium-term target of Rs 560 to record a high of Rs 600 in the Muhurat session. But the subsequent decline implies that this level (Rs 560) remains a formidable resistance. If we extrapolate the move from March lows, the targets for Tata Steel are Rs 540 and then Rs 676.
We retain the view that traders ought to remain cautious until the stock records another close above Rs 580. The medium-term trend in the stock will, however, reverse only if the stock records a close below Rs 495.
Short term supports for the stock are at Rs 528 and Rs 485. Resistances for the week would be Rs 572 and Rs 600. Failure to move above the first resistance would be the cue for traders to initiate fresh short positions.
Resistances in the week ahead would be at Rs 2,316 and Rs 2,415. Failure to move above the first resistance will imply that the weakness will prolong.
ONGC (Rs 1,175.1) 
ONGC too failed to achieve the break-out targets of Rs 1,350 despite the strong move above Rs 1,230 in the pre-Diwali week.
The decline below this level last week denotes weakness and a possible move towards Rs 1,135 in the near-term.
The medium-term view will however be roiled only on a strong close below Rs 1,125. Subsequent medium-term target would be Rs 993.
The Spread
The short strangle can be set by selling Nifty Oct 5100 call that closed at Rs 19.7 and Nifty Oct 4900 put, which closed at Rs 20.9. The strategy would entail an initial credit of Rs 40.6 per share, which is also the maximum profit that can be made. The initial credit can be pocketed only if the index closes Thursday between the strikes prices of the options sold.
The strategy would turn out of money if Nifty breaches the upper or lower breakeven points. The breakeven for this spread can be calculated thus:
Upper breakeven: Call strike price + net premium received. In this case, it would be 5140.6. This means your spread would become loss making if Nifty moves beyond 5140.
Lower breakeven: Strike price – net premium received. In this case, the lower breakeven point would be 4860, breaching which the spread would be out of money.
Exit options
If anytime before expiry, Nifty breaches either of the breakeven points you can consider a premature closure of the spread to contain losses.
Stocks Strategy: Weak outlook for Tata Steel, GAIL
Tata Steel (530): The Tata Steel stock is likely to see further correction if it dips below its crucial support at 520. In that event, the stock can reach 495 first and then even 445, if the sentiment remains weak. The stock finds strong resistance at 555. As long as it stays below this level, the chances of the stock reaching the downside target levels appear bright.
Tata Steel futures (market lot 764) saw a rollover of 21 per cent, which is low compared with the previous occasions. Besides, accumulation of open position on Friday in the October series itself shows that traders were not covering their short positions. Among the options, calls were the most active in the November series, suggesting the strong emergence of call writers. The 540 November put is less active but commands higher premium as compared with the 540 call. Consider going short on Tata Steel November futures with a stop-loss at 555. Adjust the stop-loss progressively.
Alternatively, traders can also consider writing Tata Steel 540 November call, which closed the week at 25. The maximum profit here is the premium earned while the loss could be unlimited if the stock trends upwards. This strategy is only for traders who are willing to take high risk.
GAIL (364): It was the other counter that turned extremely weak. High volumes also accompanied the recent fall. The stock finds resistance at 372 and support at 360. A drop below the support could weaken it to 345 and may even take it to 325. On the other hand, a move above 372-375 could take the stock to 400-405. The latter's possibility however appears rather remote.
Rollover of open position remained poor at just 16 per cent. Option trading provides little cue, as there was no trading in November series. Even in the current month contracts, options aren't as active.
Consider going short on GAIL India November futures keeping the stop-loss at 375.
Both the short strategies are for slightly longer period.
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Arvind Parekh
+ 91 98432 32381
