A lil bit more about PCR !!!

Well what I am goin to publish below, are inputs added by a friend and an analyst whom I hold in great esteem.His name is Sunil Saranjame and you can find him at The Indian Market Monitor(I found it to be a no nonsense blog..so go there and enjoy!!!)

Sunil Saranjame writes :

We can use Put Call Ratio(PCR) at the extremes as a contrary indicator. PCR is bearish above 1, as there are more puts than calls, and bullish below 1 as there are more calls than puts.

e.g say 1.20 is bearish than 1.15, and 0.55 is bullish than 0.65 etc. But when things go to extreme, it is time for a reversal.

One more thing - a drawback about PCR is that we will never know, whether there are fresh positions being taken, or the existing positions are being squared up!

Thanks Sunil a valuable insight!!!!