Indices failed to close above 50DSMA in volatile trade!

Taking cues from asian peers, our indices have opened positive on short covering, both indices traded above 50DSMA till afternoon, heavy unloading of long positions thereafter, brought indices to negative territory, finally closed in negative territory 4th day in succession. US markets closed in positive territory, after volatile trade, on the cooling of crude which corrected by $3.34, finally closed at US$128.95. Surprise upward revision in home sales data of April'08 enthused investors, to go for bargain hunting, as dollar strengthened against Euro and other currencies. CBOE has risen above 20, indicates volatility for US markets. VIX has closed at 28.59 down 13.39% suggests volatility to come down a bit today. Singapore Nifty futures are currently quoting 9 points premium, should give positive opening initially, on short squeeze, as huge short positions were built in the last two days, expecting weakness in US markets to continue.

 

The intermediate trend of our market is down, the initial resistance is placed at 50DSMA 4910.57(Nifty) & 16374.73(Sensex) and unless the indices close above previous week's close Nifty(4946.55) & Sensex(16649.64) with large volumes, the settlement of current series tomorrow will be below the previous settlement (4999.85 on 24.04.2008). Support for Nifty & Sensex can be expected on any weakness at 4830.25 & 16015.56 respectively, which were the settlement closings for march on 27.03.2008. These levels are the final supports for the indices to bounce back, failing which steeper falls can be expected during next month. Markets will be volatile today and tomorrow too, due to roll over positions to next month series.

 

Range for the Day: Nifty might trade in the range of 4830 to 4980.

 

Strategy for the Day: Buy 4800 calls on weakness and 4950 puts on rallies in current series for quick returns.

 

Strategy for June'08: Traders having urge for earning high returns and willing to take higher risk can consider shorting a strangle on June 4800.00 put option and 4950.00 call option at current prices, where one gets a trading range of 4470 to 5280 on Nifty for next month. This strategy remains profitable while the nifty moves within the above range, and one need to protect the breaching of the levels with Nifty futures, otherwise the losses will be unlimited.