Nifty closed exactly at 4500 inspite of bear pressure! Will there be a relief rally?

After a heavy volatile and selling session on monday, Nifty managed to close at 4500.95 and Sensex closed at 15066.10. Nifty futures closed at huge discount of 35 points indicate that shorts are quite heavy in the outstanding positions, as Nifty made new low for the year 2008 at 4411.60 in yesterday's session. Ever since June series became active, falls are quite larger than gains on indices confirming 'bear grip' on markets. Since markets cannot go in one direction either up or down continuously, there will be bounces and relief rallies intermittantly, due to some positive news flow, and short covering, which cannot be taken as trend reversal as indices are quite below all moving averages as of now. Nifty has closed at the lowest point in 2008, so far and at an important point which will decide the trading band for the remaining week and month, from here. Till date in 2008, Nifty was moving in a band of 4500 to 5000 or 5000 to 5500 range. Now, if it closes below 4500 during this week or by week end, then the bearish ness will deepen and it moves into lower band of 4000 to 4500, which should be kept in mind by investors and traders. Thus, today's trading and closing has important pivot around 4500 on nifty, in my view.

 

US markets were mixed overnight, while Dow closed in positive territory, Nasdaq was weak throug out and closed with losses. Crude cooled off by 5$ from the recent top of 139$ per barrel and trading at 134$ currently. VIX jumped to 32.43 a whopping 22% raise indicates continuation of higher volatility. Singapore Nifty futures indicate 27 points discount currently, while Nikkie has opened with gains. There will be volatility in today's session, and short squeeze can be expected on Nifty futures crossing 4545 levels at any point of time. Thus, it should be the stop loss for nifty futures short position, if one is carrying overnight position.

 

Range for the Day: Nifty might trade in the range of 4400 to 4650.

 

Strategy for the Day: Buy 4700 puts on rallies and 4500 calls on weakness for intrad day trading.