After posting new high for August on 12.08.2008, both indices have gone into correction lead by profit booking as anticipated due to truncated weekend on account of Independence Day Holiday on 15.08.2008. While 100DSMA found to be a heavy supply zone, the indices have breached 5DSMA levels on thursday, a head of inflation data to be released after market hours, but rested on 20DSMA levels. Nifty while found resistance at 4650 level indicated in the posting on 11.08.2008, and it found support or halted at 4420 levels on 14.08.2008, as indicated on that day's posting. Since US markets fared well on Thursday & Friday, last week's correction be termed as reaction after a strong relief rally. Nifty futures closing with a premium of 6 points on thursday, does not indicate creation of shorts in a big way. However, the inflation numbers touching 12.44% last week is in line with RBI expectations, might bring some more nervousness in rate sensitives. VIX closed at 35.24. Now Nifty is currently placed at critical juncture and resumption of uptrend depends on the movement and closing during this week, where the 50DSMA ...Nifty(4298.05) & 20DSMA...Nifty(4394.88) are to be watched for supports, which if breached with volumes confirm completion of the relief rally, and downward trend resumes once again. It is for this reason I have advised to exit profitable long positions and increase cash levels last week. Crude is oscillating between 112$ and 117$ for the present, and break out in either direction will inversely affect the equities, as a sentiment driver.
Asian markets are trading mixed currently, and Singapore Nifty futures are currently quoting flat not indicating any directional move. However, our markets will have initial positive opening and might move in narrow range till cues from European markets emerge and follow the trend thereon later. Volatility might be high from now on, as the fight between bears and new found initiative of bulls intensifies to hold the respective forts.
Range for the Week: Nifty might trade in the range of 4300 to 4550 during the week.
Strategy for the Day: Buy 4500 puts on rallies for intra day trading.
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