Our indices have recovered the entire losses posted on tuesday(03.11.2009) by wednesday (04.11.2009), thanks to fund buying since the markets were oversold, coupled with short squeeze in index heavy weights like RIL etc. Both Nifty and Sensex in the process have created upward gaps, which indicates the bull pressure, which might be tested and covered sooner than later. Nifty closed around October Closing level, and the immediate hurdle is 4750 series settlement level, which nifty needs to cross and close above it. However, the levels of 4800 and 4850 will offer stiff resistance, way a head. CBOE index and VIX raising to levels of 29 after a prolonged stay at around 23 to 25 levels suggests of higher volatility. Higher volatility in weak markets indicate possible bottoming.
Owing to the fundamental and economic data pouring in around the globe, there is no reason for markets to be exhuberant for some time, the 10% correction in our markets from 52 week highs happened with great speed and in less time, so some more spending in a range of 4550 to 4850 on Nifty shall be good for resumption of rally later. Break out or Break down of these threshold levels will move the markets into the direction upward or down ward, which need to be closely watched.
Options are the best products in these times, as IVs are low, since stoplosses need to be at deeper levels if one wants to take a position in futures.
Range for the Nifty today: 4660 -4750 -4800.
Strategy for Day: Buy Straddle of Nifty 4700 strike price for quick returns capturing two way movement and volatility.
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