Nifty made a double top at 5181 and Sideways movement continues!!!

Nifty which corrected sharply after making an intermediate top of 5181 on 20.10.2009, to 4538 levels on 03.11.2009, reacted at a faster pace to climb above 5000 levels by November end. The upward push continued in December amidst volatility, and a reaction came exactly at 5181 now, on 03.12.2009, and yesterday correction has set in, as gains on indices and appreciation of rupee became favourable to FIIs in our markets. This week will see some sell off from Corporates, as they draw funds for meeting 'advance tax payment' due on 15.12.2009.

 

While Nifty made a higher low at 4806 on 27.11.2009, and quickly retraced entire fall, whether the present correction/fall halts above it or around the same level, will unfold the possible reversal of short and intermediate trends. From the Options data analysis it appears that puts of strike prices 5000 and 4900 are aggressively sold by bulls and 5200 calls too are shorted on rallies in current series. This indicates a range of 4800 to 5200 for the month, as at present, and some external or domestic trigger is required to break this range which decides the further trend. Any positive news on raise on advance tax numbers which will be known by 16.12.2009, will help bulls to clear the double top formed at 5181 and Nifty can easily race to 5250 - 5290 levels immediately and then to 5555 levels, where the valuations shall look stretched.

 

Many analysts are cautiously bullish and are expecting 5300 to 5500 levels during December itself looking at the liquidity situation and the firmness in global markets. However, I am little sceptical on the second target for this month and 2009, as herd of IPOs and FPOs from both private and public sector companies are in cue, to raise resources through the booming stock markets. RBI and Government of India are watchful and are concerned of flows and appreciation of rupee with huge volatility which is hurting exporters, and liquidity tightening measures like raising CRR, Bank Rate and or REPO/Reverse REPO rates suddenly can upset the sentiment of overseas investors, which might bring in the desired correction breaching the level of 4800 too.

 

Thus, one needs to be cautious, and duly hedge the portfolio, going long on 4800 puts of current month series, or participate in the markets by increasing cash levels to 25%, by selling stocks at current levels and going long on 5200 calls.

 

Nifty Range for the Week: 4800 - 5200.

Nifty above 5120 level and what next????

Well November Series ended around 5005 levels, and markets reacted to DP World Debt Crisis along with global markets next day, where Nifty touched an intraday level of 4806 and bounced back to 4940 at the end of trading last friday. Once the impact of Dubai crisis is estimated and its effect on Indian companies directly or indirectly is clear, there was a smart rally on 30.11.2009, which was the last day of the month, where nifty climbed 5000 level at the opening and closed around 5032 levels. Recovery in Global markets helped Nifty to post further gains yesterday to clear important technical levels of 5080 and 5120 with ease.

 

US markets have posted substantial gains overnight and today the opening should be good for our markets, where Nifty should clear 5155 initially and even challenge 5182 the high of 2009 so far. However, since the rally from 4806 has already given substantial gains some profit booking can be expected in the zone of 5180 to 5200. Investors and Positinal traders who have entered Nifty at lower levels can exit the futures or calls around the earlier high or alternatively hedge the long positions with 5200 puts and ride the rally which might give further upsides of 5290 or 5500 also during this month before 10th.

 

 

Nifty Range for the Day: 5050 - 5100 - 5150 -5200.