"All markets world wide have posted substantial gains during last week, on the back of US FED cut of 50 basis points interest rates in FOMC meeting on 18th, our indices, have posted new highs daily from there on after a clear bullish breakout, and closed at all time high close for the week and day on friday. Nifty futures closed at substantial premium due to spot at 15 points in current series and October series have just 5 point discount, shows that lot of short squeeze took place, along with addition of net long positios in next series. Roll overs have begun, and one of the largest outstanding positions roll over to October series, will provide huge volatility this week. The daily turnover on our bourses for the previous 3 trading sessions averages above Rs.90,000 crores, point to greater participation, and adventurous shorts during the day being reversed in the last hour, since the strength in the markets force the day traders to cover.
The indices are posting new highs for the past 3 days, inflation was lowest, and rupee is strong, all point to continuation of interest in our markets by FIIs. The current bull run in 2007 on and off happening, is due to participation of select index heavy weights..viz., Reliance group, Engineering & Construction sector, Banking & Cement sectors. While these stocks are posting new all time highs, Technology sector, is posting new 52 week lows, due appreciation of rupee, and on concerns of possible US recession. FMCG and Automobile sectors which are rate sensitive are also under performers till now. All Technical analysts proved wrong by calling that August lows will be tested sooner than latter after touching previous highs. Further rallies in the markets in our markets might induce the fence sitters, and retail to jump into the fray, due to impatience, and over exuberance can be expected in the days to come. This being the settlement week, volatility shall be high. One need to be suitably hedged on the market to protect portfolio, due to any reversal of the trend, as markets always react suddenly and sharply in long term bull run.
Strategy for the Week: One can go long on 4700 calls on weekness and 4900 puts on rallies in current series, and book profits quickly without waiting till the expiry on 27.09.2007.
Since we are in an unchartered territory, resistances cannot be predicted, only supports to be observed, whether held or breached to know and ride the trend which is up now on:
Short term support for Nifty shall be 4678-4648-4564-4530-4480 and for Sensex shall be 16135-15950-15870-15600-15485
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