Happy Deepawali to all of you
As we enter the Diwali Week, We have lot of events that would unfold in the next few days. Tuesday - RBI Meet, F&O Expiry. Wednesday - Muhurat Trading on the occasion of Laxmi Puja (An hour of trading in the evening from 4.30 PM to 6.00 PM), Thursday - Closed on occasion of Diwali. Wednesday also we have outcome of the EFSF meeting from the Euro Zone. So it's an action packed week.
Taking the events one by one.
RBI Meet - Expectations are a rise in Interest rates (Repo Rates & Reverse Repo Rates) of probably 25bps or 50bps.
Impact to the Markets - Rise of interest rates may make Index to move lower. If the rates are kept unchanged then it can be pleasant Diwali Gift to the markets & can rally.
F&O Expiry - October Expiry Month, i.e, From 30-Sep-2011 to till date NIFTY is up a meagre 35 Points. But it was a See-Saw move, NIFTY made a low of 4728 on 4-Oct-2011 & an High of 5160 on 17-Oct-2011. This being a truncated month with just 17 Trading Sessions & Expiry is happening 2 days before the last Thursday of the month on Tuesday due to Diwali.
OI Data suggests that Highest OI in CE's are at 5200 Calls & Highest OI in Puts are at 4800PE. So it's unlikely NIFTY moving beyond 5200 this expiry month nor move below 4800. NIFTY might expire somewhere between 5000-5100 levels.
EFSF meeting - There is a positive buzz surrounding it that there wont be any hurdles in funding for the crisis. With such expectations European Indices on Friday closed with comfortable gains of close to 1.5% and above. Even a small bit of disappointment in the outcome can create a panic in their markets & eventually this would spread to other markets as well.
NIFTY - Coming to our own NIFTY & its charts. The charts doesn't seem positive, courtesy the last hour selling we saw on Friday. NIFTY was rebounding well of the 50EMA (5070), once that broke there was a free fall of close to 40 odd points in less than 15 minutes. This was post L&T Q2 results, which were actually good but their guidance was way too low at 5% (which the markets were not expecting) & hence this counter saw heavy selling.
NIFTY Daily 3 Months Chart
From 05-Oct-2011 NIFTY started bouncing from a strong support levels of 4720-4700. Gained 400 odd points in 10 sessions. Last week it has lost roughly 100 points.
Its taking support at the upward sloping trendline but facing resistance at the Top-Top trendline. It got resisted from the same line on Wednesday & Friday too.
CMP: 5050
Supports: 5050, 4965, 4900
Resistances: 5110, 5160-80 zone, 5230-5320 (Gap Area)
50EMA: 5070, 20EMA: 5026
Indicators: MACD - Has just gone below the Signal line indicating the weakness.
RSI - Pointing southwards but holding on to 50 would be a positive sign for Bulls.
EMA: NIFTY has moved below 5EMA & 50 EMA (Bearish Sign), Took support just above the 20EMA. So going forward 50EMA will be the zone that would act as a strong resistance.
Bottomline: The week ahead looks to be a week that would be in favour of Bears more than the Bulls (atleast the Charts are pointing towards that). Keep a close tab on the news as that would be significant in opening up the Market Direction.
Trading Strategy: One can go Long in NIFTY, once the Top-Top trendline is broken on the upside & NIFTY moves above 50EMA. Stop loss being the Trendline itself.
One can Short once NIFTY breaks the Upward Sloping trendline & gets confirmation of it moving below 20EMA. Stop Loss being the 50EMA.
May The Trades Be On Your Side
Happy Trading / Investing. Would be glad to receive comments from all on the views expressed.
Keep a Stop Loss in each trade you Initiate.
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