Dear All,
Attached herewith are 2 S&P CNX Nifty charts. If you look at the charts then you will clearly see that the Nifty is facing stiff resistance at the 5720 – 5745 mark due to the resistance line (denoted in red) which has been pretty effective since November 2010.
Our understanding is that although it might be a good level to sell the Nifty, this time around the scenario might just be a bit different. If you look at the numbers then the FII have been buying heavily in our markets and the fall on Friday could be nothing more than profit booking. Monday might turn out to be a more decisive day than ever considering that we already have one close in the red. If we do close in the red on Monday with decent volumes then we might actually witness the Nifty fall back to 5555 levels where it should find some decent buying.
However a close below the 5555 level could essentially see the nifty fall back in the 5400+ region. We advise traders to keep strict stop losses on their long positions and could buy some puts to hedge their long positions. A 100 point fall on the Nifty from the current 5627 level could earn decent money on Puts.
The scenario does change if we do mange to close above the 5730/40 mark. We could have an upside that potentially extends till 6000 levels. If I look at the historical trend in July then the trend has been on the upside with the Nifty gaining a minimum of 100 points in the past 2 years or so. If I was to look at the indicators then all of them suggest that we are overbought but more often than not during a break out these indicators tend to be in the overbought zone.
This time it will be very interesting to see whether we break out or continue the downtrend considering that the FIIs have been buying heavily and the DIIs have been selling. Let’s see who wins this battle but for now trade safe and be light on your portfolio positions.
Thanks,
Dewang K Mehta
DENIP Consultants
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