Nifty went down yet again. It touched 5480 and made a small bounce up. Just as one had to wait for two consecutive closes above 5750 for strength, one also has to wait for a few more closes below 5480. If it does, the next support levels are 5440 and 5320-50. Bank Nifty's next support is likely around 11340. We have to reiterate that these reactions are a good opportunity to invest.
Indian markets are expected to open in a negative terrain on the back of unconstructive sentiments on the global space. On the global space Wall Street declines on uncertainty over debt talks US markets ended sharply lower, following a Fed report that said pace of economic growth moderated in many districts and amid growing uncertainty over the ongoing debt talks in Washington and Asian markets follows the heat trading in mixed trend. On the overall basis we are cautious on Indian market trade with support seen near 5,425 broken can even test 5,250 in the near term and any positive breakout would be expected only after 5,550,`` Mehta Equities. It further said the following:
Technical Outlook:
Although the 5,500 was broken early enough in the day- and that too with a down gap- there was sufficient defending of that level particularly by the option traders. It may be recalled that we had substantial positions at this strike level and hence some fight was expected to be put up by the sellers of puts at these levels. Looking at the way the market traded, it does appear that the larger players themselves were involved with this strike and that could be the main reason why there was so much resilience at this level. Market finished thereabouts and the August future is trading at 5,498 as well, so the problems have certainly not gone away. The Aug future debuts with a smaller OI at 19 million shares and this is lower than the 3 month average. Bank Nifty also starts with a lower OI at 7.5 L shares. Even though the stock rollover was reported to be smooth, it appears that the index rolls have been lesser in quantum this month.
The next series also shows 5,400P (49L) and 5,700C (51L) as the highest OI strikes. This is a small range and with the index trading near the lower end of the range, we are likely to see some downward pressure on the index. Another point to note is that the range for July was a smaller one- only 287 points (and that too because we had some bit of extension yesterday!). Typical range for the Nifty per month is around 400 points or more. We have found that when we have a small range move in a month, the next month usually shows a decent range, sometimes a big range. So lets be ready for a larger range month in August. This means more volatile month with prices moving on both sides. The pivot for the month is 5,615 and we are beginning well below this. So initial range expansion may be to the downside. Be alert for that. We shall inform on the key trend change dates for this month in Monday`s letter.
Attached chart today is the Nifty future daily. It can be noted that the prices have now broken below the band clearly and the RSI is also slipping (current 44). So we have to continue with a bearish bias. The resistances through these bands is placed at 5,540 and 5,620. These are also resistance zones based on other methods as well. Using some Gann angle work we find that 5,450 is the nearest support level for today. So check how the market handles itself around those levels if reached. `Willingness to respect that support would be good news. Easy slicing of this would be bad news.
The whole world is worried about the
FMCG is still the top sector leading the index today. The response to results in two leaders were quite different yesterday. While HLL faltered, ITC seems to have tapped into support near 200 and rallied nicely. One can continue to look upon the latter with a bullish eye while HLL may drift lower. We had mentioned about HDFC Bank a week or so ago- the bearish signal below 496 is now flashed. Use current and rallies in this stock to short. Reliance doesn`t look too healthy as it attacks the support levels once again. May be worthwhile looking at bearish scenarios in this name. Try options- they are liquid.
Strategy for the day:
The trend has weakened and looks poised for more declines as the close is weak. With rolls over and no major names in results scheduled for today, we could have the focus shift towards US where lots of heat is being generated with the debt ceiling matter. This can bring some more softness to the market in case there is no ready compromises reached. Stocks are moving with news and results and players in the B group should keep a close track of the newsflow.
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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report
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