Some hopes were raised when the index failed to tip the Friday lows. It then proceeded to move higher, creating a minor- very minor- pattern of up moves on the 5 minute chart of the NF. Can we count on this to build more ahead? Look what we have all been reduced to Hoping and praying for the market to revive That is what bearish phase does to you. Of course one should not build hopes on such tenuous signals- it would be absurd. Like we have written earlier, the market is at an oversold stage and a rally is not at all out of the ordinary. But is it a buy signal? Most definitely not. There is a need to address risk in trading and not keep thinking about rewards. No doubt the one who picks the bottom gets most amount of the profits. But bottom pickers also get their bottoms whacked many times by the market!! In the end, it is not worth it.
Reliance rising, mild rally in metals and a few other sectors, expectations that the US markets may be better on possibilities of a QE3 being announced soon, lack of weakness in Europe despite Germany`s unwillingness to go ahead with the Eurobond issue etc all played a collective role in producing a mild rally. Short covering helped of course. We have almost moved into the last gap zone. Continuation could see the index move towards 4,995 where the next resistance lies. This is also near the weekly pivot around 4,975. So that is the zone for a rally to exhaust. If the trend remains down, then a 2-day rally is par for the course. Of course, something fizzling out right here would be bad news. Reliance looks good for 785 so that is a positive for continuation. Rolls are on and will also be helped by a better trend as it will encourage long holders to roll ahead. Nifty roll spread is about 4-5 points. If this shrinks to near 0, then we may see some upward momentum emerge. So keep watching the spread today. If spread widens, then the opposite will happen.
Strategy for the day:
Look for some continuation upward today also as a minor rally has been set off. Fizzling out of this rally early in the day would be bad news that may need to be actioned with fresh shorts. But if rally continues, then it would be a bit stock specific and one may have to approach with some caution. Not yet time to be adventurous. On a positional basis, as of now, we are waiting to sell higher levels. However, day trader advise could remain different. Bank stocks are still suspect and if weakness resumes, short this sector first.
The indices have closed at the upper end of the intraday range as the bulls were able to offer support at lower levels during the session, aided by short covering on declines. The intraday range specified for the Nifty between the 4900 / 4775 has held as the Nifty trended largely within these levels, thereby validating our intraday levels. The coming session is likely to witness resistance at the 4965 levels on advances above which the 5050 maybe seen if the bears get squeezed ahead of expiry. Support is likely at the 4825 levels. The bullish pivot for the session is likely at the 4875 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 4850 levels below which declines may occur. Traders must watch these levels for signs of trend determination in the coming session.
The daily candle chart of the Nifty shows a large bodied bullish "daki" candle after an indecisive spinning top on Friday - implying the return of the bulls, however temporary it maybe. Our expectations of the temporary bottom being fulfilled, we would like to see follow up buying support above the 4875 levels consistently on Tuesday. The Nifty sustaining below the 4850 levels may trigger a fresh bout of declines.
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