Sunday, July 24, 2011

Nifty: Technicals for the Week

The Markets ended up 52 points on the Nifty thanks to a stupendous rally on Friday. The coming week is important because RBI policy announcement on Tuesday, then important Results to come, F&O expiry and then US Debt Crisis Resolution. Lets take a bird's eye view about the Technicals.

1. The Markets are still trapped in a range. I see a break out happening above 5700 or below 5500. Till then its a range bound market with a negative bias not withstanding the Friday rally.

2. We run into a the downward trend line joining the tops from 6339 at 5660. We need at least 3 closes above this to declare a breakout.

3. The 200 DMA comes in at 5718. There is a cluster of resistances from 5650-5720 to clear.

4. Let us look at Elliot Waves. Assuming,
Wave 1 was 6339 - 5177
Wave 2 A was 5177-5944
Wave 2 B was 5944- 5195
Wave 2 C can be till 5962
This is the alternate count.

Preferred Count is
Wave 1 6339- 5177,
Wave 2 5177-5944,
Wave 3 5944 - 5195 and ongoing which can be subdivided into
Wave 1 5944- 5195, Wave 2 ongoing. This count could be invalidated above 5944.

5. The Standard indicators are all in Downward momentum and its is an Option Writer's market.

6. Looking at fundamentals, I feel this is the last rate hike. Reason is growth is slowing down, Inflation is showing signs of being tamed.Also, I have been noticing that Banks have been very stingy in hiking Fixed Deposit Rates. This means that they expect Rates to come down within next 6 months. The Reverse Repo rate is already at previous highs. The Repo Rate last time went till 9 % and now is at 7.5 % so, we are approaching the end of Rate Hike cycle.

7. The entry into Gilt funds or NCDs of India Infoline at 11-11.5 % Rate of Interest is a good entry point now.

8. Gold has been very bullish and technically is looking awesome on the charts. Buy the dips and year end I feel we could see 1800-2000 dollars.

9. I am confident the Debt Ceiling will be raised soon and there could be an initial breakout or false breakout soon.

Trade hedged and trade light.Expect volatility the next week, and expect some big bang announcement next weekend.
Supports at 5500, Resistance at 5700


  1. Hi Nishit,

    Any hint/clue on expected big bang announcement next weekend?

    Thanks in advance.

    with Regards,

  2. It would be the US Debt ceiling being raised. Aug 2nd is the deadline, they have to act before which is Monday next week.

  3. Ok, Thanks.

    But August 2nd is on Tuesday; so announcement NEED NOT/MAY NOT come on the weekend.

    Anyways, thanks for the clarification.

    With Regards,