Nifty Technical Forecast Weekly Starting August 08, 2011 - Expect a relief rally from Oversold condition

August 05, 2011 - Nifty Closed today at 5,211.25 which is about 271 points down (close to 5%) from the last week close of 5482.00 on July 29, 2011.

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NSE Index in Google Finance

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NSE Index in Yahoo Finance

Last Week Analysis

With reference to last week forecast, I have mentioned that "then there is no support level for Nifty until 5225.80" which came exactly true last week.

Last Week Low: 5,116.45 (Refer to the low point of 5195.90 on June 20, 2011)
Last Week High: 5,551.90

Nifty technical levels suggests more correction ahead towards 4800 level.

A good news for long term investors is they can take 5-10% of their investments into stock positions by going long. But do not expect a return in the short term. Currently it is on oversold condition, a nice rally is more likely. Try investing in high dividend stocks. However if you do want to take any risk, then wait for Nifty to touch until 4800.

Nifty is good to STRONG BUY for conservative investors only it encounters a deep correction which I expect it to go all the way down to 4800 which was set on Feb and May 2010. There might be chance for double dip in Indian Market along with world market correction. With double dip, Nifty is expected to touch 2600 levels set on Oct 2008 and Mar 2009. Wait for some more time to get more clues on "double dip on Nifty"

For Speculators and Intraday Players - OK to go long with Hedging

As per my last week analysis, Nifty came down and closed at 5211.95 compared to support level of 5225.80. A nice relief rally might be expected this week from the oversold conditions.

1. Long on the market and hedge using long put options - known as long position with put hedge.

2. Buy 1X times of put options and 1X time of call option - known as strangle.

Next support level for Nifty is 4800 range suggests taking long position on the market.

Technical Indicators

10 days EMA: 5428.33
21 days EMA: 5489.70
50 days EMA: 5524.92
200 days EMA: 5657.94

Next Resistance Levels:

Resistence level at: 5524.92 - 50 days EMA

Resistence level at: 5657.94 - 200 days EMA

Next Support Levels:

Strong support level at 5225.80 set on Feb 10, 2011 and Jun 20, 2011

Strong support level at 4806.75 set on May 25, 2010

Strong support level at 4718.00 set on Feb 05, 2010

Strong support level at 4003.90 set on Jul 10, 2009

Strong support level at 2620.10 set on Mar 06, 2009 Will reach here with double dip

Strong support level at 2584.00 set on Oct 24, 2008 Will reach here with double dip