Nifty Weekly Forecast From Oct 31, 2011 - Short the market in overbought condition (Expected Trading Range: 4747 - 5410)

Oct 28, 2011 - Nifty Closed today at 5360.70 which is 311 points up (6.10%) from the last week close of 5049.95 on Oct 21, 2011. Nifty was trading in between 5,084.75 and 5,399.70 which is about the swing of 315 points.

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Last Week Analysis - Euphoria on Europe Bailout Fund of $1.4 trillion contributed short covering rally and panic buying

Nifty had an excellent week of 6.10% rally last week. S&P 500 just closed at its 200 days EMA on oct 14 and many investors were treating this level as perfect time to short the market. When Europe bailout fund of $1.4 trillion was approved, entire world market was in euphoria and intraday players and speculators took the long position on stocks. Investors having short position started covering their position with by panic and by margin calls. This would be treated as another bear market rally and it would be a perfect time to liquidate your all long positions and create short positions on equities. Go long on Indian T-Bills and INR. US 30 years treasury prices plunged further this week and it will shoot up in the coming weeks. US treasury is too early to buy and too late to short. US treasuries (Ticker: TLT) would bottom near 100 - 103. TLT closed today at 111.46.

Note: US Interest Rate Bottom retesting will happen again in the coming months.

Last Week Low: 5084.75
Last Week High: 5399.70

Nifty technical levels suggest clear betting on shorting the market now.

If you are conservative investors, then exit from your long positions with the recent rally and hold currency or indian T-Bills. The key support level for Nifty is 5100, 4960, 4800 and 4747. The key resistance level is 5410.0, which is very much unlikely we will reach and go beyond this level. Market is getting ready for imminent correction now. Nifty might experience a double dip in Indian Market along with world market correction in the long term (about 2 years). 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 - Short the Market with stop loss or long on long dated OTM Put options

1. Buy long dated (OTM) put option - at least one month expiry time.

2. Short the market with stop loss order

3. Short the market with long call option (Hedging)

Note: OTM - means Outside the money.

Technical Indicators

10 days EMA: 5152.86
21 days EMA: 5087.51
50 days EMA: 5093.03
200 days EMA: 5409.85

Next Resistance Levels:

Strong Resistence level at: 5409.85 - 200 days EMA

Next Support Levels:

Minor support level at 5093.03 set by 50 days EMA

Minor support level at 4940.95 set on Sep 13, 2011

Strong support level at 4806.75 set on May 25, 2010

Strong support level at 4747.80 set on aUG 26, 2011

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