Nifty Weekly Forecast From August 6, 2012 - Fake Rally Will Continue? (Expected Trading Range: 5151 - 5351)
Aug 03, 2012 - Nifty closed today at 5125.70 which is about 116 points up from the last week close of 5099.85 on July 27, 2012. Nifty was trading between 5129.75 and 5246.35 that is the swing of about 117 points.
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Last Week Analysis - Bullish Breakout after crossing 200 days EMA
US Treasuries (TLT) collapsed from last week high of 132.21 to 127.39. Since it has got no room to rally further, it triggered sell off and favored equities market. Besides the unemployment rate remains unchanged at 8.3 percent. This number really looks good. No, people got used to this number. Getting not worst is considered best to the market?
With reference to http://www.bls.gov/news.release/empsit.nr0.htm/
"Both the number of unemployed persons (12.8 million) and the unemployment rate (8.3 percent) were essentially unchanged in July. Both measures have shown little movement thus far in 2012."
Market rallied strongly following the report and also note that many traders would be on vacation during summer months.
US will hold presidential elections on Nov 06, 2012
With respect to US long term treasury prices, TLT closed today at 127.39 which is little loss for this week compared to the last week close of 128.48. However TLT reached its all time high point of 132.21 on July 25, 2012. It is the perfect time to initate short position US treasuries. The upside is very much limited on US treasuries and downside is huge.
Last Week Low: 5129.75
Last Week High: 5246.35
Not Safe to hold your long positions on Nifty
Nifty trading its 200 days EMA, is considered as an exit point for your long position on equities. It may continue its bull run but it does not promise anything. If you are conservative investors, hold currency or indian T-Bills. You can take long positions on Nifty between 4000 and 4500.
Nifty might experience a double dip in Indian Market along with world market correction in the long term (about one and half 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 - Bet On Volatility
CBOE Volatility Index (VIX) closed today at 15.64 today which is near flat for the week. The collapse of VIX signals that market does not have any fear and is going to make a powerful upmove. Still fundamentally the US market is very week due to unemployment and slumping house prices along with US debt downgrade. Always fundamental wins in the long run. You can consider taking long positios on VIX also.
Only if you are day trader, you can have the following options:
1. Buy 1X OTM call option and 1X OTM put option - Long Strangle.
2. Long Stocks and stop loss orders
3. Long Stocks with long put options
Note: OTM - means Outside the money.
Technical Indicators
Next Resistance Levels:
Strong Support level at: 5164.77 Set by 50 days EMA
Psychological Resistence Level at: 5300.00
Strong Resistence level at: 5360.70 - Set on Oct 28, 2011
Strong Resistence level at: 5633.95 - Set on Jul 22, 2011
Strong Resistence level at: 5884.70 - Set on Apr 28, 2011
Strong Resistence level at: 6134.50 - Set on Dec 31, 2010
Strong Resistence level at: 6274.30 - Set on Jan 04, 2008
Strong Resistence level at: 6312.45 - Set on Nov 05, 2010 (Double Top of Jan 04, 2008)
Next Support Levels:
Strong Support level at: 5103.52 Set by 200 days EMA
Psychological Support Level at: 5000.00
Strong support level at 4835.65 set on May 23, 2012
Strong support level at 4718.00 set on Feb 05, 2010
Strong support level at 4639.10 set on Nov 24, 2011
Minor Support level at 4531.15 set on Dec 20, 2011
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
Posted on Aug 05, 2012
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