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Nifty: Sell on sharp rise

Nifty: Sell on sharp rise
Highlights

Friday recorded one of the worst falls as it had fallen about 4 per cent erasing entire gain in the week, ending in the red. RBI measure on capital...

Friday recorded one of the worst falls as it had fallen about 4 per cent erasing entire gain in the week, ending in the red. RBI measure on capital flows appears to have taken negative by market and FIIs, surge in gold rate created panic on Friday. May be ‘Change of Guard’ at RBI (from September) could be taken positive by market as easy monitory policy could prevail and RBI, GOI could work in tandem.

Technically, Nifty had entered medium term bearishness and unless it goes above 200 DMA, it would continue to remain bearish. Further, if Food Security Bill is passed, it would put lot of pressure on the exchequer and widen the deficit, which would be viewed negative. Fundamentally, Nifty is quoting below long term average PE and any further fall could make it more attractive. Present divergence between fundamentals and technicals could prevail for some more time.

Friday’s fall indicates market mood, any short term rise may not sustain and it would go a long way for the wounds to heal. Also, in the pre-election year, the populist policies are taken above economic, which would be viewed as negatively.
Nifty is bearish, in all time frames, as long as it trades below 200 DMA. And it can resort to short term uptrend, if it is above 5700. Any rise may be utilised to sell till Nifty closes above 50/200 DMA.

As Nifty is oscillating in a narrow zone of 750 points (ie., 6240 to 5480) in the last seven and half months, a clear direction can be expected sooner than later and the current calendar year range of 750 points would usually get widened to more than 1250 points before the end of the year and it is likely to break on the lower side. For the coming week, Nifty spot is expected to face resistance at 5585, 5660, 5735 and find support at 5435, 5360, 5290. Nifty, presently in short term Bearishness, would get out of the same only on a close above 5700.

Advice for Traders

Nifty rallied sharply last week before falling sharply on Friday. There so strong support around previous low (5480) and if breached decisively, would enter a new bearish zone. Till that is done, better to short only on sharp rally. Further, weekly open level is very important for the entire week. Short positions may be avoided as long as it maintains/closes above Weekly open and vice versa

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