Nifty can dance saala.........to our tune

Pardon the word in the title, but after all, every kid in India is singing this song.

It is quite amazing that Nifty is dancing to the few lines drawn on 7th July, and following the upper and lower levels.

Same chart is reproduced again with updated data till the 30th.

Nifty seems to be well on its way to 4740-4750 in August.

Drawing lines on a chart is child's play, ain't it?

Watch Tata Steel in August, can be bought on any dips with a stop below 575 for a target near 700.

4365 - 70 possible??

After being overtly bullish for the last few days, I am cautiously bullish now.

The market is fast approaching towards being overbought on hourly charts, and hence the cautiousness.

The first hurdle for Nifty spot is 4110 - 4120, and the support level is 3990 - 4020 (it should not go below this level this week, for this bullishness to continue).

It is recommended to remain long, and also hedge the position by buying Nifty puts once Nifty spot approaches 4190 - 4220.

The puts can be squared off in loss once Nifty crosses and closes above 4225 Nifty spot, beyond which 4365 - 4370 looks possible on Nifty spot..

Till then enjoy the see-saw ride.

'See-saw' reminds me of the relation between Nifty and the MCX Crude in Rupees.

Nifty spot high on 8th January 2008 was 6357, which will be a high for the Nifty for months to come (years ?? !!) and the high of crude oil on MCX last week was 6358 on 15th July 2008 for months to come (years ?? !!).

Are the bulls and bears in the stock market and commodities markets playing a game of see-saw like the kids do in a park?

Happy days are INDEED here again

On Monday, much before the market opened, I had hinted at a reversal this week (please refer post - Happy Day are here again). It was mentioned that 'it is highly likely that the level of 3800 - 3840 on the Nifty will be protected'.
The results are in front of you.
Not only this, but another big confirmation is an Island reversal (not again......yes..but this time on the upside); see chart of Nifty futures attached.
Readers of this blog are too familiar now with what happens after an island reversal, and how far can one go. For targets, refer the post on Monday, 7th July which gave possible upside targets.
A free recommendation - Above 649, ICICI bank can go to 690+.

A weekly perspective

Talking of a broader perspective, it is better to look at weekly charts since the hourly and daily charts show only gloom and doom. The island reversal which readers might recall was pointed out here, has really marooned the bulls in the deep sea.

The weekly charts too, don't show any ray of hope, nevertheless, a startling fact comes out.

Since 2nd May 2008, Nifty has been going down and closing negative on a week to week basis, and this has now happened for the last 7 (SEVEN) consecutive weeks.

The next week is a Fibonacci number (8), and a good reason for bulls to show some spine.

It is highly likely that the level of 4800 - 4840 on the Nifty will be protected, and the levels on the upside are as shown on the chart.

A possible final target for an upmove is 4530 - 4540 in the next few weeks. The level 4740 - 4750 looks an impregnable fortress as of now, and cannot be crossed so easily.

To put in a nutshell, happy days might be here again (for the middle aged traders who have seen the old Thums UP advetisements)

MARKET AT LONG TERM CROSS ROADS

When market has been sliding almost every day, it is now time to sit back and have a broader look at where we are going.

All those who are familiar with candle stick charting methods,
will be aware of the basic concept of 'higher tops - higher bottoms'. A strong trend is said to be in place when higher tops and higher bottoms are formed on successive candlesticks.

On a 'yearly basis', we have seen exactly this happening ever since this bull run started in 2003. The high of every subsequent year was higher than the previous year and the low of every successive year was also higher than the previous year. This year too, the high made in January was higher than the high in 2007.

What happened after that is known to all. Now, we are precariously close to the low of 2007, which was 3554, and 12316 on BSE Sensitive Index.

Today's lows are within striking distance from these lows of 2007. I am not trying to suggest that the long term bull run is in danger. Not at all.

However, it is a well known fact that strong trend of higher-tops-higher-bottoms is broken when a previous low is breached. When this happens, it takes quite a while (a few bars - years), for the last high to be crossed.

Thus, if the index goes below 12316 and nifty goes below 3554, I don't think we will see the January highs being crossed at least for the next couple of years.


It must be mentioned here, that almost 2/3rds of the individual stocks have made lows lower than those of 2007 (in my opinion, 52-week low is misleading).

As regards international markets, most of the major markets - DOW, NASDAQ, NIKKEI, FTSE have gone below 2007 lows.

The million dollar question now is, whether we can protect 12316 on the index and 3554 on the nifty.

I am not trying to suggest that if the above levels on Nifty are broken, we will keep going down and down.

The only point is, if Nifty goes below this level, we can forget about a new high for the next few years, (unless, nifty rockets up to a new high in the last 5 months in 2008 - highly unlikely!!) and market will need to consolidate.

SWING TRADE

TRADE FOR 2-3 DAYS

BUY NIFTY MAY 4900 CA NEAR 55-60, AND SELL ON WEDNESDAY AT 10.30 AM

Introductory note

I will be posting swing trades that last for a few days, with a clear entry, stop loss and exit level.

Trades will be posted every weekend. Don't forget to visit this page every Sunday evening / Monday morning.