Cease fire on Dalal Street last week

Last week saw a fierce fight between the bulls and the bears, and although some would say that bulls won, I am not sure.

A V shaped recovery was only to facilitate expiry of huge quantity of options that had been written, and the 'maandavli' was to ensure that expiry is near 5000. No one would have expected on Tuesday when Nifty made a low of 4786, that there will such a sharp recovery.

Yes, a recovery was on the cards at the huge support zone of 4760 - 4800, however, it was the ferocity that shook out many.

The maandavli of bulls / bears is over for the May settlement and a fresh settlement has begun.

2 important levels are shown on the chart, where bears might try to hold the bull by the scruff of their necks.

I still feel this is not a correction, but a 'downtrend', and such V shaped recoveries can bring out the bulls only to be shocked by a gap down opening.

It is going to be a fun filled month of June - definitely not for the weak hearts, where again, the range can be big.

I am expecting at least 4650 in June.

Above is purely my view and will go wrong if the market keeps going up, and crosses and closes above 5200 on the Nifty.

THE BEAR MIGHT BE TIRED NOW

The image says it all.

As expected in the update on 9th May, Nifty has lost almost 9% from the April close to the lowest level on Friday, all in just 3 weeks. This has made all indicators on the daily time frame extremely oversold, and a pullback rally is in the offing now.

In my opinion, the bear, after a tremendous onslaught over the past few days, looks tired now and needs a rest. This is true all across the world markets.

This is also generally a period, when the baby bulls come out and rejoice, and start shouting that the last 2 weeks was just a correction, and that Nifty is now headed for 5500 levels and then 6500 and then....

I seriously doubt this!

Just one word of caution for the bulls - please keep an eye in the rear view mirror - and look for the charging bear once he completes his rest.

For those who believe the next rally will just be a relief rally, levels given on the chart will help.

The first confirmation of this will be seen if Nifty spot rises above 4947 on Monday, which confirms the bullish hammer pattern that Nifty made on Friday. Once this is done, the previous low of 4842 should not be breached - this is the stop loss for any longs now.

A rally to 4990 - 95 before Thursday is possible, but it may not cross and close above that level in this May expiry.

Subsequent to that, there might a fall to 4900 - 4910 level, and then a rise to 5055, which will be a key resistance. A cross and close above 5055, can take Nifty to 5185.

I seriously doubt if 5055 or 5185 will be crossed in June.

THE BEARISH VIEW WILL BE NEGATED ONLY ON A CLOSE ABOVE 5200.

I have a suspicion, a lot of bears will be trapped in the next couple of days, and then as always, a lot of bulls will be trapped again later.

I might be completely wrong, if Nifty cannot go above 4947 and keeps falling - but the risk: reward is in favour of being bullish for now.

ANOTHER ROLLER COASTER RIDE IN THE OFFING?

Amazingly, Nifty behaved exactly as antcipated last Sunday.

Now, over the weekend, everyone is wondering - what next?

Everyone is now looking at the 200 DMA which is at 4981 as of today.

One hint regarding whether this level will be broken is generally given by Options data - and it seems bulls are intending to defend the 200 DMA at least for now.

Have an eye on the following levels:

4900 ce - 165 (current 200); if the level of 165 is broken decisively on the gap down on Monday, then 4981 might be tested.

However, there is a catch.

Someone is trying hard to prevent Nifty from going down in a hurry. Apart from the Options data, this is more apparent from something else that was noticed in the last few minutes on Friday.

NiftyBEES made a low of 507.6 (equivalent to Nifty 5076) and rocketted to a high of 518.25 (Nifty level of 5182) within a matter of 5 minutes almost towards the close. Moreover, this was with very heavy volumes of 12500 after 3.25 pm. Refer chart posted here.

This only means one thing - Nifty might again surprise everyone, by recovering from the lows next week, and might rise all the way to 5180 levels once by expiry.

All this sounds strange - but stock markets have a tendency to surprise everyone - on the downside, and also on the upside.

So, be prepared for another roller-coaster ride next week.

Keep an eye on 5026 on Nifty spot to start with and the 4900 Ce level given above, and then 4981 and also the NiftyBEES and you will know what the Nifty wants to do.

For long term investors, do not invest in Bharti right now in a hurry. Although it can give some fast upmoves, it seems to be going towards a good support of 232 soon, and if that is not held, then even 134 is possible, and then all the way down to 59!!

Do not invest in telecom stocks in a hurry!!

Correction starts -with a bang

As has been mentioned on several occasions, Nifty could not close above the crucial 5350 - 5400 band and the month of April gave too many whipsaws - the market refusing to go down. This led many to believe that this will continue forever. However, one needs to be aware that a major contributor towards the rise in the Indian markets have been the FIIs.

Whenever the FIIs decide to sell, they are not bothered about the support levels and invariably, this leads to gap down openings in the Indian market. The major reason for this is the fact that DOW retraced exactly 61% of the crash of 2008 and could not close above 11300.

Although everyone is saying that the 200 DMA which is currently at 4961 will hold, I have my doubts. The 200 DMA being tested twice within 3 months (8th February and now) is not a good sign.

The market is in an oversold state right now, and there might be a rally to 5148 - 60 level next week. The best possible scenario is a rise to 5225.

As long as Nifty stays below these levels, it can start its downward journey and the next fall, can take it to 4766, perhaps in May itself. Nifty can be out of the woods only on a close above 5280 in May - which seems extremely unlikely for now.

The logical question in everyone's mind will be - where will this correction end?

I would not be surprised to see Nifty at 4200 or even 3790 some time this year - yes, in 2010.