Nifty Weekly Forecast From Jun 04, 2012 - Market to bounce back from oversold condition (Expected Trading Range: 4718 - 5095)
Jun 01, 2012 - Nifty closed today at 4841.60 which is about 79 points down from the last week close of 4920.40 on May 25, 2012. Nifty was trading between 4831.75 and 5020.15 that is the swing of 188 points.
Last Week Analysis - Retesting support level of 4835.65 [May 23, 2012]
Every day news coming out from Euro Zone created a huge panic in the market. As expected Facebook continued its slide and closed today at 27.72 with the P/E ratio of 88.7X. Even though P/E is down compared to its IPO value, still it is huge for social media company. If Facebook did not do well in the next quarter, then it will erase at least 50% of its value and will put FB to trade near teens.
Nifty retested its suuport level of 4835.65 set on May 23, 2012 before making its powerful move up.
US treasuries enjoyed a powerful rally this week and the interest rate reached a low point of more than 60 years. Everyone wants front run the Fed by taking long positions on US treasuries. Fed is not going to buy at high price on its long dated securities. They will make an announcement for QE but when they are going to buy back US treasuries are completely upto US treasury department. They may buy after 3 or 6 months. The most disappointed ameatur investors will exit from long position on US treasury securities. Hence the price collapse of US treasuries inevitable.
US will hold presidential elections on Nov 06, 2012
With respect to US long term treasury prices, TLT closed today at 130.36 which has crossed the doube top of its 52 weeks high point of 125.03. It is the perfect time to initate short position US treasuries. The upside is very much limited on US treasuries and downside is huge. Note that TLT gained 5.64% in the last 3 trading sessions which is huge and historical event.
Last Week Low: 4831.75
Last Week High: 5020.15
Cover your short position and go long on Indian Equities
It is time to cover all of your short positions on Nifty and create new long position. Nifty has reached its short term bottom and getting ready for a big bounce.
If you are conservative investors, hold currency or indian T-Bills. You can take long positions on Nifty between 4000 and 4500. Note that Market will move up now before it goes down!
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 - Long Stocks with Stop Loss Orders and Long Options Strap
CBOE Volatility Index (VIX) closed today at 26.66 today. Before VIX reaches 40, it has to go down first before it moves up. It is also good idea to liquidate your long positions on VIX. 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.
Only if you are day trader, you can have the following options:
1. Buy 2X OTM call option and 1X OTM put option.
2. Long Stocks and stop loss orders.
3. Long Stocks with long put options
Note: OTM - means Outside the money.
10 days EMA: 4920.65
21 days EMA: 4965.67
50 days EMA: 5066.34
200 days EMA: 5132.57
Next Resistance Levels:
Resistence level at 5000.00 set by psychological level
Strong Resistence level at: 5066.34 Set by 50 days EMA
Strong Resistence level at: 5132.57 Set by 200 days EMA
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 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 June 02, 2012