Nifty Weekly Analysis - 19-23 December 2011

Finally Nifty retested 4640 and broke below that!!It is expected to slide lower as investors have started squaring off long positions.As said in the previous post Dollar Index crossed an important level of 80 on the upside and it would be a hindrance for any up move in Nifty. If we have a look at the volatility data we can see short positions got accumulated only at the top and lot of long positions got out of the market especially long term investors. It was a crash in every respect as along with Nifty , bank nifty and many biggies registered new 52 week lows. As i mentioned in the previous post Nifty got locked in 4830-60 zone as lot of short positions are still active at that level and it topped out exactly in the same range.It is a good time to do some shopping in the equity segment as the valuations are really attractive.Though we were sitting on cash till now time has come to start investing with a time horizon of 2-3 years.For a trader Nifty could still give lower lows and eventually it could form a low any where between 4500-4300.Thus it could be altogether a different approach in trading and investing at this point of time.As per time cycle there is every chance of a good pull back rally on or before 24th December or 21st of December. Technically charts are telling that it is a crash and we could not find a bottom soon ,but market can do anything and that too to any extreme.Thus i'm not saying that Nifty would show some strength in the near future but one should be careful when every body is bearish in the market as markets usually rally at these times.Look for volatility peaking out and Nifty trading at huge discount as these are some of signs of bottoming out.As a trading level lets keep 4500-4530 as a fair level of the current trend with a reversal above 4860. As of now weekly range would be 4530-4770.I'm uploading the same Nifty chart from 2001-2011 where i was talking about 4500 level.