Nifty update for 09 feb 2012

It was quite a tough market to trade with. As we mentioned in the previous post there is no need to initiate short positions in Nifty futures before crossing 5330 and we should consider that as a key level of support on any downward move. Nifty is still holding the channel and it shows some weakness only below the above mentioned level. As we could see nifty took a turn around from 5425 levels but the volatility index never turned positive and it indicates it was a just a profit booking at top levels and there are only quite a few short positions in the market. In a nutshell we could see regret from the part of retailers that they could not enter the market at lower rates and they are not leaving any dips into a short selling situation. If we see the history this is the place where most of the retailers are getting trapped on the long side, thus play nifty only with near out of the money options. In the commodities market base metals are showing some strength and as a continuation we could see metal index showing a strong upmove in today’s session. If the metals are going to gain it would be a strong signal for nifty to go up. Except TATA steel every other stock in this particular sector was on buyer’s radar. We have significant resistance points at 5430 as mentioned because we have a 50% pull back resistance at these levels. Thus consider buying out of the money calls only on the upside break out above these levels. We can comfortably buy puts only once Nifty futures crosses 5330 and not before that. Let’s keep 5330 – 5440 as the range and break of this range should be treated as a trading opportunity. On the upside just consider it as a momentum buy valid from an intra day point of view and on the break out of the down side consider buying puts at least for two days. On the break out of 5330 the downside target till remains at 5230 – 5250 levels.