Nifty seems to have resumed its downtrend after a much needed bounce to 5000 + levels. The key support levels on the downside are 4920-30 band where lot of buying has happened in the previous week. A break below this can be considered as short build up happening in June futures. As said in the previous post 5000 call got written at 30-35 bands and yesterday’s trading session was justifying that. Thus it is better to avoid any long positions below the support zone as the cut could be severe. For a nifty trader observe the increase in premium before adding any long positions. It is evident that nifty is not showing any addition in the premium and it shows lack of demand on the long side.
We may be close to bottoming out as one of the conditions for the process would be huge discount in futures and the second one is huge rise in volatility where the options premiums are getting expensive.The second condition is yet to happen in the coming trading sessions where we can take a decision about going long in the market. Stocks like tata motors and DLF which were forming a base at lower levels could see major downward move, that too with heavy volume. All banking stocks which were rallying due to short covering would find it difficult to continue to the upside momentum as the major part of short covering is already done. If nifty is not holding the mentioned support zones it is expected to trade lower till 4750-4800 in the short run. On the upside the important levels would be 4970-4980 where nifty started losing the strength.
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