Nifty update for 24-July-2012

Nifty broke the support zone of 5170 and is heading to lower targets placed around 5050 zone. As i was repeatedly mentioning in the previous posts banking stocks would be better candidates to be on the short side than nifty itself. We could see some deeper cuts in the world markets and though Dow would be getting support close to 12400 it can eventually break that zone and head lower in the near term.The rise in dollar index would be another threat for world markets to rise further and the currency crisis could get dirty with the recent trouble in the US and European markets. As an investor one should be very particular about picking value stocks and one should sit on cash till a good opportunity arises.Nifty broke some of the major moving averages and this tells us nifty is still waiting for an accumulation pattern to move forward. If we have a look into the equity market turnover data heavy volume selling is not visible in large cap stocks and thus we could assume this as creation of new short positions in August futures. Volatility data is showing some short build up at higher levels and 5170-5180 would be a hurdle for nifty to cross and the downside levels are  opening up with sharp whipsaws. As the volatility is rising it is better to be an options buyer than being a writer. The trading range can be 5050-5170.

Stock to watch.

Ranbaxy - The stock is forming a head and shoulder pattern (considered to be a reversal pattern) by spending around 4 months on the upside. It got enough time for the distribution at higher levels and 8-10 % cut is visible if the stock starts trading below 475-480 levels and investors have to be really cautious at these  levels.