Nifty weekly update 9-13 January 2012

Nifty had a quiet week and Nifty futures held our range of 4690-4840. It is still within that range after successfully testing 4690. If we analyse the turnover data we had a good advance/decline ratio in favor of bulls with short positions accumulating only on a single day. Thus through out the week we could see some buying activity happening especially in banking.Short accumulation happened only on Friday's opening trade and those shorts got covered supported by buying at lower levels.I would like to read it as a rally contributed by buying and not because of short covering. The rally would be a false one only below 4690. As said below 4700 we squared off all the longs but buy puts only below 4690.If Nifty is not even ready to go and fill the gap of 4640 i would not be in a hurry to create short positions.4840-50 levels have to be watched on the upside as we have a major trend line break out on the upside above these levels.Option traders are advised to create long straddles with near out of the money calls and puts as the break out is expected soon.You could see some short covering happening in weaker stocks in the cement and auto sector. Bank nifty would be an interesting chart to look as it is a clear break out above 8500 and as i said in the previous posts banking should hold for any upside rally in nifty.It should continuously trade above 8500 for banking stocks for a decent move.As we have a bad result season coming up consider this as a relief rally before that.Dollar index rallying above 80 is still a concern for Nifty and consider that as a serious threat for nifty in the near term.Thus lets keep the same 4690-4840 as the range for the coming week. Options writers could have made use of the range in a profitable way.