We had a dream run in Nifty in the first month of 2012 and Nifty is close to the upper end of the channel.As it was a very sharp rally every dip would be a buying opportunity and i would like to buy the dips.If we look at the institutional data FII's were buying heavily since the first week of January and is still continuing that. As of now if you got a buying level close to the bottom he/ she would be in a profit and the market tells you that when every body is in profit it is not good to trade on the long side.Thus if you are into stock specific trading i would like to book profits but investors can stay with their buying positions as this could be first leg of an upmove.We have some crucial resistance points on the upside around 5220 levels in Nifty futures and it would be a break out trade for a nifty trader and the next level on the upside would be 5290. The top of 5220 would be confirmed only if Nifty takes out the previous swing low of 5170.Thus in a nutshell as a trader this would be a crucial time to understand the difference between short selling and profit booking session, don't over trade the market and wait for next entry point from the downside.The market has retraced more than 100% from the 52 week low of 4530 levels and crossed all the major resistance levels. Watch out for levels of 5130 and 5060 on the downside.
Another important index to be considered is Bank Nifty. The banking index is getting locked at 9900-10000 zone and it has to confirm an upmove for any major move in Nifty. As Bank nifty led Nifty from the front it should first confirm a top for any downward move in Nifty. Thus we have to watch these two indices closely to get a clear picture.If we consider the stock specific moves as i said in the previous post IT is the only sector which has not rallied in the previous upmove and there is still some more upside left in IT stocks.I did mention about the spectacular performance of metal index in the previous posts and SAIL and TATA steel confirmed the move. Thus if Nifty continues to move upside i would like to stick to IT stocks and book profits in all the other sectors.As per time cycle below 5170 would confirm the top of 5220 but the reversal would be fast as it is a secondary rally and the week after 5th of February would see some major moves. Lets keep 5130-5290 as the weekly range
