Nifty futures held the support zone of 5180 (as said in the previous post) and gave a stop close to our resistance zone of 5240 where lot of long positions got liquidated on monday. Volatility index closed on a negative note indicating some short covering happening at lower levels. Though the premium was rising marginally it indicates short covering than long accumulation. Short covering rallies happen in every down trend and there is nothing surprising about that. Though nifty futures held the support zones many large cap stocks did make new lows. Stocks like L & T and Axis bank look the weakest of all as it made a new low in today’s trading session. As the fall happened on monday traders have got enough time to write 5300 call and that would still remain as an advantage for option writers. Thus any close below 5300 levels or close to that might be still a weaker sign for nifty till it breaks out above the previous high of 5350-5360 zones. Thus if there is a short covering rally play it with an intraday perspective and no need to carry those long positions as it won’t be sufficient for a break out. On the downside levels of 5050 – 5040 are still open as the structure of some major stocks got destroyed and they need some time for accumulation for an upside rally.

If there is a short covering rally in nifty these stocks would likely to lead (above the previous high)

Lic housing, Century textiles, Orchid chemicals, HUL

Negative Bias (below previous low)

Ultra tech cement , ACC , Bank of India