Nifty has been driving investors and analyst crazy in last months and in November it was drifting around the crucial turning points on the index. We had advised to go long at 5833 on 29th September or to say October issue. We recommended Hold with tgts of 6212/6370/6500 but we could only achieve 6212 and then we retraced from 6342 to hit a trailing SL at 6200 as we recommended in last issue. Safe traders got a 367points on our nifty call. On our blog we had seen some negative signs and initiated a short call for risk takers but the SL triggered the next day. Nifty is driving really crazy!!! What is making it so??
Fundamental earning season has been better than expected on the Indian grounds but markets have not yet reacted in line with results. Sept IIP was below expectations at 2% and IIP august has been revised to 0.43% from 0.6%. But it was better on YoY or to say MoM basis. But the rising fear was of October CPI which has rose to two digits to 10.09%. Food inflation was the main reason for increased CPI. So currently are economy is in confused state where one side we are noticing improvement in Industrial side while Inflation is at the peak. GDP which was announced yesterday after markets was at 4.8% better than last 4.4% but less than expected. RBI is also confused about economy and not sure about hiking rate. Now markets are waiting for two things. Firstly, new banking license announcement. A new story has built up and was confirmed that TATA group has backed off from the fray to Banking sector. My eyes now are on Reliance Capital who is emerging as strong contender for the license. I would recommend going long on the stock from the view point of 2-3 years. Secondly, people waiting are for the political results which are still difficult to predict. So gloomy picture of economy is now more biased towards bull after GDP data last evening and a strong breakout yesterday on Index. Looking at global markets they are at life time high. QE tapering is eyed by many analyst and I am also supporting the same view. As the report says Treasury yields are increasing in US and the thumb rule says stock index is inversely related to bond yields. Job data are improving in states. So now what we could expect is that FED would announce taper soon which would taken as profit booking on equity around the world. Even the financial end in stated next month could have profit taking effect.
Coming to Charts on Nifty, we could notice a Double bottom formation which has a neckline at 6212 on daily charts. On breakout of the pattern we could get target of around 6480. Indicators on daily charts are expecting a up move. Nifty is well above 50/100/200 EMA. Index has been taking strong support at 100 EMA which is currently at 5960. On Friday it crossed above a resistance line making a complete U-Turn with a drift. Weekly indicators are negative but Elliot wave suggest a move of around 300 points from here while monthly chart suggest that a top is nearby with max up side around 6500. Taking all three time frames we are getting a strong smell of 6400-6500. Currently nifty is no trade zone of 6000-6200 for safe traders.
Our strategy: Risk takers go long on Nifty while safe traders go long above 6212 only, with tgt of 6450. SL comes at 6000 and trailing SL at 6100 once it crossed 6212. On downside SHORT ONLY BELOW 5950.
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Note: All the data and graph is as of 29 November 2013 closing
Disclaimer: I may have personal position in index and above mentioned stocks. Views and News mentioned above may have Errors and omissions. My views are biased more towards technical analysis. Please read and study the market carefully before investing on my idea. For any suggestion contact me on my email. Some words mentioned in article don’t mean their actual meaning. They are correlated for market.