Just Imagine yourself on the tip of the Ice-Berg!! When you look down you will feel that ice-berg ends at the water-level but the basics says the height inside the water is more than above water. Nifty traders are exactly standing at the tip of the iceberg. Today we saw nifty closing below 200 EMA for second consecutive day which is weakening the bull run. Political surprise + Cyprus banking freeze has made nifty chart take a u-turn. Three Charts above are of three different markets which are inter-related. Top left is USDINR, Top right is GOVT 10 YR BOND Yield and down center is NIFTY Chart. Bond Yield and USDINR are inversely related to Nifty.. But Nifty may lag in reacting to bond yield. Or you may say that bond chart shows the signal early. Now check out the yellow line on bond chart, it made a top at 7.96% on 4th Feb and it has closed at the same level today which is acting as a resistance. But now we see a rise in yield from monday or next week than that the sign that Nifty may seem downfall. Now taking USDINR chart, it has also the same implications. USDINR has been in the symmetrical triangle formation which could breakout on either side but indicators suggest this time it will break 55.40 which has acted as support thrice but before that 54.95 is a small breakout on the way. Now weakening rupee is another indicator adding to the weakness to Nifty chart.
Coming to our Nifty chart we have seen two things breaking at the same level. First, a trendline as seen on the chart and Secondly, 200 EMA (Not plotted) at 5672. So technically we have got some weakness in the markets. On my Last article 3..2…1..Go!! i mentioned that 5630-5690 is strong support and we did see 300 points rally from that point but than Political instability came as the shock to the country. All the technical and fundamental analyst were made to think other way round and now it seems gates have opened for 5447. In my article i did mentioned that below the support range of 5630-5692 we may see the level of 5447 and now chart has shown signs that IT MAY move towards that level. To support my view, we even have a unfilled gap at 5447 which could be the support to be filled up.
Next week is gonna be important for our markets as Cyprus case would have a final resolution plus financial year ending and top of it holidays in trading session. All the three market moves on next week should be closely watched to predict the future of our market.
Strategy: As i had mentioned in my last article on 25th Feb that 5400-5630 is no trade zone for the long term investors. Yes ofcourse that could be the low but you never know as i said that iceberg could be more dangerous than it seems, so its better we sit quite. 5560 is a small but important hurdle that may act as a key reversal point after 5630 but before 5447. So now add longs only above 5850 or else just hold your position. To hedge you porfolio Buy 5500 PUT Option of MAY expiry at 68. So right now we are in no trade zone. If we see political stability than we may see new high in month of May.