Monthly Archives: May 2017

After daily chart, Weekly follows for bearish reversal on Nifty

Nifty had been quite volatile in last few sessions between 9400-9500 but during this course, as as expected in my last post: Is Doji Indicating a false breakout? , Doji did confirm bearish reversal pattern “Evening Star”  on daily chart. What did confirm Doji? ….Red candle on 18th May which closed 50% below green candle just prior to Doji and another red candle on 19th May which made lower low and lower close than the pattern as whole

Nifty Daily Chart

So as we can notice in daily chart above, Nifty has clearly giving Evening star bearish reversal and its approaching crucial level of 9370 which is 20 day SMA (Support intact since dec) and also trend line support stretched from December low. So next week being expiry, do watch out for 9360-9380 as strong level to go fresh short.

But now lets look at weekly chart….

Weekly Chart

Interestingly, On weekly chart  we have got a Grave Stone Doji right on the top which means we can even get another evening star pattern. If we close below 9355 in next week than we can expect 8980-9080 in June which would be just a 38.5% correction to previous rally.  On the other side Good results from PSU Bank and GST is would try to resist fall but we need to wait and watch whats unfold next week.

Strategy for Traders: Short 9500 CE May and Buy 9300 PE June tgt: 9210 sl :9580 on closing basis

Rd disclaimer be4 investing

Is Doji Indicating a false breakout?

Nifty managed to close above 9500 for the second day which made some traders over confidence for some more long trades…but STAY CAUTIOUS! In my last post (Range volatility expected but find sector specific moves) i mentioned to WRITE  9200 PE and 9500 CE , surely you might be in loss for M2M in CE writing but wait.  Open interest data is still suggesting a strong resistance at 9500.

To support our profit booking view for near term on Nifty, today on daily chart we have got a Doji candle which is a sign of pause to current trend. It has got more significance today as it is at the high of current trend and also indicators are in overbought position. So what could confirm its role of reversal???…”Candle Tomorrow” ! Watch out for Opening of Nifty, if its below  9517 and we dont pinch a new high, there are 70% chances that we could get a reversal sign on close tomorrow.  May be i would consider last two sessions close as a false breakout for short term traders.

On other side if we look at global markets, they are already showing signs of weakness since last two sessions and also bullion markets are in strong short covering move which is a sign of Equity market reversal. So strategy would remain the same on Markets as last post:  writing calls on Nifty and going short on Nifty Bank! 

Happy summer trading with strict stoploss!

Range volatility expected but find sector specific moves!

After a long time got something to write for Nifty as until last week we were trading strictly in the range of 9000-9360! Finally, this week we got new high 9450 and managed to get life high weekly close. Banking sector was leading markets with PSU Banks outperforming as i had predicted on 25th April in my post “Still some more time to have trust in PSU Banks” ! But now i feel for short term things are turning around.

After a massive rally in Banking stocks , now we have started getting some negative news from banking companies such yesbank’s AGM report, weak mid-cap numbers and many more.

As we can notice in daily charts of Nifty bank above, index has weakening momentum. RSI has already given bearish crossover on its average which is the first sign of weakness. Secondly, two consecutive bearish candle’s on the top are also support profit booking view in coming months. The Blue Box marked is the area of trading until May expiry which suggest that now Nifty Bank could be volatile in that range of 22000-23000. So avoid any long trades as of now because we are near to the higher range. Can look out for stock specific short term selling in Banking Counters.

Where we can expect strong profit booking in Nifty bank with almost 1000 points, on other side, Nifty is expected to be volatile with profit booking on Nifty bank to be balance by IT and to some extent Pharma sector. 

As we could notice in the nifty Daily chart above, we broke out of consolidation range of 9000-9380 last week and now we have widening range of Nifty to 9250-9500 for the rest of the series. One steep fall to 9280 could be expected but we should hold around 9250 as still weekly momentum is expected to be strong. 9250-9280 has lots of support factor like 20 days SMA, trend line support stretched from 9th Nov low and Open interest support. So as a trader i would short Nifty for few session with sl at 9500 while as a investor would wait for 9250 to park my liquidity.

Then what could counter balance Index and Banking fall?…….. IT Sector….

IT sector as noticed in the above weekly graph was in a strong down trend since start of the 2015, as in the white channel. But now new weekly upward channel (Blue channel) has taken a lead which would mean now IT stocks could outperform. Already in last week we some signs from TECHM IT leading markets ahead. So be Long as a trader in next week

Which could be other sector to watch out? …Pharma Sector.

Pharma sector has been most under-performing after IT sector since 2015 where our pharma companies have been under USFDA scanner. But now things are looking to be cooling down and worst seems to be have discounted in pharma sector. NSE Pharma index is at 9 years support which is 200 Weekly average as represented by yellow line in graph above. So still strong momentum hasnt build up which could confirm long positions but we can start accumulating pharma stock as we could expect sharp surge anytime in next 3 months. Start scanning pharma counters.

So strategy now for public participants:

Nifty Index: Write 9200 PE and 9500 CE 

Nifty Bank: Write 23000 CE and Buy 22500 PE with stop loss at 23200

IT Sector: Be long on INFY (tgt 1000) and TECHM (tgt 460)

Pharma sector: Accumulate Sun Pharma and Mid cap pharma stocks.

Read disclaimer on kushghodasara.com