#69 Nifty Update

“DISCOUNT… DISCOUNT…Sale upto 15%”…this is what Dalal Street is stating… Since last month high of 5700 market has discounted almost 10% to 5072 (close)and you may see market discounting upto 15% to 4800. But question arises is this the right time to buy??? or you should wait for stock clearance sale by Dalal street?? ….Markets over the globe are extremely volatile.  There is mixed reaction amongst the investor. Yesterday Bank of America got a notice on fraud of $10 billion on mortgage loans (as per Mint top page) which made stock to fall 20%. It seems market has already discounted the downgrading of US but now people is worried about EU debts and further downgrading of Other countries by S&P. S&P 500 for the first time ever saw all its 500 companies closing in red yesterday. Each and every channel is saying it as a blood bath but actually its a good thing for long term investors. We will get the best buy price at current levels or may be little low. Cash markets wont earn you handsome short term profits in such volatile..if at all you do i guarantee that you will lose it in next trade. Then what will work in such volatile market?? DERIVATIVE Strategies… Minimum Risk and Maximum reward..Best strategy for now is “Long Strangle on NIFTY”…Buy a 4700 Put @ 53 and buy 5200 Call @ 105.. Tgt will be the strike price on either side.. It’s risky in the sense that at least one target should be achieved before expiry….Now you might question that why i have taken a little nearer strike price for call….its because now market seems to recover on short positions practically…there is a gap between 5325 levels which might be filled up and on down side if it falls then it will be at a go…On other side the bid for buy for 3 times more then sell on 5200 call so people are bullish for sure… You must square of your position on the either strike price. People are bullish on Indian markets and expect to consolidate at this levels. Long term investors should buy 25% of its desired quantity and wait for more consolidation phase for rest of the purchase. Today Federal Open Market Commission (FOMC) is gonna met up to review QE3 and decide on interest rate. So any change in interest rate will make market go volatile on either side. Technically market is in oversold condition but EWT suggest that market will consolidate around 4800 levels. Market was almost near to that level and so we can say that market has started consolidating. There is no strategy presently on NIFTY except the above mentioned Long strangle but start booking some profits on your shorts.
NIFTY levels for 10th August:-
R-5118                  S-5056
R-5168                  S-5000
R-5230                  S-4987
R-5280                  S-4900

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