As expected, Nifty crashes to 5555-5500-5460 levels in a one way directional trade and Nifty is now trading below all EMAs and SMAs. VWAP @ close is 5551. Nifty recovers from the low to close the week @ 5512 and has now tested the lower end of the 20-week price channel as shown in the chart.
1) The trailing stop loss for positional shorts initiated at break of 5660 levels will be 5560 (around 5585 in futures prices @ current premium) if not already covered. The premium of Nifty futures at these levels does indicate some short covering and also some fresh longs too being initiated around 5480 levels in the February series as Nifty recovers 50 points from the low to close @ 5512.
2) The level of 5460-5480 if held on Monday should provide some bounce back on short covering rallies intra day up to 5550-5575 levels.
3) The break out from 5477 levels in September 2010 is now corrected. In light of this fact, Nifty could bounce back to 5690 levels if the support of 5460 is held and closes on the back of short covering rally above 5690 to come back into the bullish range of 5725+ levels. This scenario will take at least 4-8 trading sessions after the short-term EMAs stabilize around the support levels of 5480-5555. Till then the trading range could be limited to 5420-5550-5575 over the next week and a short-term bottom is in place for the February series.
4) Break of 5400 levels could lead to a more sharp and severe fall to 5250-5000 levels. Happy weekend! Happy trading!
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