AD Code

Monday 26 September 2011

Nifty - 26 Sept 2011 - Volatile downtrend to continue

Downward momentum to stay amidst high volatility

As discussed on Friday morning, the Bear attack continues. The Nifty did open in down gaps, traded down to a support level of 4830, tried to fill the gaps with a high of 4930 and closed at 4868 with a 56 point loss on a day-to-day basis. Today too, the same pattern might be repeated.

1) The Elder Ray readings : Bull Power reduced from +19 to -85 Bear Power increased from -132 to -186 indicating that the Bears are in control and a breakdown on the Nifty cannot be ruled out.

2) The moving averages especially the important 13EMA has now gone below the 8EMA indicating start of a fresh downtrend.

3) The slow stochastics momentum indicator has still some distance to catchup with the fast counterpart, indicating more room for a further breakdown.



 4) In the above chart, the MACD is in the positive but reducing. The ADX has generated a fresh sell signal. Remember, ADX signal is an advance signal and should be used patiently. The Bollinger Bands are flattening and indicating a support for the Nifty just below the 4800 levels.

5) Since the ATR is expanding and volatility is also firming up, we will be required to stretch our stop losses from 35 points to 50 points. At the same time, we will also be required to stretch our targets from 60 points to 90 points on the Nifty.

5) Considering all the above, our trading plan for the day requires us to act very patiently yet swiftly during the course of the trading session. We believe that the Nifty will be ranged between 4780 and 4910.

a) We will look out for opening fresh shorts near 4890 with a SL of 4940 and a target of 4800. We will cover all our shorts above 4940.

b) We will look out for opening fresh longs near 4790 with a SL of 4750 and a target of 4890. We will not be long below 4750 at any cost.

Happy Trading 

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