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Tuesday 27 March 2012

Nifty - 27 Mar 2012 - Volatile day unfolds

It will be a volatile day, as weakened Bulls grapple with strong Bears.

Two days ago, we had suggested that volatility will be on rise. This seems to be unfolding now. Yesterday, was a day for the Bears, with the Nifty opening lower and then seeing some follow up selling by the Bears. Also the Nifty futures premium saw some major contraction, with the roll over costs getting higher. This indicates, that the volatility will stay till the current series expires, and then a clear trend will emerge. Today, given the global cues, the Nifty is likely to open with a gap up, but is likely to see some more selling pressure at higher levels.

1) The Elder Ray readings : Bull Power reduces from -5 t0 -23 Bear Power rises from -97 to -124, indicating that the Bears are now strong enough to drive the markets, however, the Bulls have not weakened enough. For today, the Bulls need to cross 5280 to regain their lost territory, whereas the Bears need to break 5155 to continue with their momentum.

2) The Nifty is trading below its key EMAs and also below its 50DMA. However, the 200DMA is at 5154, which could turn out to be a key support.

3) The fast stochastics are just hovering over the overbought zone and are pointing downwards, indicating that there is still some room for some more fall.



4) In the above chart, the volumes are still keeping low, indicating lack of participation. The MACD is continuing to fall, indicating bearish undertones. The ADX is showing strengthening of the Bears, but is not confirming any set trend yet. The Parabolic SAR is continuing with its sell signal. Overall, this is still anybody's market, and one should trade with an open mind.

5) Considering the above, our trading plan for the day is as under.

a) Around 5250, we will open fresh short positions with a SL of 5270 and a target of 5155. We will add to these short positions only below 5125.

b) Around 5150, we will open fresh long positions with a SL of 5125 and a target of 5230. We will add to these long positions only above 5270.

Happy Trading !!! 

For cash market recommendations see our Daily Pre Market calls on NSE

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