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Sunday 27 May 2012

Nifty - Weekly Review - 21st May 2012 to 25th May 2012

After a choppy week, the Bears still in control of the Nifty, at start of the expiry week.

During the past week, we had said, "Bearish hold still on" , and that the Nifty would go through "Grinding Consolidation", then there would be a "Retest of recent lows", and "Choppiness to continue" amidst a "Bias still downwards".

In our last weekly review, we had said "The weekly downturn has got arrested, but no signs of a rally yet. Pain continues. ".

The Nifty has obliged us with moving within its previous week's trading range. The Bulls and Bears both have failed to move the Nifty past the previous week's high and low, which were at 4957 and 4789. The current week's high and low were at 4956 and 4804.

As per the rules of "Identifying Market Trends", the Bears need to breach lows, or the Bulls need to overcome highs. A failure on part of both leads to what is called a "Sideways", "Range bound", "Consolidating" or a "Choppy" market. And haven't we got just that?

The trick of the trade in such markets is always to sell highs and buy lows, where the risk reward ratio is the most favorable. However, more important than that, is to "Trail your stop loss" to preserve profits, which enable multiple entries in the same direction. Also in choppy markets, it is advisable not to wait for targets. We followed these rules, and are happy we did so.


 
The coming week, is a week for the series expiry, and we expect the choppiness to increase during this week, and would refrain from having a detailed trading plan as every other week.

1) The Elder Ray readings : On a weekly basis, the Bull Power has increased from -183 to -152 the Bear Power has reduced from -351 to -304, indicating that though it would seem that the Nifty is about to stage a smart recovery, the Bears are still in control of the momentum. For next week, the Bulls need to overcome 5080 to return to their safe zone, whereas the Bears need to breach 4780 to maintain their downwards momentum.

2) On a weekly basis, the Nifty is still below all its key EMAs and its 50 and 100 DMAs. The 200 DMA at 4822 is a key pivotal support as of now.





3) In the above chart, the volumes have decreased in the mild recovery on the Nifty, suggesting sustainability of the up move. The MACD is clearly in the negative now and is still falling. The ADX is suggesting a down move which is losing some momentum. The Parabolic SAR continues to hold on to its weekly sell signal.

 
4) Considering the above, our weekly trading plan is as under.

a) Go short around 4950, with a SL of 5005 and a target of 4840.

b) Go long around 4850, with a SL of 4835 and a target of 4925.

c) Remain short below 4800.

d) Remain long above 5005. 

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

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Disclaimer : We express our opinions on this blog primarily as a method of record keeping, i.e. archiving what was our opinion about the markets on any given particular day end. As such, trading in derivatives can be extremely dangerous to you and your finances. We strongly advice you to consult your financial advisor before trading based on the opinions published on this blog. We shall not be held responsible, under any circumstances, for any financial loss or profit, that may be accrued due to your trades being affected by our opinions.