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Tuesday 12 June 2012

Nifty - 12 Jun 2012 - Volatility continues

Bears manage to drag the Nifty back into its trading range. Bulls still hold the sway.

In our yesterday's post, we had suggested "Buy on dips", but the Nifty opened up near resistances, leaving no chance for that strategy. Instead, our plan (b) which said "Around 5125, we will add fresh short positions with a SL of 5135 and a target of 5050." got executed to perfection. Today, the Bears might be aided by global cues, and may be able to open the Nifty with a gap down. However, the Bulls still look good and may succeed in arresting this fall, if not staging a smart comeback.

1) The Elder Ray readings : Bull Power increases from +125 to +152 Bear Power reduces from +35 to +68, indicating that the Bulls are still ahead, in-spite of the drag down on the Nifty. For today, the Bulls need to overcome 5140 to retain their upwards momentum, whereas the Bears need to breach the Nifty below 4985 to regain their lost grounds.

2) The Nifty is now again above its key EMAs and below its key DMAs. The 200 DMA at 5065 could become a critical level to watch out for.

3) The stochastics are in the overbought zone, but have started pointing downwards.

 


4) In the above chart, the volumes have declined in yesterday's fall on the Nifty, indicating susceptibility for a major downtrend as yet. The MACD is rising from the negative, but the histogram is at its recent peak, indicating a weakening up-trend. The ADX is also suggesting a cooling down of the momentum, and is favoring the Bulls. The Parabolic SAR continues to give out a Buy signal.

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

a) Above 4995, we will open fresh long positions with a SL of 4980 and a target of 5075. We will add to these long positions only above 5100.

b) Around 5080, we will open fresh short positions with a SL of 5095 and a target of 5015. We will add to these short positions only below 4980.

Happy Trading !!! 

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