Daily_Nifty_VP's View-26/07/12

LEADER POST for Thursday (26/07/12)

1.         Supports are at 5108/04, 5074, 5060/58/54 and 5047/45 while resistances are at 5112, 5134 and 5193. Two likely +WWs give about 5129 and 5192 (the latter looks unlikely on Thursday) while a -ww gives 5100. Nifty seems to be in a falling wedge and is presently near the upper TL. Thursday being the expiry day, I feel market will be volatile and may show as much as plus/minus 50 point move from today's close. The first day of this expiry closed +ve and hence I feel nifty may close in this expiry above 5149NS, the close of previous expiry. A safe trade would be to buy/sell 5100 CE/PE when nifty is about 5100 provided it happens before 2.40/3 pm. If it remains flat, the loss will be total but small since cost will also small. However, selling options should only be done by experienced traders. Alternately, if nifty revisits Wednesday's low, one can try buying 5100CE or if it goes to 5150/60 in the morning, one can try buying 5100PE. Being an expiry day, trade carefully.

2.         Wednesday's candle is a hammer and meets all but one important criteria for a bullish reversal as of now i.e. (a) it is at the bottom of a downtrend, (b) lower shadow is > twice the real body and (c) it is accompanied by a large volume. The only remaining criterion is to see now whether Thursday opens with a gap.

3.         In the event nifty is going to go down after expiry, Thursday's candle will have to be an inverted hammer. Let's see how it pans out.

4.         PCR at 0.98 and VIX at 16.75. Pre-open high/low at 5192.70/5109.60 and close at 5126.30. It's an inverted hammer but the last two times such a pre-open happened in the last month, market went up. As explained above, a gap up opening will auger well for market today.

5.         AS PER 9.30 STRATEGY, SELL ABOVE 5115NF, TARGET 5086 (AND MAY BE 5065), SL 5145.

6.         Unless NS closes above 5115, it may go down.

7.         Also, today's nifty is in a falling wedge so back to 5126 is possible.

8.         The wedge has broken out as of now. Let's see whether this is a false one.

9.         (In response to a query by LKL), calls are as per strategy while my statement about falling wedge is after looking at chart. They are not related. That's why the need for SL e.g. 5124 for second strategy and 5145 for 9.30 one. So both morning calls remain till SL is triggered. In fact even if 5124NF is triggered for second strategy, 9.30 strategy remains a sell.

10.       By the way, I missed to note that -ww target of 5100 is already met. (Post by Subhash - …. 9.30 strategy target 5086 NF met.

11.       An inverted flag gives 5052.

12.       Nifty opened up with a gap past the first resistance, as stated in the first post. But after remaining flat, crashed in the afternoon. It thus did not close +ve as I had felt it would. Those who took the safe trade of buying 5100ce/pe as advised, made huge money. The targets of -ww and the 9.30 strategy were also met. The falling wedge formed by nifty gave a (false) break out but failed to sustain. The massive fall in the last one hour was completely unexpected, nifty spot making a low of 5033. This makes future of market uncertain as there are no strong supports nearby. Today's candle is thus a big, bearish Marubuzo.

The intraday chart of nifty spot values with 5 min candles is shown below.