Monday, July 4, 2011

EOD Analysis for 4th July 2011 and Outlook for 5th July 2011

Nifty opened on a strong note yet again but started crumbling as the day progressed. The OI in the opening part of the day for Nifty futures stood at 21.8 million and after a brief correction, there were some gains on Nifty again with rise in OI by 1 million and another 1 million added in OI by EOD

This is the 3rd consecutive close for Nifty above 5608; the upside or downside is getting limited due to lack of volumes. Banknifty managed to stay rangebound, go towards 11400 but could not sustain due to lack of volumes.

Way Forward
Since we had 3 consecutive closes above 5608 and 5th July marks the turning point for the next move down, we can expect profit booking to start from tomorrow; however, 5608 is an important level and if Nifty closes above 5608 by EOD tomorrow as well, 5608+ levels will be maintained on EOD basis until Wednesday evening as well and then on Thu and Fri we can expect the correction [Probability = 10% for continued closes above 5608]

As mentioned earlier, I still stick with the forecast that Nifty will start a rough ride downwards from tomorrow until Friday and retest the 5408-5440 levels and Banknifty will retest the 10660 crucial support level. Please note that the markets are neither in strength nor weakness mode at this time. 5408 remains a firm bottom for the next 2 to 3 weeks and traders should not rush to go for OTM Put options

Preferred strategy is to short via futures on rise and hedge with an appropriate call. The overall outlook for July series still remains unchanged. I will be forced to change forecasts only if we get 2 consecutive closes above 5740 or a close below 5408; else the trading range for Nifty on EOD basis remains 5408 to 5690 for July series as of now.

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