Thursday, July 7, 2011

EOD Analysis for 7th July 2011 and Outlook for 8th July 2011

Remarkable performance by bulls towards the end of the day; The OI in Nifty futures was just 23 million when the session opened; however, in the afternoon, there was a first gush of 1 million OI increase within 5 minutes and then within the subsequent 20 minutes there was another 1 million OI increase in Nifty futures

After that, even with Nifty crossing 5705 on spot, there was no significant change in OI; this is the 6th consecutive close above 5608 and significant number of closes above 5408 and 5532; this is a positive sign for the medium term; 5608 should hold firm until Monday EOD now making it 8 closes above 5608 and then possibly reverse from there

As mentioned yesterday as well, for sustained move above 5690 on EOD basis, the OI needs to be around 27-28 million for Nifty futures and today's move has shown that if indeed bulls decide to take things forward, getting 2 to 2.5 million additional OI for volumes may not be a challenge

Outlook still remains the same that Nifty may try for 5744 as the intraday high and witness some profit booking tomorrow. However, 2 consecutive closes above 5740 will pave the way for another 144-216 points on the upside and Nifty may challenge 5890-5944 levels next week. 

Banknifty may try once more to crossover 11500-11600 with broader market participation

Sell on rise will still be the preferred strategy (short term) but now the shorting levels would be 5744 for 1 tranche and 5788 or below 5690 for 2nd tranche on Nifty

Banknifty shorting levels are 11450 for 1 tranche and 11550 or below 11400 for 2nd tranche

Test of 5500-5532 levels is bound to happen in July series itself; but shorts should be opened at appropriate levels so as to avoid blocking too much funds for MTM margin; Tomorrow is last day of trading week so buying options should be avoided. 20% to 25% trading capital should be kept aside for taking options on Monday / Tuesday; 5500/5600 PEs remain best bets 

[The EOD above 5690 which I had pegged with just 1% probability has become a reality today; as I had mentioned that would force me to change the outlook, I have done so because the trend cannot be bucked]

Still happy to see 5408 being maintained and if it stays firm until 10th August 2011, then the June visit to 5196 can be considered as retest of 5177 complete and we should look for new highs on Nifty in Oct-Nov post monsoon session

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