Tuesday, August 16, 2011

EOD Analysis for 16th August 2011 and Outlook for 17th August 2011

The day started with mild cheer aided by positive global cues [read short-covering rally of yesterday]. However, Banknifty continued to remain weak and once the fall went below 5080 levels, the OI in Nifty futures soared to 30 million towards the last hour triggering a sudden drop. There seem to be a lot of shorts in the system pending to be covered which can easily give an upside of about 50 points on Nifty and 125-150 points on Banknifty.

Whilst we have had some weak sessions, we must not forget the fact that there have been a lot of Puts written in the beginning of this series at 5400 strikes which at some point of time need to be crushed. The EW count on Raghuji's blog can be seen which is also hinting at some upside.

That being said, the short-covering relief probably aided by some cheer in capital goods segment can only get Nifty towards 5150 levels; for further upside, we need fresh long positions to be created with volumes that we saw today.

Unless Nifty takes out 5225 level on EOD basis and Banknifty takes out 10600 level on EOD basis, markets will continue to remain weak. The hope for the upside stems from the PEs written in the beginning of the series and the gaps that are pending to be filled.

As far as European markets are concerned, safe to assume that they have all topped out for 2011; the correction has been very severe so one more round of relief rally likely to come in as we move towards September but they will certainly not take out highs prior to Lehman Brothers crises and may try to take out the 2011 highs once before they finally come down crashing. As far as US is concerned, safe to assume that the top is in place however, one should not write off the Dow so easily. A relief rally towards 12k is bound to come towards September end AND / OR towards Christmas.

As far as Nifty is concerned, for Aug series, it remains to be seen how 5225 gets taken out and how Aug expiry pans out.

The levels remain unchanged for both upside and downside. Now the 5177-5225 zone has also become a major resistance and further updates can only be made on the basis of time, price and volume action to these levels

The panic in the market is very much visible vis a vis the upside in gold 

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