Tuesday, September 6, 2011

EOD Analysis for 6th September 2011 and Outlook for 7th September 2011

Nifty was in subdued territory from opening bell and VIX shot upto 30 levels today on opening itself and only cooled down to 28 after entering positive territory in the last 2 hours. The volumes were high with Nifty futures clocking an OI of 29.2 million to 29.8 million throughout the day. The 4940-4960 zone provided support for the second time today but the way it is being pounded is not a healthy sign at all. A very strong round of short-covering finally managed to get some premium on Nifty futures.

Unless 5092 is taken out on EOD basis, interim rises are attracting shorts. Some buying is coming in at 4940-4960 levels but it is only a matter of time before this level gives way. Automotive segments surprisingly are showing some signs of a pullback with Tata Motors, Maruti, M&M all seeing some buying [or perhaps short covering in futures]. Sun Pharma is turning out to be a laggard now and the close below 500 is a bad omen. 2 consecutive closes below 500 and the counter can go all the way back to retest 450 on spot price. ONGC showed some pullback but interim rises in ONGC are also shorting opportunities. For some more time, 250 may provide interim support [courtesy the scheduled FPO] but it is only a matter of time that this counter goes down big time. 

The crucial levels for this week remain as follows

For Downside: 4950 - 4880 - 4840
For Upside: 5020 - 5092 - 5120 - 5177

Unless Nifty gets a close above 5092, weakness will continue but most falls should be ideally arrested within the 4940-4960 zone for this week. [2 times it has supported already so that should be kept as an alerting point]

On the Upside, a close above 5092 will bring a retest of 5140 and 2 consecutive closes above 5092 will open Nifty for retest of 5177-5225 and if this zone is crossed over with volume and momentum, all gaps upto 5348 may be filled before Nifty resumes a downward journey.

On the Downside, a close below 4940 will make Nifty vulnerable to a retest of 4800 and 2 consecutive closes below 4940 will bring a retest of 4720 within 5 to 8 trading sessions from 2nd close below 4940.

For tomorrow 5110-5150 may provide the Sell Zone but this is not the time to create fresh Long Positions. Those with Long Positions should trail the existing position rather than create a fresh long position. Shorts should be hedged with a Short Put of near strike or an opposite position with the next series Nifty future. 

Panic in the market is visible with the high gold price. Nifty is due for some correction and retest 4800; the longer it takes to have this correction, the greater will be the impact of ensuing fall. Stay hedged with a position and trail the winning leg. Risk reward ratio is slowly tilting in favor of shorts but shorts should use appropriate levels before hitting the Sell button.

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