Thursday, November 3, 2011

EOD Analysis for 3rd November and Outlook for 4th November

Quite an interesting day with reasonable movements on either side of last 2 day's closes and then ending pretty much flat. OI in Nifty futures hovered around 30.4 mill throughout the day and the premium on the futures is still pretty healthy. In stock specific action, interest rate sensitives continued be under pressure and whilst profit booking was seen in BNF, 9500-9750 provided the much needed interim support. Euro-Dollar may make another attempt to breach the 1.382 mark that is a corrective upside rally IMHO and this will aid BNF on the upside. A retest of 1.36 for this pair and retest of 1.56 for GBP-USD is on the cards and European bourses are seeing relief rallies via short-covering that should in all likelihood find the tops by today evening or mid-session of tomorrow.

5032-5092 have been providing firm support and they are expected to extend the support for another 4-5 trading sessions to complete 21 trading sessions in a row with close above 5032. If bulls manage to keep that as the firm bottom until next Friday, then safe to assume that the downside is limited to 4980 until the middle of November series [my personal take is that 5032 will be breached by the end of next week i.e. by 11th November] as some longer term bearish cycles are due to surface as we proceed to the middle of this series. Nevertheless, crucial levels are holding firm and as usual, critical to keep that in mind before taking aggressive unidirectional positions.

As usual, my preferred stratgey is to take positions via long-short pairing of Nifty futures with a 25 point stop loss on both ends and trail the winning leg. For BNF, shorts can be opened as close to 10k level as possible [as usual again, initially with a hedge and then trail the winning leg]

Gaps on the upside have been filled and one down-gap has almost been filled. For the other major gap 4750-4880, only a close below 4880 can ensure that the same will be filled. Based on patterns for the last 3 months, no gap has been left pending on either side for more than 8 weeks. Let us see how November series pans out.

Just to recap the critical levels


200 DMA is almost at 5408 and just as the close above 5150 had potential to yield another 144 points to the upside, a close above 5408 will open Nifty for a retest of 5532 [low probable outcome]

A close below 5032 will open Nifty for retest of 4911-4944-4994

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