EOD Analysis for 8th July 2011 and Outlook for 11th July 2011

With such a massive run up, the bulls did need a break; they already surprised a lot of people by taking out the 5690 level yesterday and with OI of 25 million right through the day in Nifty futures, it held out pretty well until the last 30 minutes;

However, one must note that this is the 7th consecutive day that 5608 held firm and this is a positive sign; I would expect 5608 to hold firm on Monday EOD as well and possibly break on Tuesday

On the other hand, all though SBI moved up, Banknifty is struggling to take out the 11400-450 zone convincingly but is also holding out the 11250 levels pretty well so far. As expected, the 5408 level seems to be a firm bottom for July series; the expected rough ride to the down side did not come through and remains to be seen how things pan out next week.

If the markets are indeed strong as shown this week, then the downside may be restricted to the 5480-5532 zone only . The sustained move above 5690 on EOD basis needs more volumes not just in stock specific futures but Nifty and Banknifty futures as well [coupled with of course a lot of buying in the cash markets]

The bull story will only be bolstered with 2 consecutive closes above 5740 levels and in case this happens, Nifty will witness a gush of demand-supply and can retest the 5890-5944 levels but the ballpark OI in Nifty Futures must be approximately as follows

For Upside
Sustaining Levels-------------------Nifty Futures OI (July + August Series)
5690-5740                                     28 million
5740-5780                                     30 million
5800-5840                                     32 million
5840-5890                                     35 milion
5890-5944                                     39 million
[The approximate values may be compensated for by buying in stock futures and cash to some extent only]

For the downside, OI of 25-28 million is sufficient to retest the 5500-5532 zone

Recommended strategy for Nifty as well as Banknifty - Sell on Rise

For Nifty Futures
If markets show weakness, then one should short in the 5690-5740 zone if it comes about (the weakness can be gauged by the OI as illustrated above) or below 5608 only; the fact that Nifty is maintaining 5608-5655 zone is hinting at caution for shorting outright; for those with margin for more lots should stagger the shorts across levels

For Banknifty Futures
If markets show weakness, the 11250-11350 zone will break down or else there may be one more attempt at 11400-450 zone and that is the level to open 1 tranche of shorts. The next shorting level is below 11250

With the results season out, there may be some sudden fluctuations on either sides so positions should be hedged appropriately; For options, one should not put more than 25% to 30% trading capital

Best bets continue to remain 5500 and 5600 PEs [5500 / 5600 PEs gained over 40% in trade today; recommendation given yesterday]; the buying levels for the Puts can be derived from the levels given above

Wishing all of you a good weekend and a profitable week ahead and thank you for taking the time out to visit my blog