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Where do we go….

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What catches our eyes in this morning’s newspapers is whether yesterday’s rally was the end of the fall or just a dead cat bounce.

Let us just dig slightly deeper into what entailed the markets in yesterday’s trade, to draw a picture of where it’s heading in the near term.

Taking a glance at the inflows, the FII’s were net buyers yesterday, and the DII’s numbers were flattish. The trend since the last few days has been FII’s selling, with mixed activity from the Domestic Institutions. This indicates that there is a definite air of caution amongst the investors, either they prefer profit booking at higher levels on Nifty or they prefer to stay out in times of confusion.

If we look at the option activity, we are seeing the Open Interest buildup in Nifty calls have seen a buildup in Options from 6400-6500 to 6300 levels for current month, which signals that investors have mellowed down the probable rise in the market for this expiry. And 6300 levels seem to be a threshold for strong supply. In the put side, the 6000 put has consistently seen a strong buildup in open interest, which probably indicates that the fear begins to creep in below 6000 levels in the market.

Technically the chart setup suggests that the uptrend has taken a setback, with a dip in RSI and MACD being in the sell mode. Only a breach of 6230 levels on the upside could signify that this fall was just a blip in the rally, and market will resume its uptrend. However on the downside 5930 levels would be a crucial support.

Generally the markets look very fragile when they are testing the support as a multiple attempt in a short span of time. The tendency then becomes to break the support, create confusion amongst the investors and traders, and then resume the next move.

Whether there is an actual change in the global scenario with China, being the volatile market it is, facing strong selling pressure. The picture would enfold going forward, but to make a conclusion now can lead to misinterpretation of the markets.

Trade with caution, and play stock specific. This should be the ideal strategy for the day.

Adhere to your stop losses.

It is always good to accept your mistakes and come back strongly rather than being rigid and not learning from them


Written by Kunal Bothra

November 16, 2010 at 6:42 am

Posted in Morning Markets

Tagged with , , ,

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