Nifty(5091): Perhaps the most significant price action yesterday was the movement of INR. We have already seen during this results season how the treasury departments of many companies are so ill-prepared for the weakness. TCS and Bajaj Auto are glaring examples.
Now with the rupee set for further weakness to 52 the problems are going to compound. Use a stop below 48.6/48.3 as a stop if you are going to play for the short-term.
So far Nifty has been all over the place this week, probably the currency weakness is coming at the right time and can provide the kicker needed to provide the short-term trend shift. The zone of 5125-48 should not crossed in today’s session, if it does, this market is still not YET ready to go down.
As pointed out yesterday on CNBC, if the Euro drops below 1.3670 it will be a good confirmation signal that the stock markets including Nifty are heading lower. Incidentally, the low on Euro yesterday was 1.3672!!
Keep an eye on L&T in today’s session. This stock has a potential to surprise to the downside given the position at which it is in charts. Yes I did say it might spend time between 1450 and 1300 before heading lower (in the comments section). But be prepared, today it is set to announce its results.
The clue comes from wave 4 shown on charts. It is just a couple of points above 25% retracement. That is a very weak signal. If the wave 4 has ended here, the next wave 5 push should take it to at-least 1235. Either use 1450 as a hard stop (punch it in the system) or play an Out of the money November put or just sit out.