Cash The Chaos

Nifty(4693.15) Markets staged big rally of 3.2% from the important support of 4530. Remember, one day does not make a trend and sustainability and follow through are hall marks of a trend. Shanghai composite has hit yet another new 52 week low this morning. Let us see how long the window dressing for Nifty lasts. If Nifty heads below 4600, yesterday's low, it will be clear indication of a shallow correction having come to an end.

Nifty hourly charts

Before we get too aggressive on the short side, we would like to see additional clues for the short term. However, the medium term trend is strongly down. Resistance(marked in yellow) 4810-4840 is going to be formidable in the event Nifty manages to conquer 4730. Support is at 4530 and a breach of this would signal a move to 4380.

Open position: Short Indusind @267 (partial profits taken)

Nifty(4613): The decline from Friday continued and Nifty pushed closer to our projected support of 4530. There was some erratic moves later in the day and markets saw a mild recovery and finished the day paring some of the losses.

Nifty intra charts

From the chart, we have not seen any divergence to indicate that the move is ending but we have to be a little flexible here about taking our profits, a little early. First, the momentum on the daily charts is yet to dip below the level registered when markets hit 4640 in November. Second, there is a hammer pattern on daily charts - this can fail and needs follow up buying to confirm. Third, in the smaller degree we are assuming we are in the fifth wave which is often known for failure to reach ideal levels. So let us keep these in mind.

In the bigger picture though, recovery if any, is likely to be temporary and the broad trend is still strongly lower.

Open Positions:

1)Long Nifty 4500 Dec put @20-21

2) Short Induindbank from 267 (covered and reloaded at 254)

3) Short heromotors from 2025 (covered at 1938, reloaded at 1910)

4) Silver short from $34.2 (booked part at $31.4 and reloaded at $30.65) - Please book profits today at $28.8. When silver breaks $28.1 short again

Nifty(4746): Markets came within striking distance of breaking the 52 week low of 4639 but has seen a small bounce from 4673.  So far it does not look like down draft has ended. May be the policy decision today will be the trigger for a sell off. The extreme short term technicals is a bit fuzzy but as far as I can decipher, it does look like 4843 or 4910 is the maximum upside if this relief rally continues.

No new trading bets was taken yesterday.

Nifty(4943): The corrective rally of wave 4 is over and the next leg lower of wave 5 has begun.

There is a gap area between 4920 and 4866 and the markets are likely to find temporary support around this area. Yesterday's low was exactly at the top end of this gap range. However, this is not fatalistic and if the market were to plunge through this it would signify intensity of the weakness to come. Nifty took 9 trading sessions to bounce from 4639 to 5099 and quite often impulse move like the one we have assumed exceed the move in equal or lesser number of sessions. So if we are correct a new low should come through on or before 21st December.

New position: Short Siemens 714 for a price objective of 650 SL 736 (all cash levels)