Markets for 19 aug 09

As expected, in spite of 186 point fall in dow overnight, asian markets as well as indian markets were less affected and showed resilience to move up remarkably with sensex gaining by 250 points and nifty up by 71 points. It looked as if the indices were moving with a vengeance and both sensex and nifty kept on moving up from the start itself as if a fresh up move has started. Well, how far this bounce can go is to be seen but certainly a decisive cross over of 4480 or more importantly 4492 can easily take nifty to much higher levels to cover the entire gap till 4560 levels.

From friday 14th aug high of 4613 till tuesdays low of 4375, nifty had fallen by 238 points . So a 38.2% upward retracement till 4466 has been covered on tuesday. A 50% upwards retracement can take it till 4494 level which nifty almost reached on tuesday by making a high of 4491.a 61.8% retracement may take nifty till 4522, if down side resumption of the fall does not start from wednesday. On tuesday nifty moved up above 50 dma at 4402 to close high above it at 4459. So on a down side move, the same 50 dma at 4402 should arrest further fall towards critical level of 4360 to 4350.besides bouncing back from 4357 on 12th august, nifty has managed to protect the level around 4360 twice this week also.

So the level of 4350 to 4360 may be a strong support before the expiry and option traders may write 4300 & 4200 puts on decline of nifty as well as boldly write 4600 and 4700 calls on every rise & hold these shorted calls and puts till expiry as long as 4350 is not breached on the down side and 20 dma around 4550 is not breached on the up side. Option buyers should be extremely cautious in holding out of the money bought option as these would get reduced to zero value faster with only 6 trading days left before the expiry. Quit early or short lower puts or short higher calls with the bought options. A decisive breach of these critical levels of 4350 & 4550 can see good move in the direction of breach. Resumption of the down side move in u.s & asian markets may threaten the critical nifty level at 4350. However, with such a big fall in dow on on monday night, one can easily expect a pause or up move in dow on tuesday that may see another bounce in asian markets on wednesday.

In spite of the 71 point up move in nifty on tuesday, the daily indicators still look weak and look dangerous for further falls. In the hourly chart above, slow stochastic is precariously placed at the verge of sliding down. However another good up move by nifty may see about turn in the indicator to move back into the upper zone to signify further up move.

FOR INTRADAY TRADING ON WEDNESDAY, EXPECT A MILDLY BULLISH OPENING. A CROSS OVER OF 4481 CAN TAKE NIFTY ABOVE 4500 LEVELS. THE INDEX HAS STRONG SUPPORT AROUND 4444 LEVELS A BREACH OF WHICH CAN TAKE IT DOWN TO 4424 LEVELS.