Saturday, February 20, 2016

More upside- NIFTY View For Week 21-26 Feb

This week read about Nifty and a budget special trade in Nifty Options 
In line with most world markets, Indian markets too traded with positive bias last week. Last week I had indicated at Nifty- 'in the process of bottoming out'.  
What do we expect this week?  
Technical Overview: Last week Nifty made high of 7227 and low of 6960 to close near high of week at 7210. A range of 267 points to form a small green candleLast 2 weekly candles together are forming a pattern called "Bullish Harami" (Harami is a word in Japanese meaning Pregnant Lady).  This pattern is usually formed near bottom of a trend. This pattern is giving us an indication that current formation can be lower bottom of Nifty in current ongoing downward channel on weekly chart. 
Bullish Harami, trend line support and demand zone together are giving us a clue that there can be more upside to Nifty. The upside can be larger than we imagine in few weeks to come.  
Nifty has resistances at these levels- First- 7275-7307, Second- 7363-7422, Third- 7464-7511. However second resistance is more important. 
Supports are at – First- 7058-6995, Second- 6869 
My View: On larger scale Nifty is still in downtrend. Current upmove can just be a pull-back rally. Do not forget that Nifty can resume its downtrend from any point. Coming week markets will trade in anticipation of Union Budget outcomes which is to be presented on 29 Feb- start of next week. Volatility can be high during this period. I expect markets to trade with positive bias in first half of week. 
Wise man's act: During periods of high volatility one can trade in Options on long side. Suggesting a trade here- Buy Nifty 7200 Put and Nifty 7200 Call at the same time. This is hedged position and known as Long Straddle. Wild movements before budget can bring the pair in profit. The pair need to be closed before budget is out. 
Note: Do not consider these as buy or trade recommendations.  
Check the influence areas (supports and resistance on chart below)