Tuesday, September 2, 2008

Nifty Future on a Resistance

Nifty rallied today almost 4% and a lost confidence of bulls was somewhat back. In my last post about Nifty Future I told how important was the 4207 support and now you can see why. Today's move has turned short term indicators bullish but again the rally looks more like a Bear Market Rally - Fast and Furious. Looking at the Daily Chart of Nifty Future it looks like Nifty Future was in a hurry to get past above an important resistance and failed.

Let me tell about the chart first - there are two trend lines - Line 1 is the Main Downtrend Line which is in my view an important line to consider. Line 2 is the Previous Important Support Line which was holding nicely till June and once breached then has been acting as big resistance, the interesting thing is this line is above Line 1 now. Following is my view based on the chart:
1. Today's high of Nifty Future touched Line 1 and closed just below that.
2. Nifty Future is still well below Line 2.
3. It was a vertical rally and looks unsustainable.
4. The Volume is good suggesting renewed interest in buying.
5. FIIs and DIIs both are net buyers today, in fact FIIs buying figure is quite impressive - more than Rs. 1100 Cr.

Looking at Fibonacci numbers, today's close is at 50% retracement of down move from the high of 5th May and low of 16th July, the 61.8% level is at 4690, which is coincidentally close to Line 2 !!!

From the above points it is not clear whether the short term uptrend will sustain or not, however, the main trend is still down and I would not advise buying.

As I am typing this post the US Markets are rallying but my view remains still the same - its only a suckers' rally.

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