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Stocks

Nifty Lowest In 18 Months, Critical

The Nifty closes at the lowest point in 18 months, at under 4750. The last time we were this low was in Feb 2010, and even that was a single day. We were only really lower than this level for more than two days at a stretch, in Sep 2009.

Nifty Short Term 

This particular level – around 4700 – has been a support earlier (we saw two bounces from it) and a resistance at least three times earlier (yellow arrows). We need to hold this level, and move back up – unfortunately volumes are not high; they should be high to suggest some capitulation (that is, too much selling) and therefore exhaustion. I would consider a breakdown from here as a very negative sign. Not like it’s been positive for the rest of the month.

Meanwhile, the fundamental story of India remains good. If you have been holding back and looking to invest your money, this is a good time. The rural story is strong, so anything attractive in that space will continue to grow. Find undervalued stories there.

I’ve moved out of the short positions I had (Banks, Nifty) and now hold a small long call option spread at the 5000-5100 levels that I believe will help cover a gap in the near term. But since it’s a spread, the position has limited risk (and reward) and my loss, even if I lose all the money, is less than 0.3% of my portfolio.

Nifty Near Term Trend

Finally, we see some good moves intra-day. If you are too leveraged cut back a little, but trade for the opportunities. The events for the weekend are Europe (which is every weekend nowadays) and the US QE3 yes or no from the Fed later today. Keep the faith!