Flirt With Nifty

NIFTY: 3818

In our last update, we had opined opening a short position below 4051 NIFTY for a target of 3715-3520. NIFTY fell exactly upto 3715 and rallied to 4002 before resuming the fall again. So the trade went well and you all made some smart money even in a falling market. Feel good. So what do we do now? Let us look at the larger and long-term charts of the Indian Markets. Let us, at the cost of sounding brave, state that our markets are still not in a structural bear market as some of the advanced markets like DOW, FTSE and S&P500 are. Indian markets are only in a cyclical bear market within a long-term structural bull market. India will move into a structural bear market only and only if we close below 11672BSE and 3559NSE. So what is our strategy? Can we go against the general marketplace view of extreme bearishness and fear below the previous low of 12154BSE and 3715NSE. We feel we can and we should. Major support is placed in the range of 11943-11672BSE and 3647-3559NSE. By default being contrarians in nature, our call is to buy panic sell-off in the range of 11943-11672BSE and 3647-3559NSE. If we do so, our average cost of holding NIFTY shall be 3603 and we can place a closing stop of 3500 and play for a pullback rally target of 3940-4010. That gives us a risk reward ratio of 1:3-4. We guess the strategy doesn’t sound bad. In the unfortunate event of NIFTY closing below 3500, we shall take a 100 point loss on the chin and review afresh.

Till then, happy trading.