Nifty has broken all important level of 5200 and closed above it, so, one question comes to mind...is it the signal of end of long bear phase or bear is to stay here for sometime more? Let me try to find the answer through my little knowledge.
Strong global cues and some apparently good news have helped NIFTY to shoot up like rocket from 4728 to 52XX.
But a closer look at the chart discloses some interesting setup.
1) -ve divergence is appearing in daily chart.
2) Stochastic and RSI is in overbought zone.
3) High of August 05, 2011 when nifty made huge gap-down of nearly 100 points comes at 5229, upper bollinger band stands at 5258,
4) Recent rally of October 25, 2011 was supported by short covering, not fresh buying by FIIs and DIIs.
So, nifty may get resisted at 5240-5260 zone.
Added to this, fundamentally we are not out of worries.
1. RBI has increased rates for twelve consecutive times which is hurdle for economic growth.
2) Inflation is still a worry for Indian economy although it is hinted that it may come down by few percentage points in December...but in my opinion it will be due to "base effect".
3) Deregulation of savings rate by RBI is a spoiler; because any increase in interest rate will affect the health of banks.
So, bear may stay for sometime now. We must trade cautiously as nifty is trading in neutral zone. We may sell nifty around 5230-5265 with SL 5330 for target of 5000 or lower. Time frame: November expiry.
Sreyoskar Saha
