Nifty Update

Hey Guys....
 Posting after a long sabbatical due to time constraints. Will keep posting more frequently now. Lets get straight to the point and talk market. The main reason to come back and post is due to this all important and crucial juncture the Nifty is currently at. It's make or break time for Nifty.

I say it's MAKE and then BREAK (the chart says it all)  :) Let's see in brief why.....

Nifty is in it's most interesting and crucial phase at this moment and juncture. Nifty has rallied from 4500 levels straight to 5150 levels, turning alot of people bullish.

The above chart explains and shows that Nifty is at its most important cluster resistance of 5170 - 5180 and the trendline resistance it has been facing right from 6300 levels. (please note that this trendline resistance is even present on a weekly basis for the Nifty. That makes it twice more important and significant)

Although there has been a false breakout a couple of times from the trendline, everytime it has happened Nifty has seen a decent cut off. THIS TIME IT MAY BE DIFFERENT!!!
 (look at the FII figures. The pace and strength of cash numbers definitely suggests of a breakout)

So the question remains, will Nifty give a breakout from it's all important resistance or will it respect it's cluster resistance and start it's downward journey again???

Well, there are a few factors to be considered.
1. Nifty has rallied almost 700 points and is extremely overbought even on a weekly basis. So the rally can exhaust at current levels. However, considering the strength of the cash being pumped in by FII's, we may see a break of this trendline and resistance this time and target the 200 day MA and beyond towards it's next resistance of 5400 - 5500.
2. Concerns are looming and flashing everyone in the eyes of a possible Greece default which may cause tremors in the global equity markets. A rally before the outcome of the news may have set  the stage for a big fall and cut in the global markets. A conclusive outcome may only happen near 20th March, 2012 though when the time comes for Greece to repay it's bondholders.
3. India VIX and the CBOE VIX are trading at relatively low levels and are quite oversold, leaving little space for them to drop further and thus for the markets to rally
4. The $ has retraced its stupendous rise and appreciation against  the Rupee to 50. 49 - 49.20level is a strong support for the $ against the Rupee. The continuation of uptrend in the dollar will put pressure on the indian equity markets.
5. Nifty might possibly be retracing it's fall from 5750 levels and till it does not cross the previous top of 5750  convincingly, it is difficult to digest such a fuelled rally on no extraordinary positive news. Therefore, this may only be a retracement of the previous fall and not start of a new rally.

Nifty is setting the perfect stage to CRASH!!!

An early signal will be Nifty's break of 5100 (this level will rise to 5150 - 5160 level in the coming week) and it's inability to sustain the so called conquered level in the new Feb series. We may however, see Nifty going past 5200 and more towards the 80% retracement of 5450 - 5500 before any weakness creeps in. (I am considering the far end of the retracement at 80% after looking at the way  FII's have pumped in money. Therefore that way it remains a low risk - high reward trade)

MY VIEW : Short Nifty after it gives a false break out from this resistance and closes beyond the bullish indicator of 200day MA in it's previous resistance region of 5450 - 5500 and roughly 80% retracement level of the fall from 5750. Lowest risk-reward ratio if it reaches there

THE TRADE : Short Nifty March between 5450 - 5500 with sl of 5750 and target of 4200.

Risk : 300 points
Reward : 1200 points

Risk :  Reward ratio of  1:4