NIFTY FUTURE MONTHLY
We ended the month of May 2011 with one more bounce from the trend line support at 5329. Incidentally, this trend line has provided support on many previous occasions in the past few months as shown on the attached chart.
The purpose of this update is to highlight that even in 2008 when market peaked out we had a trend (see trend line in Red) that lasted for 23 months during which period it provided support for about 7 times and when the trend line was broken Nifty Future had a sharp fall. This time around, we have seen a similar situation when during the past 21 months of the current trend (though not so sharp like last time around) the trend line has provided support for around 6 times.
For the current month, we have upper break out point at 5870 and lower break out point at 5330. Today's close at 5594 is almost at the mid point of this range. Considering the negatives, the odds are high that we have a break out on the lower side, which could take the Nifty Future to about 5000. The key difference between the two scenarios is the angle of ascent - which was much more sharp on earlier occasion (resulting in sharp fall) than the current situation. Considering the not so sharp angle of the trend line this time around, lets hope the fall is not so sharp. Nonetheless, one needs to be careful in carrying the long positions - if and when the break out does happen.
Keep Learning,
Ketan Asher.
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