Wednesday, June 22, 2011

Nifty broke 5335 next strong support level 4790!

Bottom Line: Nifty failed to sustain above 5335 and yesterday’s rally got exhausted near 5322. We might see a steep sell off further now after some sideways action. Trade cautiously!

Nifty Daily:

Nifty 20 mins:

Failure of Nifty to sustain at 5335 resulted in steep selloff and prices moved towards 5200 levels. This is how important support levels are taken out. If it has to break it has to be steep or with a gap down movements and this is what has happened. The steep movement below 5335 clearly breaks the strong support trendlines as shown on above chart. Also 15 days time cyclicality bottom failed to produce any rally which might result into steep sell off further when time cycles start turning down soon.

Over short term, we can see the wave structure on 20 mins chart and we will cross below 5200 in the form of wave v of (iii). We might take a day or 2 to digest the selloff but the trend now firmly remains down. The next support level is now at 5180 below which we will see 4800 levels as we have mentioned before.

A falling market can give extra ordinary returns over short term but one needs to be prepared for increase in volatility and steep movements that might happen in opposite i.e. upward direction. Risk management becomes extremely important and based on polarity reversal the previous support near 5335 – 5350 will now act as a strong resistance.

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