Thursday, July 17, 2008

Ray of Hope for Bulls

The Nifty found strong support at 3800. Upbeat international markets provided the right environment for a strong rally on Thursday when the Index closed at 3947, up 131 points (3.42%).
It appears that the 3800 - 3850 range is acting as a bouncing pad for the Index, a level from which it gets buying interest. So far the Nifty remains above 3800, dips can be used for buying. Long positions are justified with a stop below 3800. Yet, we must remember that Indian markets face event risk with Inflation, Confidence Vote & Monsoon blues. Thus, traders should keep volumes low and trade with stop losses.
Looking ahead at the Nifty
The Nifty is at 15 month lows. Since most European markets are at 2 year lows, we are faring much better. So far, this has been a bear market with very little pain (as compared to, say, the year 2000 - 2001 IT debacle).
But, we cannot say with certainty that we have seen the end of the bear cycle. Some analysts feel that the current down move is a correction in an ongoing bull market. On this basis, they suggest that the correction may be getting closer to its end. Now, this is a matter of subjective analysis since there is no clear cut rule defining a bear market as opposed to a correction. The Index has lost over 40% of its value from ts all time highs. I would classify this as a bear market. If this is really a bear move, then there may be more downside ahead, as well as a lot of time to be spent building a base. There is no way to forecast what will actually happen. Therefore, it is wise to follow our charts.
Buy signals have NOT yet emerged on the charts. This is fair, since till yesterday, the Nifty was making new lows.
The first signs of a new bull market will come if and when the Nify moves above 4200 and closes above it. Let us wait and watch.