Tuesday, August 23, 2011

Nifty gets ready for the second step

The Nifty found support at 4800 and bounced off these levels. The move from 4800 to 4950 was relatively easy. Remember that the Index had been following for many days, was quite clearly oversold. While oversold could contiue falling, the Index stopped falling when it touched 4800 and this was a sign that a countertrend rally was starting.

The move from 4800 to 4950 was easy. After all, the first bounce from oversold levels should come with a lot of comfort to the bulls. Short sellers rush in to cover while bargain hunters are buying. So, the market rallies quickly.

Now, we are probably entering the second step - when buyers will have to step in to keep upside momentum. This will be more difficult that the first, initial rally. We think of the next move as the second step in the upswing. If the second step can be taken by the bulls, then a sustained rally may be possible.

Resistance levels for this rally will be 5050 and then 5200.

2 comments:

sudhin said...

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