Nifty Futures has been continuously weakening, on charts we have seen the series of lower high and lower lows. So we are in a very clear down trend, also we know that traders should trade in the direction of the trend. Last week we have seen the markets correcting significantly, as global markets followed the down trend. We are looking for selling opportunities as long as nifty futures is trading below the 5200 level on 2 days closing basis. Taking a look at the charts we see that RSI is not in over sold region and is still above the 30 mark, so we should see some selling pressure in nifty futures that should take it to the lower levels of 4950. Technical analysis also suggests us of bearish markets are still active and all the control is in the hand of bears. So its is a very strict advice that unless nifty futures manages to close above the 5200 level we will see selling continuing. In our preference it is now time to trade in nifty options as there is always limited risk of the premium amount of options contract only. Traders are advised to trade long in the nifty 5100 put options, so buy nifty 5100 put near 85 and 95 for F&O August expiry target as 119 and then 141 levels. We will also advice traders to exit this positions when nifty futures closes above 5200 level, as a strong reversal may happen on closing above that important resistance level. Nifty futures is now having strong resistance at 5185 level and very strong support at 4950 level, so traders must keep a keen watch on nifty when it is near these level. Also nifty 5100 put option has shed about 3.4 lakh shares from open interest this is very clear indicator that markets are going down next week as well. Traders must also keep in mind that India will be celebrating its independence day on 15 August 2011. But other global markets will be available for trading, so its very important to keep a eye on them.
Speaking about index heavyweight stocks, we have seen heavyweights like Tata motors, Tata consultancy services, Tata steel, Reliance, ICICI Bank, State Bank of India, Cairn India, Hindalco, Wipro, Infosys Technologies and Jindal Steel correcting significantly and making new 52 weeks low, especially TATAMOTORS has not found any support at 800 levels. So these stocks can further correct and may become the market pullers in next week.
Our Trading Advice:
There is weakness in all the global markets due to US economy downgrade. So nifty futures can weaken next week targeting 4950 level. Technically nifty is having strong resistance at 5200 level and support at 5020 and 4945 levels.
Nifty 5100 Put Option Trading strategy:
Buy nifty 5100 put option near 85 level for weekly target 119 and then 141 level. Also place stop loss below 63 level or exit this position if nifty futures trader above the 5200 level on closing basis.