It was the pullback rally that we have seen last week, Nifty Futures has recovered from 4718 level to close near 5040 level, so this is about 300 points short covering rally. Nifty futures open interest data suggests us that last week short unwinding was seen and also there was long build up seen in open interest. So this pull back rally may continue till we see 5160 level of past. This level is huge resistance now and must be very difficult to break. For now we will not buy nifty futures but we will short nifty futures near 5170 level for targets as 4960 and then 4800 levels. But this will not happen soon as we believe a pullback towards 5160 is possible. On charts we have seen the pullback targeting the 5160 zone for next week but we are more careful for next week. We are in a down trend for long term, also as we have a trading rule to trade in the direction of trend. Last week for markets was of holidays and therefore we were unable to cope with most of the global markets. The European indices also come towards their previous lows, so this will be bad for domestic markets as well. We are looking for selling opportunities as long as nifty futures is trading below the 5170 level. Taking a look at the charts we see that RSI is pointing the pullback to rule the markets in short term may be a week. So we will enter a short positions in nifty future only near 5170 level, as our trading rule says to trade in the direction of trend. Stochastic will be used to time our short entries in nifty futures. Technical analysis reminds us of bearish markets are still active and all the control is in the hand of bears. So in our advice we will see selling pressure in nifty futures until it manages to close above the 5200 level. So this pullback should not be treated as a reversal and short selling at higher levels are valid for trading.
Our Trading Recommendation:
Even the pullback was large but trend remains down and traders across the globe are looking for selling opportunities. Technically nifty is having resistance at 5170 and 5200 level and support at 4960 and 4848 levels.
Nifty 5000 Call Option Trading strategy:
Buy nifty 5000 call option near 100 level for weekly target 142 and then 165 level. Also place stop loss below 75 level or exit this long position if nifty futures trades above 5170 level only on closing basis.