Monday (Dec 22nd) - Uptrend can continue in the short-term; going LONG looks more profitable.

Trading Strategies for Monday:-

• Nifty (Spot) = 3077 (Friday). January futures @ 3,100 on Friday & December futures closed @ 3,082. Both in premium indicating bullish tone. Avoid Option trading now, since expiry is just 3 days away; Future trading can be considered.
• As long as Nifty is above 3000 levels; one can go with LONG positions in Nifty with stop loss below 2900. Hence at present situation one can very well take fresh LONG positions in Nifty Futures.
• Only if Nifty falls below 2850; one can start taking small SHORT positions with stop loss above 3000 levels.

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Last week’s wrap-ups:-

• Key benchmark indices- the BSE Sensex and S&P CNX Nifty regained psychological 10,000 and 3,000 levels respectively, on buying support from foreign institutional investors. Fall in inflation to a 9-month low and slump in crude oil prices further bolstered the sentiment.
• Buying by foreign funds this month has lifted sentiments. FIIs bought shares equities worth Rs 1626.90 crore this month, till 18 December 2008. However they were net sellers in calendar 2008, so far, as they offloaded shares worth Rs 52,690.90 crore.
• Massive cut in the federal funds rate, Mad off scandal and the Satyam imbroglio were the sidelights to an otherwise dull trading week.
• Factory output in India fell for the first time in more than 13 years in October 2008, the latest evidence of a rapid economic slowdown. The weak industrial output data for October 2008 has raised expectations of a suitable policy response from the government and the central bank to shield the domestic economy from the global economic recession.

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HBJ Capital’s Views for Monday:-

• The Nifty January futures closed above 3,100 on Friday, while the December futures closed at 3,082. The market is expected to remain firm next week as F&O traders were seen covering their short positions. The uptrend is expected to continue for the next three days as the current-month contracts will expire on December 24.
• Nifty closed firmly beyond the resistance at 3000 last week. Though the short term trend in the index is up and there can be one more spurt higher to 3200 or 3250, investors need to stay watchful.
• For Nifty is close to the strong resistance zone between 3150 and 3250. A downward reversal from here can take Nifty lower towards 2500 again. A move above 3,250 would confirm a new intermediate uptrend and suggest a period of net gains through till early January.
• The upward breakout past resistance at 2,850 has been followed by volume expansion across both cash and derivatives segments. This makes the chart target projections of 3,150-3,250 appear more achievable. A climb above 3,250 would confirm an intermediate uptrend because it would be a higher high.
• Short-term supports are at 2850 and 2750. Traders can play long as long as the index holds above the first support. Our preferred medium term range stays between 2500 and 3500 for the index.
• As per ET, HNI investors are back in equity market. And wealth managers feel that the confidence back, thanks to innovative products. New offerings that provide capital protection even with exposure to equities, have received an enthusiastic response from India’s super-rich.
• This week will see the December series expiring on December 24, ahead of the Christmas holiday. Markets are expected to be buoyant and the optimism and change in sentiment to positive will keep the momentum going forward. Some amount of short covering and NAV propping in the next week with year-end considerations will also help.
• Though the undertone remains bullish, Nifty future could turn weak if it touches the immediate resistance zone. Hence we suggest investors to go short on Nifty future keeping the stop-loss at 3,000. And if the market does go low as predicated, traders can book profits at 2950, 2850 and 2750, depending on their risk profile.

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Sandeep Jain, Associate, HBJ Capital
Note: Pls read the disclaimer on this site. Investors/ traders should do their due diligence before taking any action based on our analysis.