Nifty Technical Analysis as on 13 May’13

Nifty is very near to test its recent swing high of 6111.80, but little far from testing all time high of 6338.50, as Bank Nifty is very close to it. After such a sharp rise in matter of just 18 trading sessions, most of the traders and analysts (including me) are skeptical whether Nifty will continue to move with such vigor?

According to my analysis, from this point onward technically Nifty has a potential to move towards 6150, and subsequently 6300. I am saying technically, because if tomorrow some Global News flash than we don’t know how market players will react to it.

Momentum oscillator RSI (14) is still in support of rising prices, although intensity may reduce, but still it can walk further.

Bank Nifty & CNX IT has a chance to move further, which in turn may support to Nifty also. Risk from here is, If Nifty does not move higher and turn sideways than gradually momentum will start falling and negating upside possibility.

NIFTY Trading Strategy

In such case trader can initiate Long Strangle in Nifty.

Nifty Long Strangle
Strike Price Options LTP Lot Size Investment
6200 CE 50.15 50
5900 PE 25.25
75.4 50 3770

I am buying 5900 PE just to protect traders from any unexpected reversal. Traders can hold this position with stop loss of 25/30 (30×50=1500). As Future Nifty is already trading higher than spot prices, once position moves in profit, trader should hold position with stop loss of cost price.

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