Market Outlook for the month of May, 2012

May 4, 2012   ·   0 Comments

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Trading Strategy for the Week:

  • The 200-day SMA (Simple Moving Average) and 20-day EMA (Exponential Moving Average) have now shifted to 17100 / 5135 and 17400 /5250, respectively.
  • The ‘20-Week EMA’ is placed at 17200 / 5200 level.
  • We are now witnessing a ‘Downward Sloping Trend Line’ resistance around 17350 / 5280 level.

http://stockssavvy.comFor Nifty:

 After a gap down opening below the mentioned support level of 5223, yesterday we witnessed a

volatile trading session where selling pressure intensified in the later half and Nifty closed below

5200 mark. The positive crossover in ‘RSI’ oscillator on the Daily chart has been negated. However, we are witnessing that indices took support near the 78.6% Fibonacci retracement level of the rise from 17020 /5154 to 17432 / 5280 which is at 17110 / 5180. Going forward, if indices trades convincingly below 17110 / 5180 then they may drift towards the next support level of 16920 / 5135. On the upside, 5226 – 5280 levels, may act as intermediate resistances in the coming trading sessions. Trend is bearish for the Nifty.

 

For Bank Nifty:

A close below the mentioned support will trigger fresh momentum on the downside and the index may drift towards 9934 – 9845 levels. On the upside 10208 – 10275 levels are likely to act as resistance in coming trading session.

 

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FII’s were net buyers in cash market segment, however the quantum of buying was quite minimal; they were net buyers worth of `74/- cr. On derivatives front they were net sellers in index futures indicating some shorts buildup by them; while in index options they continue to be net buyers with decent buildup in open interest.  On options front 5200 and 5300 call option have seen good amount of buildup in open interest, while in put option 5000 and 5100 strike price have seen maximum buildup in yesterday’s trading followed by some unwinding in 5200 and 5300 put option. The highest open interest in May series has now being shifted to 5100 put option from 5200 put option. This means the trend is on negative side for the month of May.

 

Effect of Falling rupee on Stocks:

There are 2 factors leading to the decline of the rupee. First, Dollar continues to remain the safest currency till Eurozone stabilizes. The other reason is trade deficit. Our exports have decreased in the Month of March, first time since 2009 and imports have increased due to which rupee is falling. As far as stocks are concerned, Stronger the rupee, stronger will be the markets. If rupee continues to weaken in the month of May and June, then market can take a deep dive. Hence, macroeconomics is not very strong at this moment.

Last time, Rupee went to Rs. 54/Dollar the market was trading at the levels of 4800 levels. If the dollar continues to get stronger then Markets may fall to the same levels as selling pressure will intensify. On the other hand, if Rupee starts getting strong which at the moment looks difficult markets can bounce to 5300 levels.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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