Wednesday, January 30, 2008

Markets Choppy Ahead of Bernanke Verdict

Nifty continues to move in a small range between 5150 and 5500. After such a deep correction, in which so many retail investors burnt their fingers and were thrown out of the market, this was only to be expected. We can expect a stock, or for that matter, an index to move up in a healthy way only if it consolidates after a deep correction. This is what is happening in the Nifty now. We expect it to continue with this base-building exercise till the time it either crosses 5500 on the upside or 4500 on the downside. Tomorrow is expected to be a very volatile day.

Not only is it the day of the F&O expiry, but also, we are expecting an interest rate cut by the US Fed Reserve Governor, Mr. Bernanke. While a 50 basis points cut is being largely expected by the market, yet the decision totally lies with Bernanke. The market, in general, should take the rate cut (if it comes) positively and expect some downside if there is no change in the interest rates.

As seen from the 30 minutes chart of Nifty above, the previous high made on 25th could not be crossed by the high made on 29th and the previous low made yesterday (29th) was broken today. But the low made yesterday was not a very significant low. If the Nifty were to go below 5071 then we would be back into a pattern of lower highs, lower lows and the short term trend will change to down. The intermediate term, as we have been mentioning since the last so many days is already down. But the long term trend remains up. So, any dip is a good time for investors to buy. Traders should take long positions only if the short term trend were to turn up, which means if the Nifty were to go above 5390.

Tomorrow is going to be a very volatile day. Though, day-traders do look for volatility to make money but in such volatile conditions, a wrong trade could cost a fortune. Tomorrow is a day when traders also should stay away from the markets.

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Happy Investing!!!