"The NIFTY is approaching 200dma resistance".
Here is last weekend's summation -
4875 rsi 33.41, 50/200 4909f/5205uf
low 4448 Jan 22 4468 Mar 18, hi 5298 May 2
weekly uptrending 50wma at 5075, line lost again!
wrsi 47.04, must rise and take out 50 else trouble
fib levels 6357 - 4468 = 5189 hit! 5412 5635
DB breakdown 5/26 bearish po 4600
Let me quote what I wrote in the previous post-
"This first approach will ALWAYS fail, though
one does not know WHEN it will fail". I was
referring to the 200dma resistance.
Let me draw the latest weekly chart. Remember,
about 4 weeks have elapsed.
Ah, one can see that it went up to about 5298
before turning around. Thats roughly 100 points
above the 200dma ( not shown in these weekly
charts but you can take my word for it! ). Since,
it has fallen to just below its 50dma at about
4900.
Let me explain the cryptic lines in the analysis
above-
1. price, rsi, 50dma, 200dma.
4909f means 4909 flat.
5205uf means 5205 sloping up but flattening.
The 200dma line, which slopes healthily up in
a nice bull market, is flattening! If it curves
down, it will form a strong downward sloping
resistance, or that unhappy word DOWNTREND!
2. some recent significant highs and lows
3. the 50 weekly simple moving average line ( see
chart ) which had held the nice move all these
months, and the nifty jittering around it.
Still nothing too bad.
4. a comment on the weekly 14-RSI, as can be seen
from the chart. Back in March 2007 and July 2006,
this indicator plunged the depths of March 2008,
then picked up and didnt look back. We need the
same to happen, so the 50 line becomes important.
5. fibonacci retracement levels of the move down from
6357 to 4468. We have claimed the 1st level at 5189,
which unhappily was close to the 200dma. Thus double
trouble!
6. a p&f chart comment- on 5/26 we had a double bottom
breakdown and the bearish price objective, 4600.
So, the approach to 200dma did fail, and this time
the 1st fib retracement level was also sitting there
to make it more difficult. But we could not know
WHEN it would fail.
I wont bother you with classical trading analysis
of the nifty, since I am doing that with the Euro.
I just wanted to say that one way to play this
would be as follows -
Sell a CALL option above the resistance zone
For symmetry, sell a PUT option below the support zone
That, my friends, is a short strangle. Its what
I do for a living!
Questions -
1. Which months options to sell?
2. Exactly which strikes to sell?
3. What happens if my strikes are approached?
The answer to those questions, is my speciality.
I do not need to be able to predict where the
nifty will go - I have already collected my
cash by selling the strangle. All I need to do
is to be able to protect my money. I need to
react if it looks like I may be exercised on
my short options.
"Do not predict; react!"
Thanks for your viewership!
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