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Nifty targets 6000 mark

Sunday, October 28, 2007

The Nifty has retraced all its losses. The weekly charts look strong and this bullishness will take the benchmark indices to new highs. However, the relative strength index (RSI) should be observed carefully because if does not mirror the market highs, there could be a sharp correction, according to Kamalesh Langote, vfmdirect.com.

Almost two weeks prior to October expiry, the RSI diversion had led to correction of almost 2000 points on the Sensex and 700 points with regard to Nifty.

Nifty has a target of 6,100, going by Fibonacci numbers, as it has retraced from 5737 to 5071 and back to 5,707 now. As the Nifty has retraced 636 points from its low and the Fibonacci number after 144 is 1.618, Nifty should rise by 1,030 points from its low of 5071 to a target of 6,100.

The Fibonacci ratios are derived by dividing any number in the series by the next higher number. The ratio after 3 is always 0.625 and after 89, it is always 0.618. If you divide any Fibonacci number by the preceding number, the number is always 1.6 after 2 and 1.618 after 144.

Call options data suggests that upper limit for the Nifty November contracts is between 6050 and 6128, because call option writers have paid a premium of Rs 148 for the strike price of 5,900.

The last week saw long OI build up in stocks such as Axis Bank, Central Bank, CESC, Federal Bank, GE Shipping, HDFC Bank, JP Hydro, JSW Steel and Triveni, with the cost of carry turning negative for Axis Bank and HDFC Bank.

These stocks are likely to outperform in the coming days and hence one should enter at lower levels.

Posted by FR at 7:49 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.