Budget Day to be Volatile

Shown below is the 60 minutes chart of the Nifty. It wasn’t such a volatile day as we expected it to be. On the contrary, it was a narrow range day with an intra-day movement of only 75 points. More surprisingly, the Nifty is still holding on to our support line mentioned yesterday. Not only that, it even showed a good rally in the last 30 minutes to close near 5300.

A narrow range day suggests that a big move is about to come. This may, or may not, come tomorrow, but will surely come. The more the narrow range days, the bigger the move is likely to be. But for now, we hold our view mentioned earlier that the Nifty is in a short term uptrend (as long as we remain above 5055) and in an intermediate term downtrend (till we remain below 5600) and in a long term uptrend (if 4000 is not broken on the downside). Our view also remains that the Nifty has made a pattern, on its 30 and 60 minutes chart, the target for which is between 5880 and 5900. This will not come in a single rally. There will be minor corrections in between. Traders should continue to follow the short term trend and investors should follow the long term trend, both of which happen to be up now.

Tomorrow is budget day. There may be volatile movements as Mr. Chidambaram continues with his speech. After the speech finishes the markets may go down. This is because the markets have built up expectations before the budget and not all expectations are always met. But, since the markets are already not expecting anything much out of the budget (and a populist budget, as expected, has already been built into the market), there may be some positive surprises in store.

But, we are safe. The traders are already out of the market and are advised to stay away for one more day. A rally above 5300 should be used to build up long positions (in the short term). For long term investors any dip tomorrow, or in the days to come, should be used to buy. Since expectations are already low, there can be nothing worse which can make the markets go down below our intermediate term supports (at 4600).

As mentioned in earlier newsletters, we are inviting our esteemed readers to send in their contributions in the form of articles to be published on this page. Take this opportunity to voice your opinions to the world about the budget, the markets or anything remotely connected to the markets. Please e-mail your articles and don’t forget to mention your name and location so that you are given due credit for the article that is published.

Happy investing!!!

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