Had it not been for the last hour of trade on Friday, the bulls could have gone into the weekend with their heads held high. It has been a rough week for global markets.
Under those circumstances the Nifty has displayed some resilience in closing at around 4,150. On at least two occasions this week, it started the day down and then managed to pull back from important technical supports. Sure, it lost 150 points during the week but has not quite broken down completely, despite some negative triggers.
While that is certainly not a conclusive indicator of bullishness for the next week, particularly given the choppy global markets, it makes life a bit uncertain for the bears. After all, the Nifty futures discount of 20 points does indicate the presence of shorts in the market.
Next week is a big one. At a time when global market volatility is rising we have the DLF issue opening here. Technically, that is a dangerous cocktail. A sure recipe for volatility. If the global problem deepens, the index may plunge below supports. Stop losses will then get triggered even for the positional traders on both the Nifty and stock futures and that could have a cascading effect.
Conversely, the opening up of large short positions in Nifty futures and pivotals like SAIL, Tata Motors and ITC raises the odds of a sharp pullback if global markets were to stabilise. It is almost impossible to call the global market direction after observing the last couple of dips.
The picture is hazy and the market poised on a knife edge. Hedged trading is a good idea, naked futures trading not. Someone was suggesting a pair trade of going long on CNX IT futures and shorting the Nifty futures. If the rupee continues to weaken it may be an interesting idea.
For next week, it may be prudent to be a bit conservative. Maybe trade with smaller quantities, use stop losses and take hedged bets. It is uncertain and volatile, not the best time to be adventurous.
(The writer is Executive Editor, CNBC-TV 18)