Tuesday, May 14, 2013

Selling in May Has Started - Nifty On Course To Target

Selling in May has started as I had predicted on 10 May 2013. We are about to witness a bizarre game of Distribution. Those who are uninitiated to the term "Distribution", it is a technique of selling by big players wherein they try to mask their intention to sell large quantities by selling in small tranches. This ensures that the prices do not get depressed suddenly and they are able to get good average sell price of their overall quantity. In this process they also intermittently try to artificially spike up the prices by buying back portion of their sold quantity.

This is a normal process of selling that happens in the market as a precursor to Bear Run. Then why am I calling it bizarre? The other day I was telling a friend of mine about what I perceive would happen in the market looking ahead. I am of the firm opinion that in days ahead we are in for some serious selling in the market. In normal times, the distribution phase is meant to suck up the retail investors by tricking  them into buying when actually they should be selling. Conditions in market are so created which convince the retail investors to buy. But at the present moment there is hardly any retail participation and even the domestic institutions are well nigh non participants in the market. That leaves the very big fishes comprising of all shades of FIIs. It is these big players who will try to hoodwink each other to get the best selling prices. So in short you will witness some very complex market movements and illogically high volatility. One day it will seem as if the Bears have taken total control and the very next day you will inexplicably find Bulls racing ahead in full steam.

But don't worry. As long as you are with me through this blog, you will be guided to weather any storm in the market. You will recall that on 10 May 2013 I had advised to sell Nifty May Futures in a post titled Sell In May & Go Away - Should We This Time?   And in the very next trading session on 13 May 2013, Nifty May Futures dropped from intraday high of 6119 to intraday low of 5986. In today's session Nifty May Futures has made a Doji and closed at 6006.

However, in my recommendation I had given the first target of 5870 for Nifty. It seems we are on course to achieve this target. Those who have sold Nifty as per my recommendation, can hold on to their position till the given first target. But they should keep stop loss at 6090, owing to expected high volatility. And once the first target is achieved then they should hold their position for the second target, but with apt trailing stop loss so as to protect their profit till then.

So far so good in trading Nifty since we are sitting in profit. Lets see whether the coming sessions vindicate my stance. Happy trading!