4200 how strong is the support?

As I am typing this post i can see that the dow is trading 300 pts lower also the crude has touched $135 again today. In the midst of these uncertainties how strong do you think 4200 support is on nifty. I know most analysts have predicted 4200 to be a formidable support for nifty but my point is that it's just 250 pts below the last formidable support of 4450 (Jan lows). If the macro conditions like inflation, crude, US economy and Indian company profitability has really worsened since Jan and then do you really think investors will start buying just 250 pts below the Jan lows? There could be a good reason for technical analyst to believe this but other than that can we really make a strong case with fundamentals for this support to hold?

Also what makes 4200 a great support on charts? Can anyone please explain. It would be great if you could post some charts to backup your case.

Thanks

If look at the chart of NIFTY for last 2½ months ,except for 4 days ( a month ago) NIFTY was always less than 200-DMA. Many analysts believed that at least ,NIFTY will take support at 50-DMA.Presently 200-DMA is at 5200 and 50-DMA is at 4860.It breached the 50-DMA support level CONVINCINGLY.

The way the crude price is rising ,( as of now it rose by 8$ per barrel TODAY itself ),the level of 4200 can not be ruled out.

Hi,

Nifty @ 4200 is not "just" 250 pts from Jan lows. It is 10% down from todays close and we have already corrected 10% in last 13days. 4200 support is still little far. We need to first test Jan lows of 4450 and break it convincingly.

Dow has cracked 400 pts today i.e. 3%. If we were to assume, that we would also fall 3% from 4627 (which is not likely beacuse we already cracked 2% from today's high in anticipation of negative news from US), it comes around 4470. If it bounces back from there, technically its a completely different ball game.

There are various kind of TA's available such as DMA, EMA, Oscillator, MACD which can provide this information. Excel have in built features for this, only you need to collate the data.

Investors normally keep buying in small quatities, accumulate and hold it for long. Though they refer to rumoured, murmured and overheard TA, it only helps them to be ready with cash in hand for one more buying opportunity. Further, since investors have long term interest, it doesnt really matter them whether its 4200 or 4000 or 3600, 'cos they are willing to buy at every opportunity. Infact, they wait for such opportunites.

Now coming to macro conditions, it wont change overnite. Just see US economy, fear of recession is making round since Aug 07, we are now in Jun 08, still it is fear and not confirmed.

Inflation, frankly is now a non event. If you see today, nifty opened +50 on gloabal cues and was almost flat to negative when inflation was announced. After that nifty recovered and crossed 4700. It is after that negative data came out of US which resulted crack in Europe and Indian makets.

Crude is a concern, but again its cyclical and short term event. Falling dollar increases price, increase in demand for dollar would reduce the price. Even increase in crude gives opportunity for investment in stocks like Cairn, HOEC, RPL, etc...that is again a different issue.

Wether US economy is in recession, stagnation or depression, its markets are so far outperforming world markets. Considering this, Will mere short term economic slow down affect our fundamentals so much so that we lose confidence in our markets and economy? I dont think so.

Indian company results were reasonably good. Results are definitely important but even if it worsens in one or two quarters, fundamentals do not change in this short span of time.

Further, this is election year in India as well as US, so markets are bound to be volatile. Political mood has the potential to drown markets to new lows and can also drive markets to new highs. Whatever we may see in the near term, Vision 2020 is the mission of India. With this vision, buying at 4200 seems "qualified for investment", even if not recommended.

I personally do not think investors need to be concerned about 4200 levels, when there is already 20% decline in two weeks. These are just my views and there is no intention to contradict with your any other boarders views.

Regards

Nice info... thanks buddy

but why 4200, why not 4100 or 4000 or maybe 3600? what is so special about 4200? What makes 4200 special for a technical analyst?

Nothing special about 4200. Its just one support level from where maket can bounce back. If that is also broken we will have some other support level...say 4000.

Regards

And 4100, And 4000, And 3900, And 3800, And .......upto 2600 If That Is Broken Then We Are Back To Square One.