Possible Trades in the Futures Segment

As a new week starts on June 30, Monday, traders must be wondring on the possible trades that may emerge in the FNO segment.

Before we look at trading opportunities, let us examine the current market scenario. The Nifty is in a bear market, falling from 6350 in January 08 to 4135 on Friday, June 27. Friday also saw a 10 month low in the Index.

Trade with the trend should be the basic philosophy for all traders. But, as Tom Demark said, “the trend is your friend until it is about to end.”

New lows made on Friday tell us that the trend is not about to end. New signals may come in next week, but as of Friday, the down end shows no signs of exhaustion.

Trades should then be mainly on the short side. If you are uncomfortable with short positions, then it may be wise to avoid trading. With this warning, there are some opportunities to buy. These are dsicussed below.

We used Rank-It! a ranking tool available in Trend Mechanic to identify the strongest stocks in the FNO segment. The top names included:
IFLEX, SASKEN, NIIT, TULIP – All four are software stocks. This tells us that the software sector may outperform the broad market in the coming week. All four stocks are in a trading range. Any up move could see gains in these stocks. Traders should consider long positions on signs of a market rally. Always keep stop losses.

The list of weak stocks is long. Banks, Infrastructure, Capital Goods & Real Estate dominate the ‘weak’ list. Siemens, Havells, Andhra Bank, Corp Bank, Bombay Dyeing, India Infoline, IFCI, BEML, Parasvanath, HDIL are sell on rally candidates. As usual, the warnings are to trade with low volumes, always keep stop losses & take profits quickly.

Have fun !