PIVOT POINT

Pivot, Support and Resistance levels for Sensex, Nifty and Bank Nifty Based on Sep 6, 2010

	SENSEX	NIFTY	BANK NIFTY
Close	18560	5577	11219
Pivot	18428	5549	11171
R1	18732	5618	11309
R2	18904	5658	11399
R3	19208	5728	11536
S1	18256	5508	11081
S2	17952	5439	10944
S3	17780	5398	10854

After the steep fall in stock prices in October, a look at the broad market reveals that the damage to individual stocks is severe and that has killed purchasing power drastically. In such type of scenario, I don’t think insiders may adopt rising bottom falling top approach to consolidate (symmetrical triangle).
The ideal formation should be falling top falling bottom (falling wedge) or flat bottoms and falling tops (ascending triangle) to consolidate or prepare for the next up move. The average-traded volumes should come down to extreme levels that will indicate diminishing interest of selling force in the market.
our advice is to have guts to buy on major declines and sell back the same at major resistance levels
The level of 2860/9700 may act as a concrete support breach of the same may invite further sell-off to the levels 2650/8900, or may be even up to 2580/8720. However, a close below 2580/8720 may empower bears and in that case retesting of previous lows is not ruled out.

On the higher side, sustenance of the market above 3050/10450 may lift the sentiment and in that case the market may even surge to 3250/10900. However, weekly close above 3170/10800 may lift the market to even 3400/11600.
The Nifty will range trade between 2,850 and 3,250.
The Nifty's put-call ratio (in terms of OI) is at 1.15 while the PCR OI for November Nifty is at 1.05
STRATEGY FOR NIFTY PLAYERS
Take spreads inside the 2,800-3,300 zone, where prices may move randomly. A second is to take long strangles outside this zone hoping for breakouts. The third is to take short strangles (or short puts or calls) outside the 2,800-3,300 zone on the assumption that there will not be breakouts.

Close to money spreads have reasonable risk-return ratios. A long 3,000c (189.6) and short 3,100c (140.15) costs about 49 and pays a maximum of 51. A long 2,900p (160.15) and a short 2,800p (121.8) costs about 39 and pays a maximum of 61. The bullspread is much closer to the money – a further from money spread of long 3,100c and short 3,200c (98.65) costs 41 and pays a maximum of 59.

A long strangle of long 2,800p and long 3,200c costs 223. It can be laid off with a short 3,500c (25.55) and a short 2,500p (49.25) to generate 75 in initial premium inflow and reduce the total cost to 148. This position would breakeven if the market swung beyond 2,650-3,350. The maximum gain on a breakout in either direction would be 150.

The exactly reversed set of strangles can be taken if you believe the market will not breakout. The even risk-reward ratios reflect indecision on the part of the market due to the current range-trading pattern.

Another way to take a set of short strangle is to take a short 2,500p and short 3,500c with an inflow of 75. Lay off with a long 3,600c (16.05) and long 2,400p (38.95) for a payout of 5. The total initial income is 20 and the maximum loss is 80 but the position is much less likely to be hit.
chart patterns suggest, the Bank Nifty looks capable of a move till around 5,200.However, this would be dependent on the rupee staying at current levels (Rs 47.75) or moving lower. Liquidity in terms of OI is quite low in the CNXIT and average in the BankNifty.