Friday, May 10, 2013

Sell In May & Go Away - Should We This Time?

In Western markets there goes a saying "Sell in May and Go Away". And this adage has generally been holding its worth even in Indian markets most of the time. But this time around Dow Jones has been surprising everyone by making all time highs everyday in May. Does that mean that things will be different this May and the adage will be proven wrong? Will it be foolhardy to sell in this month of May 2013?

I do not think it is unwise to sell now in May 2013. Of course you will have to time your 'Sell' differently for different stock futures. As for record breaking streak of Dow Jones, it seems the bullish exuberance has already been overdone for the time being. I am not for once saying that Dow Jones has peaked. I am only saying that Dow has overstayed in the untrodden territory of All Time High for a bit too long. So for the present moment Dow will have to cool down somewhat in rest of May.

I have been reminding you in previous posts that we will be selling May series. And the time has come for some action tomorrow. The first 'Sell' candidate is Nifty itself.  Lets have a look at Nifty May Futures daily chart.:

 We can see that Nifty has the following weakness in daily charts:-
  • V-shape recovery which needs to correct so as to provide stability for further move up.
  • There is formation of Bearish Engulfing candlestick pattern, if we see the candles of the last two trading sessions.
  • Support for this V-shape up-move will be at 61.8% or 50% retracement. This means that  5800 and 5725 are the support areas for Nifty.
So we can sell Nifty between 6060 and 6090. Even if Nifty has to move up from here without correcting, it will still have to touch down to 5970 before going up, Hence selling Nifty now is low risk and high return proposition. Sell Nifty May Futures between 6060 / 6090 for first target of 5870 and second target of 5725.

There are other 'Sell' candidates also, but we can keep our exposure at low risk by selling only Nifty for the time being. But in case anyone needs to reconfirm a view on selling any other stock futures, he or she can do so by simply asking my opinion in the 'Comments' section. Remember its May and we can make merry by selling stock futures in May. So go right ahead and take action. All the very best!

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