It would be worth taking a chance of buying in any panic in the first couple of trading sessions this week. However, one thing is certain that the shorts should cover their positions in any panic in the first half of the week

S&P Nifty close: 4,841

Some Observations
1. The Nifty is facing stiff resistance in the 5,135-5,185 area which has to be taken out in close for the bulls to be shaken.
2. Weekly averages remain negatively phased implying that the bears are in control and immediate bottlenecks are pegged at 4,964, 5,045 and 5,086 (optimistic scenario) this week.
3. We are witnessing a five wave decline on the daily charts and a panic low in the next couple of days should be bought into only from a trading perspective.
Strategy

A breach of the recent low of 4,788 points would result in the current decline being in five waves on the daily charts which would set up the scenario for a contra trend rally. However, since the trend is firmly down the expected recovery will lack confidence in the initial stages and only the die-hard traders would be able to take advantage of it. The weekly oscillator is also exhibiting a positive divergence at this moment and if it succeeds in holding on, the chances of our above-mentioned scenario likely to play out increases. It would be worth taking a chance of buying in any panic in the first couple of trading sessions this week if our anticipation comes out to be correct. However, one thing is certain that the shorts should cover their positions in any panic in the first half of the week.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com)