When market closes at and about round figures(for example on Nifty at 5400 or 5403, like today at 5550) this type of closing is called False closing.
Significance of False Closing
In 10 previous occasion when markets closed False closing, there was a selling off the next day on 7 such occasions.
Today(2-6-11) was one such day when market closed at correct 5550. I am expecting a minimum fall in the market of 1%. As I said yesterday(1-6-11) also, that market will fall by 1%, morning market fell by almost 1.2% and then recovered. I was expecting atleast a 2% fall but the traders who had bought in the rally of last 2 days might not have thought to sell their holding at loss so they bought a bit and kept the market up. But if you observe in the graph at 2:30pm there was sudden fall. This was time when the volumes suddenly surged clearly suggesting a heavy selling. Yesterday(1-6-11) Reliance communicaiton, Reliance Infra and Reliance Cap all the Anil Ambani group(ADAG) companies were good gainers. But today if you see the charts I placed below there was a heavy selling at 2.30pm during which all ADAG stocks came down in one straight line. This shows that some heavy investors sold in the market to exit his position. So you can expect ADAG companies to fall heavily in coming days and market also to slide heavily. I recommend a short sell trade on Relcom and Relinfra tomorrow. I am still maintaining my view of Nifty falling to 5450 in next 2 trading sessions based on my theory of False closing, heavy selling of ADAG shares and Global negative cues. People having the Put Options that I suggested yesterday should hold them for good returns in coming days. Happy Trading. :-)
NIFTY CHART
RELIANCE COMMUNICATION CHART
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