Sensex Technical View :Sensex as expected has tested the 8900 zone by making a low of 8957 closer to the lower range and 61 % correction. This was the most preferred zone of 8900 /9300 being mentioned since we reached 10700 zones. The simple and clear strategy to get in early and get out early with lower risk and higher returns is the best way to go in such volatile markets then to be part of the total move.
Although Sensex has a gap around 8740 which can also get filled but it would be a buy on dips from 9000 to 8700 with a stop of 8500 on closing basis technically. So look for stock specific options or wait for a sustaining move which may try breaking 9900 to give some quick impulse.
Technical Comparisons and Possibilities :
The strategy we have been using is to react then to predict of late . As a matter of fact its simple either markets will go up or go down , but all the technical views in the market -men have been one day up and down the other day with quick conclusions.
The consensus at 10500-10700 was of 12500 and at 9000 it goes towards 7500. So our simpler/watchful strategy and analysis of waiting for confirmations has been more fruitfull , less risky and on the mark.
As we see in the chart above there is a possibility Sensex may form a flag pattern. This has been compared to a similar one before. The major trigger though remains a breakout from the flag and the sloping trendline. So we will continue to track this pattern over next 2 weeks as a back drop to any market move. A fall below 8500 on closing basis would negate this possibility.
Stocks to watchout for :
Reliance Inds sustaining above 1195-1215 could lead a strong bounce back in mkts and may test 1300 + in that case.
IDEA cellular is sustaining nicely in the current fall and a move above 53 would give a tgt of 60 + in short term. 45 is a level on downside which is imp support
MTNL and Nalco seem to be showing some positive bias. Can they give a quick upmove is difficult but possible in good markets.
Market Observations and Thoughts :
ATF prices slashed by 12% . The last price cut of 17 % on November 1st was one of the reasons for a sharp drop in inflation in Nov 2nd week. Will this further cut lead to a moderation of inflation around November last week. Yes it seems so if other components support or stay stagnant.
Over the last few months have been seeing the insider trading n Sast list on bseindia getting bigger only by the day. There has been good creeping acquisitions in many companies. But dunno where i could get an entire archive of the same so we can get more insights.
The major myth or fallacy with a day trader or even a positional trader who is into it as a business :
You can either go/remain long or Either go/remain short on the 200 + sessions over the year.
Why is staying on CASH/ No trades not a position.
I believe the third one is the safest when one is not very confident or the business ( trading / swing ) is difficult to gauge.
As a matter of fact in any business or profession there is a provision for Sick leave , Peak Season / Off season , Paid Leave ,Unpaid leave Vacation. All of us should try to co-relate these things with our Stock investment / trading business which will definitely lead to better productivity ( profits ) and patience ( stability ) in the long run. THINK ON IT !!!!
Investors tend to underestimate the importance of sector before investing in a stock. They generally concentrate on stocks but forget about the importance of sector. Investors in IT and sugar stocks missed to capitalise on the glorious bull run in 2007. Except in rare instances, even good stocks in bad sectors will underperform while bad stocks in momentum sectors generally outperform due to positive sentiment. Just see how even good commodity stocks are now falling to unreasonable levels. In USA, many waste management stocks are now trading near 1-year highs.
Investors in power sector got bumper returns in the December, 2007 rally. Textiles are the hot stocks in early 90’s, while IT stocks are the hot ones in late 90’s. Metal stocks are star players in 2007 while they are the worst performers in 2008. When sentiment turns to negative in a sector, even strong fundamentals will not save good companies from free fall.
Why sector is so important?
1. 2001: Nifty gave -16% returns while top sector, Auto, gave 29% returns. Hero Honda was a star in those days.
2. 2002: Nifty gave just 4% returns while top sector, Energy, gave 74% returns and Metals and Banks gave 50% returns.
3. 2003: Nifty gave 74% returns while top sector, Metals, gave 238% returns. Real Estate and Capital goods gave 170% returns.
4. 2004: Nifty gave just 9% returns but top sector, Real Estate, gave 144% returns. Telecom gave 63% returns.
5. 2005: Nifty gave 36% returns while top sector, Real Estate, gave 290% returns. Capital goods stocks gave 110% returns.
6. 2006: Nifty gave 40% returns but top sector, Real Estate, gave 200% returns. Metals and Telecom gave 70% returns. Unitech and Bharti Airtel investors may not forget those days.
7. 2007: Nifty gave 55% returns while top sector, Metals, gave 190% returns. Capital goods and energy stocks gave 110% returns.
8. 2008: Nifty gave big negative returns but investors in FMCG and sugar stocks escaped from big losses.
Statistical source: Business Line.
I am requesting readers to share their views and data on the importance of sector. I am eager to see which sector will outperform in 2009. Will alternative energy finally take lime light? Will commodities bounce back? Will defensive sectors like Pharma and FMCG continue to rule?
My GDP estimate: Indian GDP growth will fall to 6% in this financial year from 9% in the last year.
About valuations: Analysts are talking about historically low valuations of BSE Sensex and NSE Nifty but such assumptions will not work in the current market. When BSE Sensex was trading at P/E of 14, it was trading at a forward P/E of 10-12. There was an investment opportunity at that time. Now Sensex is trading at an attractive P/E of 10-11 but it is now trading at a forward P/E of 14-15. There lies the problem. Future growth is very important in stock markets. Very few companies will positively surprise us the next quarter results. Fall in consumption will offset the fall in commodity prices and interest rates.
Global recession news: Developed countries are gradually slipping into deep recession and these economies will take years to recover. Reviving economy is not going to be as easy as Obama said. It is no longer about “sub-prime crisis”. Crisis spread to main economy and families are now really feeling the heat. Job losses are aggravating the problem.
1. Citi Bank will cut another 52,000 jobs to reduce work force by 20%. The bank already cut 23,000 jobs in this year.
2. Europe: Continent is officially in recession after 15 years. All the European countries are showing negative growth.
3. Japan: Unexpected shock. Japan GDP growth shrank by 0.4% in Q3. World’s second largest economy went into recession for the first time since 2001. Japan’s public debt is 180% of GDP while USA public debt is 300% of GDP. When will these developed countries recover?
4. Hong Kong: Country is in technical recession which will see more negative growth by next quarter.
5. England: Recession in U.K is painful and prolonged – British Chambers of Commerce. 30 lakh people will become jobless by 2010. Britain economy will shrink by 1.7% in 2009. 18 lakh people are now unemployed in U.K.
6. USA: Retail sales recorded biggest monthly decline since 1992. Auto sales fell by 32% in October to the lowest level since January 1991.
ATF price cuts:
Even though ATF price cut is good news for Airlines industry, it will not change the industry’s business prospects. Airlines problems are mainly due to rapid slowdown in economy and the consumption power of people but ATF price is a minor problem. Can you invest in IT stocks due to dollar appreciation? Can you put your money in textile stocks due to rupee depreciation? Can you invest in Oil marketing companies due to short term fall in crude oil prices? Can you put your hard earned money in Real estate stocks due to RBI rate cuts? Can you invest in Aviation stocks due to ATF price cuts? Give importance to business fundamentals but not to minor happy news. These little things are meant for traders.
About IT stocks:
This sector is seeing dramatic collapse in the last 10 days. Current decline in IT spending is much deeper than estimated. IT research firm IDC revised world IT spending growth estimates to 2.6% from 5.9%. India will be severely impacted by this drastic slowdown in IT spending. Intense competition for new orders among companies will dent their profit margins. Investors should stay away from this sector until January. Intel, Cisco, Apple, AMD, Google and Nokia shares are plummeted in NASDAQ. IT industry lost 7,00,000 jobs in 2001 and it will lose 2,00,000 jobs in 2008 and more in 2009.
Investment advice:
Investors should stay away from stocks of the companies which depend on developed economies for their business growth. Investors should not believe in the statements of Company CEOs. Believe in your intuition and research. I don’t believe in the domestic consumption theory. Indian consumption will fall drastically in the coming months due to job losses. Indians so far felt only 30% of the crisis effects. Real picture will unfold in the coming days. Invest in companies which depend on Government spending, necessary consumption like Pharma and companies which can continue their growth prospects. Many people are concentrating only on IT job losses by forgetting the lakhs of job losses in unorganised sectors like Textiles and Jewellery etc.
Investment strategy:
Short-medium term investors should monitor situation on day to day basis. But long term investors with 2-3 year perspective should accumulate on every fall. Accumulate only good stocks with strong growth prospects and sound business models. But current market is ideal for traders and short term investors. Note down stocks which are actively participating in bear market rallies. Closely monitor them to make 20-30% profits on every rally. Is it not enough?
How I use online trading: I have online trading accounts with ICICIdirect, Reliance Money and Religare.
1. ICICIdirect:
This is for pure long term investments in emerging companies. I will not sell these stocks except in rare circumstances. These companies will not give you any significant returns in the next 1-2 years but even 1-2 successful investments will give outstanding returns over long term. Among these emerging companies, some companies (MIC Electronics and Time Technoplast etc) disappointed me in the recent quarterly results while some companies announced encouraging results like Compact Disc, XL Telecom, Tanla and IKF etc. But I will not sell even bad performers but reduce future investments in those stocks. These are buy and forget type of investments.
2. Reliance Money:
I will use this for medium to long term investments. I am now using accumulation strategy for these investments. Due this strategy, I missed big profits in short time in Educomp, Core Projects and Kalindee Rail Nirman etc while I escaped from big losses in Balasore Alloys and Visa Steel etc due to this accumulation strategy. I will continue to accumulate on every fall. I will sell these stocks if I find something is seriously wrong with the company. I treat every fall in the stock price of a good company as an investment opportunity but not as a selling sign. In these days, things are changing on a daily basis. So you need to monitor your investments and exit bad stocks. Buy and forget is not good in these unpredictable times. Stock selection will depend on your profile.
3. Religare:
I use this for ultra short term opportunities. I bought and sold Larsen and Toubro, JP Associates and Punj Lloyd etc at least 5 times in the last 3 months. But I have not sold single share of Larsen and Toubro in the Reliance Money account. That is the difference. Enter into the stock if you spot an opportunity and exit with reasonable profits. Greed is very dangerous. If you are an experienced investor, you should not miss these opportunities.
Suggestion: I am saying above things to suggest that clarity is most important in any investment especially in stock markets. One should invest according to their age, risk profile, needs, expectations and income etc. HUL is a good stock for conservative investors while it is bad scrip for young long term investors. Gujarat NRE Coke, Tata Steel and Hindustan Zinc are bad stocks for short to medium term investors due to commodity slowdown but they are must buys for contra long term investors. XL Telecom, Educomp, Compact Disc, Tanla, ICSA and Bartronics are not good scrips for short to medium term portfolios but educated long term investors should accumulate them.
Investors should analyse their needs and risk profiles and made investments in those stocks that suit their requirements. I am strictly against investments in derivatives especially in futures. Retail investors should stay away from investments in futures and other speculative activities. This is my sincere advice.
Nifty :: After first hour correction at least 2 hour Nifty try to make support near strong support zone 2700 and finally in last hour made Long lower Shadow High Wave bullish candle pattern …For 18th Nov. Watch two strong support at lower level 2732/2695.. Below it next support 2633 (In Sensex Watch two strong support 8928 & 8760).. Still Nifty and Sensex both are in mid term corrective upward momentum. For short term momentum in one level hold above 2732 momentum seems up , below 2695 momentum down.. Avoid shorting at low.. Our strategy for 18th Nov, up to 2732 buy on deep sell at high, Below 2695 sell at high buy on deep.. Resistance for up move at 2866/2900/2975/3019/3053.. Supports at 2732/2695/2633/2610/2551/2500/2450.
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| Alert Name: India, Bearish Alert Criteria: Stocks (Any Indian Exchange); Price at least 50.00 and below the 200-day moving average; Volume at least 10,000; Classic Patterns; Bearish; Pattern Duration at least 25 days; Possible Price Move of at least 10%. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Alert Criteria: Stocks (Any Indian Exchange); Price at least 5.00; Classic Patterns; Bearish; Daily Events; Pattern Duration at least 25 days. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Wow! At last I've made my contribution to technical analysis by discovering this arrow pattern! Pattern implications - as long as prices remain below the shaft, go short! and go long when prices pop up over the shaft. Brilliant!
The Indian market opened on flat note and drift in to red zone market recovery at last hour of session and close in red zone .For the coming session nifty can test 2866 zone if it cross 2870 it can test 2910 zone on the lower side2746 – 2717 will act as support zone. For clear direction nifty has to trade above 2976 .Reliance as we all know the heaviest of all index(Nifty) stocks and its movement affects
Nifty movement to a larger extent compared to any other stock.
From January high,If we try to break Reliance waves it looks like it did 3 down waves till
27th oct low.Wave 2 being a simple zig zag ,4th wave could do a bearish flat or a triangle.
The current conditions look well suited for a bearish flat(3,3,5),Though the 3 wave b part
still looks incomplete its a warning to shorts to keep strict sl as the rise would be of same
momentum as we witnessed from 27thoct low.
1180 above reliance should be strong and target 1300 and subsequently 1480.
These levels are outcome of Technicals applied on chart and should not
be compared or analyzed with fundamentals:).
On chart the dotted green trendline is the trend decider.If a close is given above that that
would give strength to this view.
The strongness of this view holds if Reliance trades above 1180 and gives a close above that.
Nifty movement to a larger extent compared to any other stock.
From January high,If we try to break Reliance waves it looks like it did 3 down waves till
27th oct low.Wave 2 being a simple zig zag ,4th wave could do a bearish flat or a triangle.
The current conditions look well suited for a bearish flat(3,3,5),Though the 3 wave b part
still looks incomplete its a warning to shorts to keep strict sl as the rise would be of same
momentum as we witnessed from 27thoct low.
1180 above reliance should be strong and target 1300 and subsequently 1480.
These levels are outcome of Technicals applied on chart and should not
be compared or analyzed with fundamentals:).
On chart the dotted green trendline is the trend decider.If a close is given above that that
would give strength to this view.
The strongness of this view holds if Reliance trades above 1180 and gives a close above that.
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