NEWSLETTER

Sensex Technical View :

Couple of days back had put this chart of comparison to earlier pattern COMPARE FLAGS.

Again we will list down a few technical points.

1) GAPS Filled

Sensex has filled all the 3 gaps which we had been discussing since markets were nearing 10700 zones. The last gap at 8740-8900 is finally filled. Its a preferred thing that gaps dont remain unfilled. Also the 3 gap ups gave the ideal opportunity to book and generate cash in exhaustion.

2) Flag Pattern

Yet again we are seeing a flag formation similar to what was seen after March lows as shown in another chart. The characteristic of such a pattern is declining volumes in this period which we are seeing now. Followed by that we need to see a breakout with larger volumes to confirm. The levels on higher side for break out are roughly 9400-9700. So continue to wait for a breakout on upside to decide next move till then wait .

3) Retracements.

The 61 % fibo level is done at 8900 and markets are trading below it. The fibonacci levels are not strict technical support zones. Although in such corrections markets can correct to 75-85 % also in some cases. Generally markets are found to retrace uptill 61 % but that is not the only consideration for trading decisions.

In simple words the strategy remains the same to wait and watch , look for stock specific trades. Since the decision to book out/generate cash at 10500-10700 the view has been to look for selective trades on either short or long side. Continue to keep the above chart as a reference to catch the next direction.

Stocks to watchout for :

HDFC BANK

Technically its getting into a very crucial area of support 850-865 which can be touched in near term. A sustained close below 850 would be a real bad signal technically which could lead it closer to 700 -750 levels also.

Reliance Capital

Another stock which is trading below October lows. Technically the stock seems to be heading lower closer to 420/380/320. Although this was one of my favourite bounce backs in previous bear rallies but have avoided this time around. But still seems would be a bargain for real long term if one can start buying staggered if it comes to above 3 levels.

Some of the stocks have broken their October lows and quite a large caps cos are nearing those zones. So it will be interesting to see how it pans out in next couple of weeks. Reacting rather then predicting would be the simplest approach.

Nifty broke an important level of 2640 and closed below it, and thats going to be the SL for anybody who is short.

Next support is at 2540 levels.

for intraday if trades above 2640, may go on to hit 2673-2694 levels.

Sell Reliance below 1115, Target: 1090, 1065 SL: 1120

Sell Icicibank below 336, Target: 328, 315 SL: 340

Sell Ntpc below 132, Target: 128,124 SL: 134

Sell LT below 715, Target: 700, 680 SL: 720

Sell BHEL below 1190, Target: 1170, 1150 SL: 1196

Sell GMRINFRA below 51, Target: 49, 47 SL: 52.5

Sell HDFCBANK below 868, Target: 850,838 SL: 874

Sell Relcapital below 444, Target: 435, 428 SL: 448

The world markets are volatile, directionless, confusing to traders. Yesterday, the Dow was trading minus 150, then suddenly, a last hour rally saw it move up by 300 points. What is such market movement telling us ? Volatility inside a bear market is NOT bullish. The message may well be: there is more downside. Why ? Because a bull market starts when the markets literally go to sleep. Volatility falls dramatically, the daily, weekly, monthly ranges contract. People forget that the stock market exists. An increase in volatility, as we are witnessing now, is giving quite the opposite message. NIFTY WATCH The Nifty closes near to the 2525 close made in October. Is this a test of the lows ? It may well be, although the momentum suggests that this is a bear market rather than a friendly 'test'. Any rally in the Nifty will face resistance at 2900. If and when the Nifty closes above 2900, the next resistance is at 3200. A new bull market should start if the Nifty were to close above 3200. This seems like a tall claim, as of now. Inside such a strong down move, the wise trade is to go with the flow, which is down. Any up move will be corrective in nature, and, corrections cannot be easily traded. A close below 2525 will take the Nifty into new closing lows for this bear market. That is a sign of more downside. It is possible to assume that the Nify may eventually touch 2000, or even go lower. There is no rush to buy. Wait patiently.