newsletter

Sensex Technical View :

In the chart posted 2 days back it was stated that markets could also drift down till 8300-8500 which would be around 80-85 % retracement which is also a possibility in such corrections. Now let us list yet again some technical observations.

1) 80-85% retracement.

After markets bounced back from 7700 to 10945 we are seeing a correction of a quick bear rally. In such a correction as per technicals could correct to a max of 80-85 % also and the counter rally would remain in place. The retracement zone is 8250-8400 in such a case. So till markets hold above these levels the bear rally remains intact. A deviation below this level would lead to a violent move. ( Before we saw violent moves when markets dropped below the 11k zone which was an important pattern and support zone ).

2) Downward Channel /Flag .

As we see from the charts we are forming a flag type pattern. The drift has continued on the lower side but is still in the flag or channel. The major directional trigger could only be seen if markets cross the flag with a volume supported move. Till we see a clear move above the flag we will continue to watch this pattern.

3) Counter rally should last 20-40 sessions or 4-8 weeks.

Few weeks back had put up this chart where we have discussed that markets should sustain above the low of 7700 for 20-40 sessions or even 4-8 weeks.

CHART

Although in previous rallies we bounced back 25 % in this we had a bounce of 42 % already but the fall was also 50 % . So it would be difficult to guess whether we have already seen a top for the counter rally or we still go beyond it. But ideally the markets should continue to close above the 7700 zone for 4-8 weeks frm the low.

ALTERNATIVE MOVE :

Above i have listed some of the technical observations which project towards a possibility of 8250 holding on for some weeks. But what if markets start closing below 8250 the next scenario could be very violent and difficult to gauge. We will look into this scenario only if it comes till then its a stoploss of 8200-8250 on Sensex for longs.

Stocks to watchout for :

It would be difficult to trade positional till Sensex doesnt cross 9500 or 8200 convincingly.

As of now the best bounce back candidates would be .

RIL , LnT , Idea , SBI, ICICI. LIC Housing , Punj Lloyd in the large caps.

Market Observations and Thoughts :

The market consensus continues to remain very bearish with lots of justifications for newer lows very quickly. Can markets surprise against the consensus is the thing to watchout this week.

More updates on this section in the week.

MARKET WILL MOVE IN TANDOM DUE TO EXPIRY

BSE Sensex(8915.21) and Nifty(2693.45) closed 5.0% and 4.2% down last week.Inflation was also under control 8.90 v/s 8.98 last week.Crude oil was at 51$.Market declined due to concernes over auto sector crisis in USA .Rollover in the futures was very low before expiry.Support for Sensex is 8350 and for Nifty 2520.Resistance for Sensex is 9450 and Nifty is at 2850. Selling of FII was visible..Nifty put-call ratio was 1.03.Nifty 2600 call added open interest.HDIL and Chambal Fertilizer added open interest.RPL and TataSteel reduced open interest.

Strategy for Future Option players.

1)RPL(73.95) Lot Size-1675 Shares.
Buy one call option of December month strike price 75@7.00 Rs.
Sell one call option of December month strike price 80@5.20 Rs.
Premium Paid=7.00*1675=11725.00 Rs.
Premium Received=5.20*1675=8710.00 Rs.
Net Premium Paid=11725.00-8710.00=3015.00 Rs.
Maximum Profit=80-75=5*1675=8375-3015=5360.00 Rs.
Maximum Loss=3015.00 Rs.
Break-even=76.80 Rs.

2)NIFTY(2732) December month future-Lot Size 50 shares.
Buy one lot December month future@2732.00
Sell one call option of December month strike price 2800@171.00 Rs.
Premium Received=171.00*50=8550.00 Rs.
Max Profit=2800-2732=68.00*50=3400+8550.00=11950.00 Rs.
Max loss=Unlimited.

Trading Idea

1)Reliance(1124.35)Buy this stock in decline and trade.
2)IndHotel(47.75)Buy this stock in decline and trade.

BUY L&T ABOVE 770 TGT 810>827 STOPLOSS 747

BUY IBREAL ABOVE 101TGT 110>114 STOPLOSS 93

Last week nifty fell 4.2% but broken the seven days of losing trend on the Friday and close with handsome gains . For coming session if nifty trade above 2765 it can test 2851 -2953. on the daily chart upper trend line will act as resistance zone on the lower side 2540 -2520 will act support zone closing below 2520 it can test 2250 zone. For clear trend nifty has to close above 2976 so it can test 3154-3200 zone.

The Indian market opened positive note and close with handsome gain. After smart gain nifty drift in red zone in mid session but saw smart recovery and managed to close green zone .Nifty had test our level which mention on Friday newsletter 2722.For coming session nifty can test 2770 -2813 levels on the lower side2650 -2580 will act support zone .

weekly nifty

Question : Redlines Shows that Trend Lines are Broken So What

does it mean

Answer : Target : Rs900 in short term, Stop Loss 1,200 on closing basis

Indian Stock Markets have witnessed a worst hit. Indian markets are now down over 57% from its peak. Its almost at its 3 years low.

Markets need a good breath now. Traders are worried and even Investors.

Recession has covered the whole globe.

No one has been left out. No fundamentals in markets as of now.

When I look at NIFTY charts I see an uptrend to come till 2780 in short term.

Indian markets will be the first to recover says SEBI cheaf CB Bhave.

Stocks you should look out are.

LNT - Plans to add 10,000 staff by 2010 and the stock has good fundamentals so a reason to buy its Support is at 665 and 711 and a resistance for upmove at 791 and 825.

Unitech - This is one of the most beaten out scrip 52 week High of 600 odd and low of 27 odd. Makes sense in buying and booking profits at 40 odd levels.

SBI - Inflation has cooled and if RBI takes some action in reducing the CRR or Repo Rate it will benefit and then makes sense to buy for short term.

ICICI - The same above reason apples and even if you go to see its is one of the most beeten out blue chip after DLF and Hindalco.

Sectors I am bullish on -

Infrastructure and Banking and later Metals.

All of these sectors have witnessed the worst hit ever so chances are there for these sectors to recover very fast.

Nifty Elliott Wave Count :: In last weekend post we plot major corrective wave count.. Today we plot last leg count in small time frame.. As per last post Cycle Double Zigzag may be finish near 2250 level.. From there Nifty and Sensex both start to move up.. We Plots here two options
(1) Intermediate Flat as A-B-C of B finish near 2500 level and C start to move up. For this wave count Nifty must be close above 2860.. And once close above 2860/2900 target of C leg in between 3350 to 3900..
(2) May be B leg start as Intermediate impulse 1-2-3-4-5 of 3 over and 4th still running as far as stay below 2860.. Target of 4th in between 2776 to 2860..
Now what to do.. First we book profit at higher level near our 4th wave target zone, and wait for conformation of C leg and again enter above 2860/2900…

Sell In Rumor Buy On News :: Stock market always reflect economy in 6 to 9 month advance.. Let’s see with proof.. We post here S & P 500 Jan 1974 to Oct 1975 chart. Now see S&P 500 made bottom (Low) at 2^nd Oct 1974 after that in 3^rd quarter US economy announced negative GDP growth.. But S & P 500 made higher bottom on 5^th Dec 1974.. And after that constantly two quarter 4^th and 1^st quarter of 1975 announced negative growth and stock market move up and up..!! Up to last phase of negative GDP announcement, Jul 1975… !!

Weekend,Its raining here in Bangalore had nothing constructive to do,
Thought let me ramble with FII selling we witnessed this year(2008) till now.

In 2008 top three months of wealth destruction till now are

January

June

October

October being the darkest month of the year till now.

January (OHLC)=6138,6356,4450,5171 A loss of 15%

June (OHLC)=4870,4906,4022,4025 A loss of 17%

October (OHLC)=3921,4000,2253,2905 A loss of 27%

Lets compare the FII selling in these 3 months

January FII sold=-17,226.90 (cr)

June FII sold =-10,577.70 (cr)

October FII sold=-14,248.60 (cr)

Now run your eye through the attached chart of nifty.

It clearly shows though the fall was steep traders/Investors were quite eager to buy
because by the time month ended more than half of fall was retraced (Traders were hopeful)

Come to June its calm compare to January but absolutely no retrace and the month ended
quite near to the monthly low.(Traders sold too not hopeful of rise) One thing to look for
though this being the lowest out of the three months comparing FII selling .Still it managed to shave off 17% off Nifty.

The October comes darkest of the three "mayhem" Bear salsa world over FII sold lesser than
compared to January but we witnessed Nifty being lighter by 27% .
Distress sale,Panic sale etc etc and what not.Long term investors sold there blue chips.
Sentiments negative to the core no one wanted to talk about stocks etc etc.

Then suddenly from no where we witnessed sharp and swift rally in October itself
From a low of 2250 to 2900 that's 650 points in a week, Of course on low volumes:)
Retail was quite scared to buy.

Nifty : resistance 2761-2827

Some trading ideas : Monday 24-11-2008
Note : do not short anything unless
Nifty fall below 2650



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STOCK........ CLOSE.......STOP LOSS........ TARGET... WEEKLY
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SBI...........1124.........1104............1176-1228.....1220-1315

DLF............198...........197.............215-232.....252-305...

IVRCL..........131...........128.............139-147.....148-165...

Union Bank.....144...........143.............149-154.....159-174...

Bank Baroda....268...........264.............276-284.....289-310...

Kotak Bank.....309...........304.............322-335.....391-473...

RELIANCE......1124.........1104..............1176-1211....1220-1335

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Note : weekly targets are conditional. You can read details in the economic revolution in which I have given trading idea at length.
Weekly targets are on survival of below rates:

SBI : 1148
RELIANCE : 1126
DLF : 216
IVRCL : 125
Union BK : 147
BOB : 270
Kotak BK : 333
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RCOM :
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Close : 206
Target 222-233 stop loss 201
If close above 233 can test 261

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RPOWER
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Close : 104

Buy only above 106 with SL-104

Target-115-125

NOTE : TCS and INFOSYS give buy signal but it may fall to red during the week.Once touch-528-551 ( TCS ) faling below 494 it can give 472-437 levels

INFOSYS : Can touch 1226-1268 ihn between
faling below 1158 it sharply can test to 1116-1048 Zone.

Till market move up, you shall wait for upper levels to touch and then short once start falling from given resistance levels.

If You are smart trader with some TA knowledge, only than trade in TCS n INFOSYS. Else eye on my 7 stocks given above.