TECH_SPEAK: NEWSLETTER

(Prashanth Tapse)

In this update I want to take a look at the pattern in the context of the Gold market. Our first chart contains two examples of the pattern. Note the three stages of the pattern, which follow the formation of the cup. The first example occurred from 1996 to 2004, while the second example occurred inside of the larger pattern, from 1999 to 2002. Notice how both patterns completed the three phases? (Initial pullback, breakout, retest and blastoff).

The rule on price targets is first and foremost arithmetic and then logarithmic. In the first example, the price targets would be $363 and $398 for the logarithmic. In the second, the targets are $593 and $702. As you can see even the logarithmic price targets played out in both cases.

Now let's focus on the big picture and what is about to happen in this gold market. Take a look at the Gold chart below (from bigcharts.com). Gold is just starting to emerge from this nearly 30-year cup and handle pattern, which has a massive base at $700 to $730.

Remember the three stages? Initial pullback, breakout, retest and blastoff. The market is now at the blastoff phase. In terms of the targets I come up with $1,205 and $2,087. I should also mention that the next strongest Fibonacci targets are $1,500 and $2,300. I neglected to mention that in the cases seen on the last page, the targets were hit in less than a year (after the pullback to support). I would be surprised if our target of $2,087 wasn't hit within two years.

As we mentioned, technical analysis is not an exact science. It should be utilized in tandem with fundamentals and sentiment. Most readers of this website are well aware of the bullish fundamentals of Gold. We don't need to tell what you already know. In terms of sentiment, I believe we are fast approaching the point of recognition. I have been writing about this for several years and prematurely expected the point to be imminent.

The point of recognition by the way is sort of the herd realization of the bull market. Why is the herd realization coming soon? First, let's look at the deflationists. Most of them seem to believe that inflation will be coming, though very far into the future. The reality is that Gold advances and outperforms well in advance of an inflation cycle. During the cycle it is non-gold commodities that perform best. The deflationists will capitulate as soon as Gold hits a new all time high. The average investor is starting to realize the inflationary future. Moreover, they are starting to realize there are few viable options outside of precious metals.
We think a stampede into precious metals will begin later this year.

Here is our rough projection for the future. Look for the market to make a final pullback before the most exciting phase begins. The moving averages are starting to align and in a few months should provide a solid base near $850. This market is just months away from an explosion to new all time highs. $2,300 is our target by year-end 2010.

(Nifty Bhaloo)

Nifty Bhaloo)

(Ilango)

As per the weekly charts, we still remain within the triangle. And the weekly trend has turned firmly down.
Some positive divergences appeared in 5-min & Hourly charts and a bounce is on. Daily is in "OS" region and so a short rally for 2 days if there are + ve cues.
This rally can continue upto 2780 and above which to 2805/2820. There are positive divergences in so many stocks. So keep that in mind while you go into trade on Tuesday.
A close below 2730 is required for a fast fall as mentioned earlier...
Lastly, with weekly trend also having turned down, play the bounces carefully and sell @ 2850-2860 if the rally reaches there with SL 2880.

(RAJAN BHATIA)

This week market will remain in lower side

Sensex lost 791 points or 8.22% to 8843.21 and Nifty lost 212 points or 7.19% to 2736.45 in the week ended 20/2/2009. Market remains closed on Monday, 23-2-2009, on account of Mahashivratri. Market may remain weak in the near term as sentiment remains edgy on concerns of a slowing domestic economy and weak global markets. Yet, stock-specific buying on expectations of rate cuts and industry specific export sops could restrict losses. Volatility is expected to remain high ahead of the expiry of February 2009 futures & options (F&O) contracts on Thursday, 26-2-2009.

Inflation based on the wholesale price index rose 3.92% in the year through 7-2-2009, much lower than previous week’s annual rise of 4.39%. It was the index’s lowest annual rise since 3.83% on 29-12-2007. Falling inflation has provided room for the RBI to cut interest rates further to shield the domestic economy from the global financial sector crisis and recession in key global economies.

FIIs outflow in 2009 totaled Rs 5,425.90 crore (till 19-2-2009). FIIs had pulled out a massive Rs 52,998.70 crore in calendar year 2008, as against an inflow of a huge Rs 71,486.50 crore in calendar year 2007.

Meanwhile Commerce minister, Kamal Nath is likely to announce an export booster package later this month which would address some of the crucial concerns of the exporters. The sops under consideration include simplification of rules for service tax refund, extension of time given to exporters to meet export obligation and an increase in rates of input duty reimbursement schemes like drawback and duty entitlement pass book (DEPB) scheme for some sectors.

on 16-2-2009 did not offer anticipated tax sops and there was no sector-specific stimulus package to revive economic growth, causing disappointment among the investors.

Use Stop loss strictly in your every trade, because market is heavily volatile with narrow trading range.

INDEX

(WEEKLY)

THIS WEEK CLOSE
20-2-09

PREVIOUS WEEK CLOSE

13-2-09

PERCENTAGE CHANGE

(%)

SENSEX

8,843.21

9,634.74

-8.22

NIFTY

2,736.45

2,948.35

-7.19

NIFTY FUTURE CHART (WEEKLY)

NIFTY FUT. (2723)
Nifty had made bearish engulfing on weekly chart. Nifty is having strong support at 2630. Be careful in this week. This is last week of F&O, Mostly lot sizes are increasing to 3-5 times. You may see heavy volatility and you may see stock specific movement. Same time good news may come like, RBI may announce CRR & REPO rate cut, Govt may give special package to reality and export industry, but looking to bad global sentiments, slowing growth rates etc good news are discounting. Buy nifty if close above 2766 for target is 2893-2952 and sell nifty if close below 2700 target is 2639-2573-2482.

(B.N.RAO -THE STOCKS DOCTOR)

The markets across the globe are in a queue to accept the US markets decision as DOW falls to 6-year lows. The Nifty is holding above 2735 could be a challenge as the global concern has worsen than expected. The Nifty at home was down by Budget sentiment and followed by the US concern could hold for two days above 2750. The recovery in RIL is very important as the Banking sector lost more than 15% in some stocks and around 10% in most of the heavy weights despite the expectation of rate cut on the cards.

The stocks like GE shipping moved up from 187 to 225 levels now back to square. The ICICI from 360 levels to 440 levels now back to 360 levels. The effort made to move was used to exit is the main problem in the markets. The HNIs, MFs and FIIs have little conviction that the world economy will recover soon so is the Indian economy.
The Nifty is good above 2803 as Reliance good above 1306. The markets today may not hold above 2780 level cold test 2704 level first and the better support exists at 2680 level. The volumes were dried up and the trading has been confined to limited stocks with high degree of volatility based on news/expectations.

Today Nifty may face resistance at 2793 level may get support at 2724-29 level and next at 2703-05 level. The Reliance may face resistance at 1301-1298 level and will become weak below 1281 level may get support at 1246 level and next at 1238 level. The ONGC may face resistance at 683-86 level may get support at 662 level and next at 651-53 level. The Rel Infra may face resistance at 516 level may get support at 486 level and next at 473-71 level where the recent bottom support exists.
The ICICI may face resistance at 373-75 level may get support at 341-42level. The Relcap may face resistance at 381-83 level may get support at 359-57 level. The Bharti which built huge open interest at 640 CA may see steep fall if it trades below 639 support level. The BHEL is facing resistance above 1410-12 level may correct steeply if it closes below 1350 level.
The Asian Markets are trading in red with nearly1.5 - 2% cut and the ADRs were not deeply cut. The SGX Nifty is trading at 2740 level down by 52 points. The challenge now is to recover from the lows. In case the Govt willing to provide easy liquidity situation by signaling RBI to cut the CRR and Repo rate cuts to spur the local demand as the inflation is totally under control may save our markets, other wise the markets next broad range will be in a range of 2830-2420 for next quarter.

Use it learn & Learn to make money and convey the same to others.

(ss)

Here's a chart of the typical investor psyche cycle alongwith a chart of the Nifty. Compare each stage of the two charts and figure out where we are now. Some of you may feel that the panic phase is not over and there can be more downside. Maybe, who knows? But I think we're getting near to the last phase as there is an explosion of pessimism all around. Besides, the world is not coming to an end, is it? Things will find their own way around and settle down. There is always a day after a night.

(ss)

This is the sad story of Mid Caps and Small Caps. Is there anything remaining to be sold now!

Real Estate and IT are below their October lows.

Health Care and Capital Goods are also at their October lows.

Things are now so oversold that the present situation is a goldmine for contrarian investing. This is the best time to do fundamental analysis, focus on growth, value or cash rich companies, go out and buy them and just forget about them for the next 5 to 7 years.

(ss)