NEWS

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis

Top Stories of the Week Sensex gains 5% on the back of Dow's recovery. Industrial Production drops 0.5% YoY in 'Jan. Inflation dips to a new 7-year low of 2.43%. 183 Mutual Fund schemes, including 68 FMPs, delayed. 3rd front taking shape ahead of elections. Madoff pleads guilty, may serve life term if convicted. Pakistan undergoes political turmoil as Sharif challenges Zardari.

Dow's 12% recovery lifts Global markets

Last week I argued, “Readers may watch the Dow chart, which looks oversold after breaking its previous lows. This may throw upwards or sideways corrective move to its fall. If such a positive scenario unfolds on Dow, we may also see the Index creating a sideways within the downtrend. Watch out for that.” Dow indeed recovered from Monday’s low, as suspected, and moved as much as 12% higher by the end of the week. This resulted in recovery in the Global stock markets, as an effect of which, Sensex also finished 5.25% higher. Beaten down Banks, Metals Autos led the recovery. The action formed a bullish Piercing Line pattern on the Weekly chart of Sensex, with two consecutive gap-up actions on Thursday and Friday. These gap-up actions compelled bears run for cover. The move is now getting closer to the b-d line of the suspected Triangle from ‘Oct lows. This line is now at about 8900-8950, which was broken earlier. We may, therefore, watch 9K levels for reaction if any. Moving beyond 9K could put a question mark on Triangle assumption for the move since ‘Oct lows. That’s because b-d line of any Triangle should be clean. Move above 9K does not, however, reject the Diametric I had assumed during the same period. I had said that “a bigger and faster downward segment will further confirm opening of the 3rd corrective. Lack of it would mean an ‘x’ label for the fall post Interim Budget.” I have, accordingly, changed the wave label for the fall to an “x”, and another Diametric could now be forming. The “x” leg from 9700 to 8047, in effect, would join two Diametric formations. Not many may be aware that “x” can be virtually any Corrective pattern, and can even be a Non-Standard or Complex Corrective pattern itself. In case it is a Complex Corrective, it usually joins two similar corrective, like a Double Three. Alternatively, the 14-day fall from 9700 to 8047 could be “a” of “a” of 3rd corrective, and Index is now moving up as its “b”. In this case, since “a” (from 9700 to 8047) was a label of 3 (corrective), the “b” leg has to move above 9083, which is 61.8% retracement to “a”. I had mentioned few weeks ago that since Jan’2008 all bear market rallies (except 1) lasted for 6 days. As long as the Sensex maintains a higher high and higher low each day, we can expect the 6-day phenomenon to unfold yet again. This would only mean that positive trend could continue for 4 more trading sessions. In such a case, we can expect Sensex to reach its highest levels of the move by coming Wednesday/Thursday, by which time the technical position would also reach an overbought zone. As per 8-year cycle, we saw three bear phases unfolding during the life-time of the Sensex so far. These three phases are as follows : 1. 1992 : Index dropped 57% from 4546 (Apr’92) to 1980 (Mar’93). 2. 2000 : Index dropped 58% from 6150 (Feb’00) to 2595 (Sep’01). 3. 2008 : Index dropped 63% from 21206 (Jan’08) to 7697 (Oct’08) [so far]. A study of these three bear phases throws up an interesting list of similar parameters : 1. Sensex lost about 60%. 2. It took 13 to 16 months to achieve lowest point of the phase. 3. There were 4 to 5 sell-offs. 4. There was a particular group of stocks that performed at the tops, “Old Economy” during ‘1992, “New Economy” during ‘2000 and “Property” during ‘2008. 5. Cycle heroes faced difficult times for 5-10 years. 6. Stock market Scam. 7. Scam related to cycle performing sector, “old economy” during ‘1992, “new economy” during ‘2000 and “property” during ‘2008. 8. The scam-tainted bull was taken to jail, Harshad, Ketan, Raju. 9. The phase ended with a higher bottom higher top with faster retracement of the last falling segment. 10. The lowest level of the phase was hit after a catastrophic event unfolded, “Bombay Bomb Blast”, “WTC collapse”, ????. Of this, the last parameter is still awaited to get unfolded. Students of Technical Analysis may note that “history repeats” is one of the three basic pillars of T.A. I had adjusted the time zone for such an event to occur by end of Mar’09. However, the suspected corrective recovery in Dow can continue for more than 18 trading sessions. This could only mean that Dow may not break its most recent lows for a month. This reading could be relevant for all Global markets, including India . In such a scenario, the time zone for unfolding of catastrophic event could get postponed, though history shows us that major bottoms were made only after catastrophic events. While wondering when such an event takes place, I also explained how to deal with the situation wherein bottom is made without the occurrence of a catastrophic event. I had argued that, “we may, look for higher bottom higher top formation with faster retracement of the last falling segment to make any judgment against the history.” As long as the Sensex doesn’t move beyond 9725 in faster time, the parameters for unfolding catastrophic scenario remain open. If the current rally sustains beyond 9K, the time of occurrence would be postponed till until the second Diametric or “b” leg, as the case may be, is over. As I argued earlier, with the help from such a catastrophic event, Sensex can create the lowest value, preferably near 6150-6500 as the final sell-off of the bear phase sets in. As per the parameter during the 8-year cycle, Sensex would move closer to the bottom after 4 to 5 sell offs. Four sell-offs have already been seen. Until the faster retracement is seen on the upside, the fear of the 5th and final sell remains in place. I had also noted that on one higher degree, “Triple Combination can occur only as the largest leg of a Triangle (or Terminal). Therefore, the fall from ‘Jan highs is likely to be the “a” or first leg of the larger Triangle.” A Triangle always has exactly five legs, to be marked as a-b-c-d-e. Once “a” of Triangle is over, configuring as a Triple Combination, “b” leg should move higher to about 50% of “a” leg. Of the four retracing legs of a Triangle, 3 out of 4 should retrace at least 50% of their respective previous legs. Since “a” leg would have consumed about 14-15 months since Jan’08, the entire Triangle, consisting of five legs, could consume 5 years, shaping up something like Dow’s 21-year triangular correction during 1929 to 1949. The following chart for Dow should prove self-explanatory : The suspected 5-year Triangle would be 2nd wave within 5th. This 5th wave could be forming as a Terminal. Terminal confirms if the Sensex drops below 6400, which is the value of the 2-4 line on one higher degree. One may see the last chart of this Report (Yearly chart), which shows the 2-4 line and its value. Remember, Terminal development usually violates the 2-4 line. From the channel perspective, the upper limits for any bear market rally were shown to be closer to the Purple lines shown on the Weekly chart below. Note that the latest highs attempted to break the middle channel line, but failed to trade much beyond it. Earlier I also argued that Previous bear markets (as per 8-year cycle), during 1992-93 and later during 2000-03, had seen 4 to 5 sell-offs. This year we have already seen four sell-offs : (1) Jan’08 (2) Mar’08 (3) Jul’08 (4) Oct’08. Smart investors may please note this fact, and may risk their capital in a staggered manner until our bullish confirmations, like faster retracement of falling segment or higher top higher bottom formation, are in place. The yearly channel, which I used earlier to project 20000 level for Sensex during ‘2007, was broken when the Sensex moved below 17200. Break of this long-term channel weighed in favor of the larger bear phase as per 8-year cycle, and Index lost 62% from highs. The 8-Year Cycle and its implications The Sensex is assumed to be under a larger 8-year cycle ever since its birth. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992. In my Super-Cycle Degree count, shown on ASA Long-Term chart under a separate paragraph, I have, in fact, taken ‘1984 as the beginning point for the most dynamic 3rd wave. The next two important turning points occurred exactly 8 years thereafter, in '1992 and '2000. Both these turning points were marked by stock market scams, because of which the leaders of the rally had extremely difficult time later. For example, ACC, the leading stock of '1992 bull market, remained below its highs till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally, lost as much as 90% of their top valuations by the year '2003, and most are below their top levels even today. Last year, we were sitting on this very important cycle, which therefore, threw up similar possibilities. Remember, every 8 years, market does see a deep cut in valuations. In the previous 8-year cycle top during ‘1992-93, Sensex lost 56% from 4546 to 1980. In the next cycle top, the cut was almost 58% from 6150 in ‘2000 to 2594 in ‘2001. Time-wise, ‘1992 cycle completed the bear phase in 12-16 months, while the ‘2000 cycle took 19 months only to hit the low, which was then followed by 19 months of base formation before bull phase could begin again. I had, accordingly, targeted sub-10k levels for Sensex price-wise, and a minimum of 13 months into bear phase time-wise. Though the price targets have been achieved, the time targets are yet to be achieved. Remember, in technical analysis, both time and price forecasts must be achieved. Long-term investors should, therefore, wait till then. As long as Sensex keeps on making lower highs, the bear phase continues. Besides price \ time damage, I have been mentioning scam as a usual occurrence after 8-year cycle top. In the current cycle, this may have, or will unfold further in the Global financial markets. The size of the figures will, therefore, be much larger than the earlier ones, and so will be the number of people involved in it. Furthermore, the history shows that the bull always goes to jail. (Raju did). Another parameter that leads to the actual lowest value of the bear cycle is the catastrophic event. Such event would be a terrible disaster or accident, especially the one that leads to a great loss of life. The last two cycles had seen terrorist activities, serial blast in Mumbai during ‘1993 and WTC tower collapse during ‘2001. These events happen suddenly, without any warning, and their catastrophic proportions are not known even while they are happening. During ‘1993, one blast would have been normal, but 13 serially proved catastrophic. During ‘2001, 1st hit could have been an accident, but two in succession was catastrophic. These events led to such desperation that the lows created thereafter were never ever broken again, Sensex low of 1980 during ‘1993 and 2584 during ‘2001. Ironically, therefore, such events did, and will provide the best of the investment opportunity to an investor, who is able to take it when it comes. If so, we could be on watch, from now till whenever it occurs. With recent accounting scam from Satyam, one more parameter of bear market has unfolded as was argued for. The last remaining parameter would the catastrophic event, which we are waiting for. At 7700, having seen the required 62% cut from high of 21206, we need such an event to take the Index lower, in which case, I am expecting 6150-6500 to be the lowest target/support. Alternative scenarios for Sensex As far as larger wave scenario is concerned, I have been explaining two alternatives : The first one assumes that a large Triple Combination corrective, beginning Sep'1994 got over in Oct'2005 at 7656. The last corrective within this Complex Corrective phase formed as a "Non-Limiting" Running Triangle, the breakout from which has already happened. This has been my preferred scenario for many years. (Remember, Non-limiting Triangles, as the name suggests, do not impose any limit on the post-pattern behavior). This scenario also combines well with the traditional channeling technique. Sensex followed a parallel channel for 11 long years from Apr'1992 to May'2003. As I had shown, if one projects the width of this channel on upper side, such a projection also gave 20000 as the “minimum” target. The forecast was achieved. As per the alternative bearish scenario, a Diametric had been developing into Sensex' 5th leg of impulse. In this alternative, the 4th wave ended at May'2003 low near 2904. The 5th leg, being a non-extended wave of the Impulse, should not have gone much beyond 61.8% ratio to the 3rd, which projected a maximum of 13300. In this argument, the 5th wave was assumed to be the "non-extended" leg within the 3rd which began at 259 in Nov'1984 as shown below. (in an Impulse pattern, only one directional leg can be the extended leg.) As per this wave-structure, the 3rd (of the 3rd) was shown to be the extended leg, which achieved exactly 261.8% ratio to the 1st on log scale. The 2nd was exactly 61.8% of 1st value-wise, and 161.8% time-wise. The 4th was 38.2% of 3rd value-wise, and 261.8% time-wise, as shown below. There are good ratios present within different waves, as explained on the chart, to support this scenario. However, the Sensex sustaining well above 13300 thereafter, may lead to a "Double Extension" scenario by this alternative, wherein both 3rd as well as 5th would be extended waves. The development into 5th wave was read as a "Diametric" formation, as marked above. It was explained that the well-channeled Complex Corrective legs, with a subsequent correction of less than 61.8%, led to the suspicion of a "Diametric" formation. (Remember, channeled moves indicate complex correctives, which should normally get retraced more than 61.8%, except within a new pattern called "Diametric"). Diametric formation has 7 legs, marked as a-b-c-d-e-f-g. It is called "Diametric" because it combines two Triangular patterns, one initially contracting up to the "d" leg, followed by an Expanding one, thereafter. The contraction point is the "d" leg, and the legs on either sides of it tend to be equal. Accordingly, "c" and "e" were equal in "log scale", both showing about 60% gains. Similarly, "g" would be equal to "a", both showing about 115% gain. This Diametric could be taken as the 1st of the 5th (5th, which, due to its corrective structure on one lower degree, could be developing as a Terminal wave). This 1st leg Diametric appears to have ended at 'Jan'08, and we may be looking at the 2nd wave, which, due to its violent beginning, could be forming as a Triangle. . The "Double Extension" scenario was also shown on ASA Adjusted Long-term Index chart. I've created this chart combining Index figures compiled by a British advisor (from '1938 to '1945), RBI Index figures ('1945 to '1969), F.E Index ('1969 to '1980) and Sensex (thereafter till date). The chart shows the Super-Cycle-Degree count that I had been presenting since many years ago. The labeling shows that the market is into the 5th of the SC-degree 3rd wave. This 5th leg (within SC degree 3rd) may have begun either from 2904 (May'2003) or from 7656 (Oct'05). If a "Double Extension" unfolds, Sensex could be projected to achieve even 50000+. Break of 2-4 line, however, would confirm the Terminal development inside the 5th, and would therefore, restrict the upsides to much lower levels, though higher than 21206.

RELIANCE : (1327.60)

Sell Near 1350 target 1- 1300, target 2- 1287, target 3-1255, stop loss 1380

RELCAPITAL : (315.45)

Sell Near 325 target 1- 313, target 2- 305, target 3- 295, stop loss 340

RELINFRA : (464.60)

Buy Above 465 target 1- 478, target 2- 492, stop loss 460
Sell Below 460 target 1- 448, target 2- 430, stop loss 467

RCOM : (156.70)

Sell Near 162 target 1 - 152, target 2- 146, stop loss 166

RNRL : (44.20)

Buy Above 44 target 1- 47, target 2- 50, stop loss 41
Sell Below 42 target 1- 38, target 2- 35, stop loss 44.50

ICICI BANK : (322.80)

Sell Near 330 target 1- 315, target 2- 302, stop loss 335

ABAN : ( 270.45)

Buy Above 270 target 1- 278, target 2- 285, stop loss 264
Sell Below 265 target 1- 260, target 2- 250, stop loss 272

AXIS BANK : (342.55)

Sell Below 340 target 1- 327, target 2- 312, stop loss 352

SBI : (987.05)

Sell Near 1000 target 1- 977, target 2- 963, target 3- 940, stop loss 1020

ONGC : (715.60)

Sell Near 725 target 1- 710, target 2- 702, target 3- 695, stop loss 735

MCDOWELL-N : (671.75)

Sell Near 690 target 1- 660, target 2- 645, target 3- 630, stop loss 705

EDUCOMP : (1929.10)

Buy Above 1920 target 1- 1991, target 2 - 2053, stop loss 1880
Sell Below 1880 target 1- 1823, target 2- 1744, stop loss 1915

AKRUTI : (1401.05)

Sell Near 1460 target 1- 1405, target 2- 1350, stop loss 1485

EVERONN : (123.35)

Sell Near 135 target 1- 122, target 2- 110, stop loss 145

STERLITE : (293.05)

Buy Above 290 target 1- 306, target 2- 320, stop loss 278
Sell Below 280 target 1- 267, target 2- 245, stop loss 292

Sensex : (8943.54) Today Sensex face resistance at 9035, if cross 9035 then goes up to 9126 and 9218. Sensex find support at 8865, if 8865 break then fall up to 8774 and 8604.

Nifty : (2777.25) Today Nifty face resistance at 2807, if cross 2807 then goes up to 2835 and 2865. Nifty find support at 2753, if break 2753 then fall up to 2724 and 2671.

For Nifty Traders keep a eye on 2807 level, which is 50 DMA for Nifty and very unlikely that its cross that level easily. If not cross 2807 then short Nifty with a stop loss of 2836 target 1- 2755, target 2- 2724, target 3- 2705.

(Inder Bhatia)

The Indian market opened marginally up on positive global cues and saw smart buying in afternoon session and close in green zone . For coming session nifty can test 2807-2830 zones on the other side we can see profit booking at higher levels on hourly chart nifty is trading in overbought zone.

(raman)

SELLReliance Industries Stop Loss 1352 Target 1220

SELLNTPC Stop Loss 179 Target 155

SELLDLF Stop Loss 169 Target 142

SELLReliance Capital Stop Loss 324 Target 280

(Lee)

Some requests from viewers:

Heres Bank Nifty -



Heres Reliance -




Lastly here is a look at Nifty again.
Nifty -



I have to admit I have been wrong this time in shorting the rally too early..I have to give kudos to Ilango for calling this correctly i.e an ending diagonal...

Maybe a move down from 2780-2840 range to tag 2500-2450 range again. After which we shall see a much more sustainable and bigger rally.

For now, I am in damage control mode regarding short positions held. I still think 2500 will be seen again. But I am considerably less bearish than before..So will look to reduce risk and trade lighter. I would recommend same to everyone.

MY CHART

Nifty :: As we say in our Friday post be caution at higher level.. Nifty now enter in extreme overbought level and near to strong channel resistance.. Watch 3 strong resistance for up move 2787/2804/2835.. And in down side supports for further up move strength 2700/2692.. In one level above 2787 momentum seems up below 2787 momentum down.. Our strategy for 17^th March sells at high (S.L 2835) buy on deep (S.L 2692/2689).. Resistance for up move at 2787/2804/2835/2886.. Supports at 2700/2692/2661/2632/2620..

S S Cheema

Before I start let me share the wonder of night with you. Well it is 1:30 AM and the moon is up. The weather is beautiful and romantic to say the least. The moonlight and smell of distant rain, the vast open space of the airport can make any one a poet at this time of the day. Standing out I relive my time as a college student – that running out of the house after midnight and roaming the streets of Chandigarh. The beauty of life, the beauty of GOD’s creating – WOW. I came back to the office and started off with writing this article – and as I pen down these words – I get distracted off and on to take a small stroll out. What am I doing up at this time? well I have a sortie and that is scheduled at 0300 hrs and I am waiting my turn. Another one and a half hours to go.

The markets were beautiful and the predicted third white candle is standing tall inspite of a negative predictions by many. Well frankly – given a chance I would have happily skipped today’s update as the indications now are so conflicting that to take a call for tomorrow may be more like flipping a coin than anything else. More of it when I come to the candles. The Global cues meanwhile are also giving signs of taking a breather. In Asia the Nikkei closed up 1.78%, Hang Seng up 3.6% and Strait Times up 0.56%. The Europe too kept the steam and spirits up by FTSE clocking 2.94% up, DAX 2.3% up and CAC 3.18% up in green. It is US that has shown the signs of the upswing tapering off – DOW opened flat – immediately starting climbing and continued its rally to impressive almost 200 point up then after the mid session came tumbling down to close 0.10% in red. Nasdaq too closed 1.92% in red and S&P closed 0.35% in red. It would be interesting to see the opening of Asia in few hours as it is likely to dictate where we open and how we behave.

As far as the candle are concerned – ideally three strong standing white candles do signal the continuation of the uptrend. This uptrend has actually already taken us above the mid way of Bollinger bands. The Bolliner Bands have started contracting and if we go on to the upper edge of the Bollinger bands then we hit somewhere just short of the 2900 mark – that is if all go well. The volumes were ditto of day before. on ADX DI+ has gone above the DI- but the red flag is the DX line turning down. If it continues this way then there is a danger of negative divergence building up. 5 EMA is just short of crossing over 20 EMA and I am keeping my fingers crossed. IF we do cross this then definitely the 5 EMA will attempt kissing the 50 EMA also. MACD is showing a positive divergence. RSI looks up. The %K line of Slow Stochastics (for the analysts)/red line for others has already reached the overbought zone. As the medium term trend is still down – we may see the markets green only for one odd day more before the trend reverses or the market consolidates. The TRIX has started to look up and that is a good development to say the least.

As far as the markets trending today was concerned – let us see the charts. the day started somewhere in middle of Pivot and the R1. Markets opened flat with Negative bias, dipped down once where in everyone would have held their breath and then recovered going on to cross the R1 and closing comfortably above it. The projected high range was 2722 to 2777 and you can see the opening and closing – the opening was within 4-6 points and closing bang on – 2777.

The levels for tomorrow are: -

R3 2861 as compared to 2718 yesterday
R2 2833
R1 2805
Pivot 2753 as compared to 2612 yesterday
S1 2725
S2 2673
S3 2645 as compared to 2506 yesterday
Projected High Range 2779 to 2819
Projected Low Range 2743 to 2703
Fib Projected High 2802
Fib Projected Low 2679

Its time for me to go for flying and I will pen off now. and before I go here are the options data. See the build up of puts…

Astrology18 Group

Market may open up. Market may up between 11.38 and 11.58 Market may steady or up side between 12.44 and 13.07. Market may close at up to previous closing.




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Opening Bell Call
Buy
RELIANCE - Reliance Industries Ltd More.... Target - 3200
RANBAXY - Ranbaxy Laboratories Ltd
TATASTEEL - Tata Steel Limited
TCS - Tata Consultancy Services Limited
NTPC - NTPC Limited

On 16th March 2009 - The BSE Sensex closed at 8,943 (up 186 points) while the NSE Nifty closed at 2,777 (up 58 points).

Opening Bell Call
Sell

ICICIBANK - ICICI Bank Ltd
HINDUNILVR - Hindustan Unilever Limited
GAIL - GAIL (India) Limited
RAJESHEXPO - Rajesh Exports Ltd.
VGUARD - V-Guard Industries Limited

Technical Analysis for 17th March 2009

BSE-SENSEX - Major Resistance - 8865, 8949, 9033, 9078, 9123, 9207, 9291, 9375
BSE-SENSEX - Major Support - 8820, 8775, 8691, 8607, 8562, 8517, 8472, 8427

NSE-NIFTY - Major Support - 2753, 2779, 2805, 2819, 2833, 2859, 2885, 2911
NSE-NIFTY - Major Resistance - 2739, 2725, 2699, 2673, 2659, 2645, 2631, 2617

(NOORESH)

HDFC Ltd:

The last time this stock was covered on breakdown below 1350 -- CLICK HERE

A sharp bounce back came from the lows and is now back to re-testing the breakdown line. The current fibo retracement of 61.8% is done and the trendline resistances are placed around 1420-1450 zone. A possible trade would be short on rise till 1450 with a stop of 1470 on sustaining for some time or closing basis.

ONGC :

The stock has been stuck between 61-740 for the last so many months. Will it cross 730-740 range this time with volumes... This could be a tirgger for the index too.

Stocks to watchout for :

Cairn moved up frm 165 zone to 170 still a hold. Bharti has come to 570+ stop would be 595 positional for shorts.NTPC could not stay below 168 so wait. Infosys made an intra dip but is around 1300 stop is 1330. Jaiprakash moved up whereas Jindal steel flat.

TVS motors seems to be the next mover in the auto segment. A small breakout on charts can tgt 25 odd in short term buy on dips to 20.5-21.2 with a stop of 20.

India Cements could give a small bounce to 110-112. Risky traders can look to buy above 105.

Market Observations and Thoughts :

Edserve moves to 145 + on listing day and comes down to 40 in a few days... How long can this IPO fooling keep happening :) ... Hope small investors have become more aware after the resurgere etc.

Everonn Systems surges 45 % in a day on back of 3% delivery trades. Was it some investor interest on pure punting :).

Continue to be carefull in wild moves as preserving capital is more important now as even small cash of portfolio may give good returns in long term from current situation provided u keep it safe :)

Akruti City hits a new high of 1400 ++.. Is it a short squeeze ? FNO curbs aiding it ... Watever it is there is something fishy with delivery volumes of less then 5% today :) . The stock has a market cap more then the sum total of 3-5 decent real estate developer stocks. So all one can do is avoid or take care when punting in such stocks...