NEWSLETTER

(NOORESH)

Sensex Rising Wedge :

The above chart is pure wishful thinking or trying to predict a possibility. Though i believe the best way to trade now is react then to predict till then stay with the trend which still remains up.

As per the above observation Sensex might be forming a fractal pattern similar to what happened in Sept-Jan 07-08. This may interest all the people who are waiting for a correction. Although if index has to follow this path then there might be a few legs still left. Sensex may break the upper trendline giving a false move.

False move - Yes its been an observation that many major trends are set only after a false breakout ! -- We did see it in Jan 08 where index corrected heavily. Similarly we saw a slightly different pattern in March 09 where we saw a super upmove after a false breakdown.

This observation is premature and naive but we will continue to ponder on it in coming weeks/months.

Sensex Technical View :

In last few sessions had shown the support of 14500-14700 zone to be important as shown by the blue supporting line and bang on Sensex reversed from the same zone by just going a little below 14700. CLICK TO SEE CHART

So for now the blue line shown in chart would be our reference point for any intermediate trend change.

On the upside index now needs to break 15550 levels in quick time to show strength of the upmove. Sustaining above the same would create a good possibility that the Sensex may surpass 16k by a better margin though with negative divergences.

For the short term 15550 is an important level to watch.

Stocks to watchout for :

ION exchange does 125 tgt. Easun good for medium term. GHCL breakout keep stop of 39.8. Hikal, Bombay Burmah, ITD cementation good for investors. ORG informatics for penny pickers.

VBC ferro discussed before at 350 is notching ckts book part and hold rest for 450.

Wockhardt on sustaining 165-167 can tgt 180 levels in short term. Risky trade.Emco transformers if stays above 90-92 zone can touch 105-115 in short term- investors can hold on.

IFCI looks good if able to cross 54 can give a quick move to 60 +.

GMDC

Watch for sustained closing above 95. If stays above for a few sessions the stock can tgt 104/118 in short term. stop of 90

Jkumar Infra

liquidity in the stock is low but seems a good breakout. Buy on declines to 122-125 stop of 118 tgt 140. Do your own research.

Day picks:

Buy Bharti Airtel above 416 stop of 408 tgt 425-430

Welspun Gujrat buy above 220 stop of 216 tgt 228-232

Polaris buy above 139 stop of 135 tgt 148.

Small cap ckt hitters --- For lion hearted risky traders

ORG informatics.

Jayswal neco

Four Software.

(S S Cheema)

You want me to place my bets in this upmove? See the FII/DII data – the purchasing by the FIIs does not at the moment show too much of enthusiasm. The markets are perhaps being forced to be kept range bound – and that may remains so till the expiry. On Friday the markets moved up with a sudden drop in open interest in 4500 Calls. Now the range may be dictated by a different level in Nifty but all the same the range is likely to remain till such manipulations disappear. The second factor working in favour of the markets at the moment (negate the China factor) is the fact the globally there is a talk of being high and dry out of recession. The results coming out an the various forecasts may be pointing towards that. Finally all the world markets are waiting for me to become bullish – it is only then the bears will get a signal to strike. It will be when you me and the tom around the corner is convinced that we are out of the woods and when we reach the other bank – we will stare with complete disbelief and the markets will fall. That they are not falling means that everyone is still not board the bull bus.

As far as the Global cues are concerned – Asia had ended down in red on Friday inspite of an effort to recover from the lows of the day. Nikkei was down 1.4% down, Hang Seng down 0.64% and Strait Times down 0.58%. Ofcourse – Asia should open and try to recover some lost ground when it opens on Monday. Europe opened red and then steadily climbed to end at almost the highest – FTSE up 1.98%, DAX up 2.86% and CAC up 3.15%. The US too – after opening on a positive note went on to climb and end at almost the highest – Dow was up 1.67%, Nasdaq up 1.59% and S&P up 1.86%. As expected the Asia has opened with a bang – as I write Nikkei is up 3% and Strait Times up 1.44%.

As far as the charts are concerned – they display the typical confusion associated with range bound markets unable to breakout in any direction clearly. We have had two white candles and we have moved from the bottom of the fairly constricted Bollinger Band to the middle. Now either we come down – to once again test the bottom of the Bollinger band or move on to pierce the middle to go on to the upper edge. The 3 EMA line is just about 7 points below the 15 EMA line and if we have a good day then a buy signal may be generated today on 315. If we have a break up then those pacing their bets on inverted head and shoulders may be the ones cheering. Volumes are low – just 78% of the last 50 day average. Even in this upmove the ADX has not even budged an inch. RSI and Slow Stochastic have generated a buy signal and MACD is still in favour of the bears. TRIX is still looking down. So all in all you can take any stance but like bears earlier – I would be vary of the bulls too. (The ADX as shown in the iCharts is incorrect)

The Put call ratio has moved in favour of the puts. The highest Open interest in the order of high to low is 4300 Put, 4400 Put, 4600 Call, 4700 Call, 4500 Put and 4200 Put. If you observe carefully you will realise that 4500 Call has conveniently disappeared from the scene. So next level to watch out is 4600 and if we do go there then we should ideally have a Put build up at 4500 that would define the range of 4500 to 4600 till expiry.

So all in all to summarise – Global cues are rocking for bulls. Indicators on the charts started favouring bulls – Option data defined a new range – above the earlier range as the favoured range for expiry. So all in all we can test the upper Bollinger Bands. Best of luck to everyone for the today.

(*M J Akhtar*)

1. Nifty made a swing high of 4619 on 14 Aug 2009. Swing low was 4353.45 on 19 Aug 2009.



2. Range => 265.55;



3. 61.80% of 266.55 => 164;



4. Low + 164 => 4353.45 + 164 = 4517.55;



5. Nifty closed at 4528.80; Meaning Nifty is/was Bullish...;



6. Now Nifty would try to take the previous high of 4619;



7. 14 day ATR is 120. Do not expect a big range on Monday;



8. So 4528.80 + 120 = 4648.80. The high of the day is likely to be lower than 4653, in all cases;



9. Nifty would be Over Bought at 4602.35, with resistances at 4616.25, 4636.10, and 4653.70;



10. The region between 4591 and 4568 would act as a support. 4636 and 4653 would be very stiff resistances;

(NIFTY)

From the weekly chart, we can see that NIFTY is going range bound, for the last 14 weeks between 62% and 38% retracement level. Unless, NIFTY breaks out above 62% level or breaks down below 38% level, we cannot be sure of the next trend. We need to still wait for such an event to happen. Till then the major trend is to be considered neutral.

But the indicators are showing negative divergence, which is a matter of concern.

WEEKLY NIFTY FUTURE OBSERVATION

Observation:-

1) Total OI of NIFTY FUT up 19.71%, NIFTY AUG FUT closed flat last week.

2) Out of NIFTY 50 Stock FUTS, 15 Stock FUTS closed positive, 26 Stock FUTs closed negative and 09 Stock FUTs close flat last week.

3) OI of current series NIFTY 4400 CE is up 35.35% prices down 26.49 %, NIFTY 4500 CE is up 52.83% prices down 43.11% last week showing buying. OI of NIFTY 4600 CE is up 34.15% prices down 61.66% showing call writing. OI of NIFTY 4600 CE is 42.85 LK highest OI in CALLs.

4) OI of current series NIFTY 4200 PE is up 32.04% prices down 66.98%, NIFTY 4300 PE is up by 31.41% prices down 61.51% and NIFTY 4400 PE is up by 30.75% prices down 48.18% last week showing put writing. OI of NIFTY 4300 PE is 49.79 LK highest OI in PUTs.

5) Total OI of AUG series CALLS is up by 10.82 LK to 2.49 CR, AUG series PUTs is up by 26.25 LK to 2.81 CR. NIFTY AUG series PCR (OI) at 1.13.

NIFTY(4528.8)

Resistance : 4550 / 4605 / 4670 / 4725 / 4770 / 4815

Support : 4495 / 4455 / 4405 / 4365 / 4320 / 4275

SENSEX (15240.83) : Has Short Term Support@ 14700/800 Zone

Resistance : 15325 / 15445 / 15680 / 15885/16085

Support : 15130 / 15010 / 14855 / 14735 / 14585

NIFTY Has Sentimentally Huge Support Near 4320/4280 Zone & Big Resistance Around 4770/4810 Zone.

Sustains Below 4320/4280 For 4 Days, Heading Towards 4200/4100/3950/3850/3650

Sustains Above 4770/4810 For 4 Days, Heading Towards 4890/4990/5140/5240/5440

SECTOR WATCH : CAPITAL GOODS (BULLISH)

Total OI of ABB FUT up 22.68% prices up 4.40%, BHEL FUT up 39.38% prices up 4.59%, LT FUT up 21.78% prices flat and SIEMENS FUT down 12.71% prices up 2.22% last week.

Most of CAPITAL GOODS showing long positions build up. SIEMENS FUT showing short covering.

We expect positive move in coming week.

STOCK FUT TO WATCH NEXT WEEK : HDFC FUT (BULLISH)

Total OI of HDFC FUT up 57.24% prices up 5.03% last week. HDFC (AUG) FUT Intraday high 2454.00, Intraday low 2205.05 last week.

We expect up move in coming week.

Conclusion :-

Last week trade showing shorts build up but NIFTY SPOT failed to move down. I Expect First To Move Up Due To Short Covering.

NIFTY SPOT Resistance@ 4595-4605 levels, Strong Resistance@ 4660-70 levels. Profit booking expected near 4660-70 levels.

On down side, NIFTY SPOT Support@ 4490-4500, Strong Support@ 4440-50 levels.

COPPER : Range 300/312 (Bullish)

Strong Support : 295/290

Trades Above 312, May Test 315/18/21/24

CRUDE : Range 3510/3625

Strong Support : 3440/3420

Trade Above 3625, May Test 3655/3675/3705

Trade Below 3510, May Test 3480/60

SILVER : Range 22850-23350

Above 23340, May Test 23500/23600/23700/23800

Below 22850, May Test 22685/22585/22500

GOLD : Range 14900-15100

Above 15100, 15150/15200/15250 Is Possible

Below 14900, 14850/800 Is Possible

Rel Infra Chart - 30 min:

Rel Infra broken the high of 1112 which is formed on 20th Aug - Thursday and triggered longs. But it didn't sustain above this level by end of the day same like Reliance. Also there is a possibility of Nifty forming Bearish ABCD pattern, need to be a bit cautious with this.

Reliance Chart - 30 min:

Reliance broken the high of 1928 which is formed on 20th Aug - Thursday and triggered longs. But it didn't sustain above this level by end of the day. Also there is a possibility of Nifty forming Bearish ABCD pattern, need to be a bit cautious with this.