newsletter

(NOORESH)

SENSEX TECHNICAL VIEW:

In the last update had mentioned that the gap level of 15350 should be a support to watchout for.

Sensex made a low of 15350 odd. This now clearly sets a level for the next major trend change for now.

Also at 14700 some time back had mentioned that we may be forming a pattern similar to the Sept-Jan 08 and in that case we still have an upleg to 16k plus as shown in the chart discussed then.

MY CHART

Nifty :: Body gap up bullish candle given fresh breakout of 1-3 line 4756 and exactly close at 61% correction level of entire fall .. Be careful at high due to berish Wolfe Wave & Ending Diagonal pattern, but still short term bullish structure intact.. In coming days 4756 breakout level (1-3 line as closing basis) works as trend decider level.. Above 4756 our strategy for 8th Sep buy in deep (S.L 4740) Sell at high (S.L 4878/4957).. Resistance for up move at 4818/4831/4878/4900/4913/ 4957.. Supports at 4756/4740/4700/4690/4600..
(Still bearish Wolfe Wave and Ending Diagonal pattern valid, Nifty enter in Ending Diagonal pattern target zone.. Sensex Wolfe Wave 1-3 line strong resistance at 16275)

(Vishal Dangaich)

For the first time since May 2008, Nifty closed at 4782 levels. In the last few months, Nifty was trading in an Island pattern between 4375- 4748 levels. Nifty in the last 4 months, tried several times to close above 4748 levels, but could sustain the selling pressure. But finally this time the Bulls have made it possible. Indices closed at 15 month high. Sensex touched a new high of 16035. Before closing at 16016 up 327 points or 2.09%. Nifty made an intraday high of 4790 before closing at 4782.90 levels up 102 points or 2.19%.
In the early hours Indices opened up with marginal gains, but positive global cues, buying in frontline stocks and short covering, helped indices rally nearly 2%.
As mentioned in my last blog also, that the Upside move in the markets are more in sight, rather downside. As stated that the Nifty in last few months was trading in an Island pattern. And the breakout pattern through the triangle pattern, will take the Nifty to 4803-4836 levels. RSI has also turned positive, and MACD is also trying to turn +ve. Mid cap stocks were doing pretty well. Bears will continue to cover their shorts for sometime. Nifty will have resistance at the 61.8% retracement level.

Finally, the fence of 4740 has been broken and Nifty closed the day at 4780. It looks like a open field now…though not very smooth. Is this the breakout we all have been waiting for? Well - here’s my view on today’s nifty movement.

Does today’s move qualify as breakout?

Purely Price wise - Yes…but price behaviour wise - No. [Yes, you read it correctly, I am not calling today's move as breakout. Anyway - who cares what I call ]

First, we need to understand what breakout means?
Here’s the definition as per Investopedia – Breakout is a price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility

Heavy Volume + Increased Volatility….both were absent today.

Breakout is a very powerful term and it signifies immense momentum. Going by today’s action – there was no momentum. Actually, there was no great fight either around resistance and Nifty quietly moved up to it’s surprise…actually..it felt like bears just ran away without giving any fight. After moving up above 4740, nifty traded there for good period of time. I could hear - bulls yelling - Is anybody here…and since no bears responded, more market participants joined in leading to some good buying in last 90 min of the trading day.

Technically, today’s move is more a case of market making an advance (range expansion) than breaking out.

What difference does it make – whether we call it breakout or Range expansion?

Answer: A lot. Well, let me give you three simple differences -

1. When markets breakout in pure technical terms – with increased volume and volatility [high energy] – the follow through buying takes the market to much higher level in a very short span of time WHEREAS

If it is range expansion – the upmove may come but at very slow and tiring pace creating lots of doubts on sustainability. Also, in case of range expansion - news flow, global cues matter more than inherent technical strength of the market.

2. When markets breakout in pure technical terms – the risk of false breakout remains pretty high WHEREAS

this is not the case in case of range expansion. Since, market never broke out with high energy – there will no mad rush on the downside. Infact – dip buyers will remain pretty active.

3. In case of breakout, the inherent technical Strength of the market can protect the market from ugly Global cues whereas

In case of range expansion – market can remain hostage to Global cues; and it can push the market from one end to another. It happens because rangebound markets lack conviction at extreme ranges.

How should one approach this market and Nifty?

There is a saying - Focus where the action and momentum is. In momentum assets - technicals work perfectly, which is not the case with ranging assets.

Nifty is a ranging asset where ranges may expand and contract from time to time but will be difficult to trade because it lacks energy and gets too much influenced by news, global cues etc. Right now, stock specific trades are more rewarding and it seems like this trend may continue for some time to come.

MAHINDRA FORGINGS closed up 10.200 at 83.450. Volume was 47% above average (neutral) and Bollinger Bands were 25% wider than normal.

MAHINDRA FORGINGS gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Bharat Mudgal’s comments:

MAHINDRA FORGINGS has given a strong buy signal as per our Metastock Trading System. The stock can move strongly in the short-medium term. One can buy at current level and on any decline to 72/ The target is 89 > 107 > 146 stopLoss 64 on a closing basis.

NIFTY (4782.9)

Resistance : 4820 / 4865 / 4895

Support : 4740 / 4710 / 4680 / 4640

SENSEX (16016)

Resistance : 16135 / 16190 / 16265 / 16345

Support : 15900 / 15855 / 15790 / 15700 / 15625

NIFTY FUT (4796)

Resistance : 4840 / 4865 / 4885 / 4905

Support : 4745 / 4725 / 4695 / 4675 / 4655

MKT COMMENTS

NIFTY FUT OI up 2.52% with 34% decreasing volumes indicating forming of long positions.

4800Pe Saw Addition In OI Of Around 8 Lakhs,While in Ce’s Saw Shedding Of OI

We expect NIFTY FUT to trade positive.

On Tuesday,Opening Is Flat To Positive,

Buy NIFTY Above 4760,Sl Below 4745,Tgt 4810/30/65/90

Sell NIFTY Below 4745,Sl Above 4760,Tgt 4710/4680/40/15

BUY Delivery (Book Profits In These Scripts Near Targets, Since Markets Are At New Tops)

CADILA,Tgt 525/35

BLUEDART,Tgt 565/75/85

GRASIM Above 2705,Sl 2605,Tgt 2805/25+

ICICIBNK Above 785,Sl 715,Tgt 850/60/70

M&M Above 855,Sl 805,Tgt 910

RELCAP Above 920,Sl 870,Tgt 970/80

SBIN Above 1810,Sl 1710,Tgt 1910/25+

BUY

GRASIM Above 2725,Sl 2705,Tgt 2745/55/65++

SBIN (1816),Sl Below 1785,Tgt 1830/40

IVRCLINFRA Above 355,Sl 345,Tgt 365/70/75/80

TATACOMM Above 490,Sl 480,Tgt 505/10

CHAMBAL Above 55,Sl 50,Tgt 59/61/63

SCI above 143,Sl 140,Tgt 145/47/49

RPOWER Above 160,Sl 155,Tgt 165/70/75/80/85

FUTURES

TECHM, Sl 955,Tgt 990/1000/1010

ONGC (1188) : Buy@ 1175,Sl 1160,Tgt 1200/10 (Close Above 1190,Hold Longs As BTST)

ICICIBNK (788.8) : Buy@ 775,Sl 765,Tgt 785/95/805

BHARTI (421.6) : Buy Above 415,Sl 405,Tgt 425/30 (Close Above 425,Hold Longs As BTST)