The indices opened flat and fell sharply due to consistent
selling among the heavy weights. The fall continued till
mid afternoon (an hour before the last), when the indices
hit the yearly lows. The indices did trim some of their
losses in the final hour, but still ended negative for the
day. On hourly chart, as the momentum indicator is in
oversold region some bounce can be expected in the
coming session, though that bounce is expected only up
to 4000 levels, which is 50% retracement of the fall from
4,207 to 3,778. On daily chart, the momentum indicator
KST is still enjoying its negative trend, which indicates
that the bears will have an upper hand over the bulls in
the near term. Market breadth was depressing with 1,211
declines and only 68 advances.
On hourly chart, the momentum indicator KST is still in
the negative mode, but the gap between the indicator
and the moving averages is getting thinner. We are
revising our short-term target to 3,700 with reversal at
4,000 and our mid-term target to 3,600 with reversal at
4,120.
Sensex and Nifty ended the day with a loss of 506 and 135
points respectively. All the 13 sectors ended in the red
with the banking and consumer durable sectors faring the
worst. Of the 30 stocks that make the Sensex, ICICI Bank
(-13%) Jaiprakash Associates (-11%) and Satyam Computer
Services (-9%) were the worst hit, whereas only Hindustan
Unilever was in the green with a minor gain of 0.3%.
Monday, September 29, 2008
Sensex at a critical level
IN THE continuing intermediate downtrend, the 13200 mark — a 62% retracement level of the previous rally of 12558 to 14222 — was breached on the downside. As a result, there is a high probability that we may see a kink in the index again to the level of 12500. Though this will form a triple bottom structure, rallies like the ones seen before, it may just not have the momentum to inspire confidence among bulls. Till the Sensex tops 14000, buyers are likely to remain sceptical. On the other hand, if the Sensex does not find support at 12500, the ensuing fall may be far severe than what we have seen so far. So, 12500 remains a critical level, as most short positions are likely to be covered at that mark, in anticipation of triple bottom formation.
In this intermediate downtrend, stocks that had been outperforming so far, like banking for instance, will also attract profit taking. On the other hand, stocks from oil & gas and realty are already in an intermediate downtrend. These sectors will fall steeper than the main indices.
There can be two ways to deal with the situation. One is to start buying only when the trend has reversed. That is above 14000, if 12500 is not breached. If the 12500 is breached, one should start buying below the 11500 to 11200 levels with appropriate stop loss. Markets could turn before 11500 level but below 12500, we are in an uncharted territory. Hence, it is difficult to predict new supports.
Why 14,000? It is the level of the highest closing on the daily charts from where the current downtrend started. The breach will not only stop the lower top-lower bottom formation, but will also give an early indication of possible trend reversal. A prominent technical analysis indicator called ‘Fan Angles’ connects the high with all the lower tops and when the third fan line is breached upwards, the trend is supposed to reverse. Connecting the high of 21207 with the lower tops of 18895, 17735 & 15579, the third Fan Line will be breached at the level of 14500. A breach of 14000 creates higher tops and hence, increases the chance for Sensex to go up to 14500, a crucial upward trend reversal level as per fan lines seen on the weekly charts.
Market participants are awaiting signs of strength in the rallies. The rally from 12500 did have the momentum, but could go only as far as 15580 by mid-August. Bulls ran out of breath even before the index reached even near the 200 DMA of 16500. This set off a downtrend with yet another lower top formation and dragged the index to 14000 by the end of August. The index attempted to rally yet again but this time, the bulls were stopped near 15000, just short of the intermediate reversal level of 15200 mark. These movements formed a bearish structure known as Head & Shoulders’, in just nine trading sessions. Hopes of a strong rebound diminished, when the sharp follow through rally fell short by 80 points from the level of 14300, which could reverse the intermediate trend.
In this intermediate downtrend, stocks that had been outperforming so far, like banking for instance, will also attract profit taking. On the other hand, stocks from oil & gas and realty are already in an intermediate downtrend. These sectors will fall steeper than the main indices.
There can be two ways to deal with the situation. One is to start buying only when the trend has reversed. That is above 14000, if 12500 is not breached. If the 12500 is breached, one should start buying below the 11500 to 11200 levels with appropriate stop loss. Markets could turn before 11500 level but below 12500, we are in an uncharted territory. Hence, it is difficult to predict new supports.
Why 14,000? It is the level of the highest closing on the daily charts from where the current downtrend started. The breach will not only stop the lower top-lower bottom formation, but will also give an early indication of possible trend reversal. A prominent technical analysis indicator called ‘Fan Angles’ connects the high with all the lower tops and when the third fan line is breached upwards, the trend is supposed to reverse. Connecting the high of 21207 with the lower tops of 18895, 17735 & 15579, the third Fan Line will be breached at the level of 14500. A breach of 14000 creates higher tops and hence, increases the chance for Sensex to go up to 14500, a crucial upward trend reversal level as per fan lines seen on the weekly charts.
Market participants are awaiting signs of strength in the rallies. The rally from 12500 did have the momentum, but could go only as far as 15580 by mid-August. Bulls ran out of breath even before the index reached even near the 200 DMA of 16500. This set off a downtrend with yet another lower top formation and dragged the index to 14000 by the end of August. The index attempted to rally yet again but this time, the bulls were stopped near 15000, just short of the intermediate reversal level of 15200 mark. These movements formed a bearish structure known as Head & Shoulders’, in just nine trading sessions. Hopes of a strong rebound diminished, when the sharp follow through rally fell short by 80 points from the level of 14300, which could reverse the intermediate trend.
Monday, September 22, 2008
Indices likely to trade with a positive bias
Market Outlook: • Sensex (14042)/Nifty (4245) LAST week, we had witnessed a triangular breakdown on the daily Sensex charts. The projected target for the pattern was around 12370 (Sensex) /3767 (Nifty) levels. Further on the daily charts, we had witnessed a “lower top lower bottom” formation, which also showed weakness. The indices registered a low of 12558 /3799 levels, which were close to the above-mentioned levels. However, a mix of fresh buying and short covering propped up the market, and indices rose 0.3% on a weekly basis.
Pattern Formation
• On the daily charts, the Sensex & Nifty futures have formed an ‘Island Reversal’ pattern at the bottom, which is a bullish pattern. • On the daily charts, the Sensex has given a close above the gap area (13934-13666 / 4216-4100 levels), which was formed during the downtrend. This suggests further upward momentum in the coming trading sessions. • On the weekly candlestick charts, we are witnessing a ‘Hammer’ formation at the bottom, which is a bullish pattern. • Further, on the weekly charts, we are witnessing a ‘Double Bottom’ formation in process, which is also a bullish formation.
Technical Indicators
On the daily charts, the RSI & Stochastic oscillator have given a positive crossover, which indicates a further rally in the coming week. On the weekly charts, the RSI & Stochastic oscillator are on the verge of giving a positive crossover. Hence, any rally in the coming week will also trigger a positive crossover on the weekly indicators. The latest week has witnessed larger volumes compared to the volumes witnessed in the previous 3-4 weeks. Rising volumes, accompanied with bullish pattern formation should ensure positive momentum in the coming week.
Indices are likely to trade with a positive bias this week, and head towards 14600-14820 / 4450-4530 levels. Any sustainable move above these levels would take the indices to 15580-15800/4650-4700 levels, which cannot be ruled out. The upward gap area around 13347-13675/4073-4143 level, remains an important support level for the next week. There could be two scenarios unfolding in the coming week : • Indices opening with a Gap-Up: In such a scenario, short-term traders who have gone long at the support levels, should book profits near 14600-14820/4450-4530 levels. • Any initial corrective move from the current levels up to 13500-13330/4085-4031 levels, should be used to go long for a target of 14600-14820/4450-4530 levels.
Pattern Formation
• On the daily charts, the Sensex & Nifty futures have formed an ‘Island Reversal’ pattern at the bottom, which is a bullish pattern. • On the daily charts, the Sensex has given a close above the gap area (13934-13666 / 4216-4100 levels), which was formed during the downtrend. This suggests further upward momentum in the coming trading sessions. • On the weekly candlestick charts, we are witnessing a ‘Hammer’ formation at the bottom, which is a bullish pattern. • Further, on the weekly charts, we are witnessing a ‘Double Bottom’ formation in process, which is also a bullish formation.
Technical Indicators
On the daily charts, the RSI & Stochastic oscillator have given a positive crossover, which indicates a further rally in the coming week. On the weekly charts, the RSI & Stochastic oscillator are on the verge of giving a positive crossover. Hence, any rally in the coming week will also trigger a positive crossover on the weekly indicators. The latest week has witnessed larger volumes compared to the volumes witnessed in the previous 3-4 weeks. Rising volumes, accompanied with bullish pattern formation should ensure positive momentum in the coming week.
Indices are likely to trade with a positive bias this week, and head towards 14600-14820 / 4450-4530 levels. Any sustainable move above these levels would take the indices to 15580-15800/4650-4700 levels, which cannot be ruled out. The upward gap area around 13347-13675/4073-4143 level, remains an important support level for the next week. There could be two scenarios unfolding in the coming week : • Indices opening with a Gap-Up: In such a scenario, short-term traders who have gone long at the support levels, should book profits near 14600-14820/4450-4530 levels. • Any initial corrective move from the current levels up to 13500-13330/4085-4031 levels, should be used to go long for a target of 14600-14820/4450-4530 levels.
Wednesday, September 10, 2008
Sensex dips 44 points
BENCHMARK indices drifted lower on Tuesday as investors chose to take some money off the table, rather than double their bets. The exuberance seen on the previous day was missing, and while the market rebounded from the day’s lows, bulls clearly lacked conviction. Brokers expect the Sensex to oscillate in a 1,000-point range on either side, near term, till there are fresh triggers. The weakness in the rupee vis-à-vis the dollar, and the relatively attractive valuations of Chinese equities, could keep FIIs wary of Indian shares near term, feel brokers. Select index heavy weights pulled down the 30-share Sensex by 44.21 points to 14,900.76. The broader S&P CNX Nifty slipped 13.60 points to close at 4468.70. The premium on Nifty September futures narrowed down to 20 points at 4489.05. The BSE Mid and Smallcap stocks followed suit to close marginally below their previous close at 5,778.20 and 6,964.61, respectively. Banking and capital goods shares, the star performers on Monday, were among the prominent losers, as traders booked profits out of near-term concerns. Even though inflation has been showing signs of easing in the last couple of weeks, market participants feel that the Indian financial sector continues to be on tenterhooks. “We downgrade our stance on the Indian financials sector to cautious from neutral. In our view, rising P&L (profit and loss) headwinds would likely lead to lower market expectations of earnings,” said Goldman Sachs in a note to its clients. “The growth would be stunted due to tighter monetary policy in 2008 (estimated) resulting in slower loan growth, tougher outlook for NIM (net interest margin), and mark-to-market losses due to rising bond yields, deterioration in asset quality, and increase in loan loss provisions as well as the net NPA (non performing assets)/equity ratio,” the note added. Among the frontliners, Sterlite Industries plunged 7.5% to Rs 575.35, its sharpest fall in over two months. Vedanta, the parent company of Sterlite has announced the transfer of Sterlite’s aluminium and energy businesses to Madras Aluminium, as part of the group restructuring. Sterlite stockholders will get seven shares of Madras Aluminium, or Malcom, for every four held. Madras Aluminium jumped 17% to Rs 212, its highest since July 25, 1996. Other bluechips like Hero Honda , PNB, Dr Reddys, SBI, Ranbaxy Labs and DLF fell 1-4%. Tuesday’s session started on a weak note following a similar trend in Asian markets but bounced mid-session after European stocks opened on a firm note. But, bulls struggled in the face of sustained profit selling, with losers outnumbering gainers 7:6. “The market players realised that the nuclear sapling wouldn’t be able to sustain the rally. We expect the range to continue between 4200 and 4650,” said VK Sharma of Anagram Broking. Turnover traded in markets was muted at Rs 58947 crore, breaching the 60,000-plus crore daily average over the last couple of weeks. FIIs net sold equities worth Rs 391 crore while domestic institutions net bought 106 crore worth of shares.
Monday, September 8, 2008
Market sees a positive nuke explosion on St
EQUITIES appear poised for a surge on Monday after the Nuclear Supplier Group (NSG) on Saturday reached a consensus on the Indo-US nuke deal agreeing on a clean waiver for India, allowing it an entry into the hallowed nuclear club. Dealers expect the Sensex to surge by as much as 500 points, fuelled partly by short-covering of positions. The next key trigger would be the outcome of the Organisation of Petroleum Exporting Countries (Opec) meeting in Vienna on Wednesday. In the wake of slowing demand, an economic downturn and fall in crude oil prices, Opec may decide to trim the supply to avoid a further fall in prices of crude oil. Although inflation appears to be coming under control, analysts say the volatile macro-economic picture will prevent investors from braving the market. “A gloomy global scenario, tight monetary policy, lower economic growth, impending elections and high fiscal deficit — all these are negative for the performance of the Indian market,” said an Indian Equity Strategy report by Lehman Brothers. “We believe that inflation has peaked and the Indian market at current valuations is more leveraged to interest-rate falls and less to a growth slowdown,” the Lehman report added. After the steep fall on Friday, benchmark indices are now at two-week lows. Adding to the macro-economic worries, the rupee weakened further against the dollar on Friday, touching its 20-month low. While the positive outcome of the nuclear deal is a big victory for India, the upside in the stock market will continue to depend on the mood in world markets. A sharp slide in major markets will sour the mood for Indian equities, brokers warn. “We expect the Nifty should be in a range of 4150-4520,” said Dharmesh N Vala of Nayan M Vala Securities. “The surge in the dollar is in the last phase of uprun, and the bull run in the dollar compared with the rupee is just about to end soon around 45.65 levels. We believe every rise above the level of 45.65 is a good opportunity to short dollar or vice versa buy rupee,” he added. Mr Vala said that the dollar topping out will be followed by a surge in FII flows into equities. Broking firms are advising their clients to take a cautious view in the short term. “We would buy the market aggressively around 12500-13000 levels. In the short term, we would suggest running widely diversified portfolios and raising the weights of interest-rate sensitives, especially banks, at more appropriate valuations,” the Lehman note said. Meanwhile, in spite of the general sentiment on inflation, government policies continue to hint otherwise. The commodity market regulator on Friday extended a four-month ban on futures trading in soybean oil, rubber, potatoes and chickpeas to cool inflation. The halt to futures trading in the four commodities has been extended to November 30. However, there is a dissent among market participants on this issue as they feel that there are no conclusive evidences that suggest that futures trading fuels price increases. While macro-economic conditions, opine dealers, would have the last say in the way Indian equities play out in the near term, a delay in the withdrawal of the monsoon may offer some respite to the beleaguered sentiment. A lazy monsoon is expected to benefit crops in the current kharif as well as in the ensuing rabi season.
Tuesday, September 2, 2008
Neckline Retest
Market has opened on positive note and Nifty has made a
high of 4,390. However, the early gains have been trimmed
due to selling pressure at higher levels. The previous swing
high, which was a good support, is also broken. So, the
next support for Nifty is at 40 HEMA (ie 4,328). We expect
the momentum to be volatile for the day. Market breadth
is positive with 727 advances and 390 declines. Daily KST
is moving up for a positive crossover. Our short-term bias
is still up for the target of 4,500 with the reversal nailed
at 4,270.
On the hourly charts, the momentum indicator KST is
lingering above the zero line with a positive crossover.
Going further, on intra-day charts Nifty is forming an
inverted head-and-shoulders pattern, which has been
breached for the target of 4,450.
Banking and construction sectors are gaining momentum.
Axis Bank looks good for the day. Unitech has a potential
for Rs180 in short term, as the stock is making a bullish
inverted head-and-shoulders pattern.
high of 4,390. However, the early gains have been trimmed
due to selling pressure at higher levels. The previous swing
high, which was a good support, is also broken. So, the
next support for Nifty is at 40 HEMA (ie 4,328). We expect
the momentum to be volatile for the day. Market breadth
is positive with 727 advances and 390 declines. Daily KST
is moving up for a positive crossover. Our short-term bias
is still up for the target of 4,500 with the reversal nailed
at 4,270.
On the hourly charts, the momentum indicator KST is
lingering above the zero line with a positive crossover.
Going further, on intra-day charts Nifty is forming an
inverted head-and-shoulders pattern, which has been
breached for the target of 4,450.
Banking and construction sectors are gaining momentum.
Axis Bank looks good for the day. Unitech has a potential
for Rs180 in short term, as the stock is making a bullish
inverted head-and-shoulders pattern.
Monday, September 1, 2008
Nifty Support @ 4,201
Market opened on a negative note, but Nifty has witnessed
a follow up buying. Nifty on the daily chart is trading in
the range of 4,200-4,450, which is a crucial level. The
momentum is expected to be positive and volatile on an
intra-day basis. Market breadth is negative with 706
declines and only 426 advances. Daily momentum indicator
has given a negative crossover and is trading below the
zero line. On the daily charts, support is at 4,200 and
there is a strong resistance at 4,450.
On the hourly charts, a small inverted head-and-shoulders
pattern has formed with resistance at 4,370 and support
at 4,280. The momentum indicator has given a positive
crossover and is trading below the zero line. On the hourly
charts, there is a strong support at 4,280 and a very strong
resistance at 4,331.
Reliance Industries has gained momentum and is likely to
test Rs2,250 on upside. Infosys has support around Rs1,695
and on the upside the stock is likely to test Rs1,850. Capital
goods sector has lost momentum and is expected to move
downwards.
a follow up buying. Nifty on the daily chart is trading in
the range of 4,200-4,450, which is a crucial level. The
momentum is expected to be positive and volatile on an
intra-day basis. Market breadth is negative with 706
declines and only 426 advances. Daily momentum indicator
has given a negative crossover and is trading below the
zero line. On the daily charts, support is at 4,200 and
there is a strong resistance at 4,450.
On the hourly charts, a small inverted head-and-shoulders
pattern has formed with resistance at 4,370 and support
at 4,280. The momentum indicator has given a positive
crossover and is trading below the zero line. On the hourly
charts, there is a strong support at 4,280 and a very strong
resistance at 4,331.
Reliance Industries has gained momentum and is likely to
test Rs2,250 on upside. Infosys has support around Rs1,695
and on the upside the stock is likely to test Rs1,850. Capital
goods sector has lost momentum and is expected to move
downwards.
Nifty Support @ 4,201
Market opened on a negative note, but Nifty has witnessed
a follow up buying. Nifty on the daily chart is trading in
the range of 4,200-4,450, which is a crucial level. The
momentum is expected to be positive and volatile on an
intra-day basis. Market breadth is negative with 706
declines and only 426 advances. Daily momentum indicator
has given a negative crossover and is trading below the
zero line. On the daily charts, support is at 4,200 and
there is a strong resistance at 4,450.
On the hourly charts, a small inverted head-and-shoulders
pattern has formed with resistance at 4,370 and support
at 4,280. The momentum indicator has given a positive
crossover and is trading below the zero line. On the hourly
charts, there is a strong support at 4,280 and a very strong
resistance at 4,331.
Reliance Industries has gained momentum and is likely to
test Rs2,250 on upside. Infosys has support around Rs1,695
and on the upside the stock is likely to test Rs1,850. Capital
goods sector has lost momentum and is expected to move
downwards.
a follow up buying. Nifty on the daily chart is trading in
the range of 4,200-4,450, which is a crucial level. The
momentum is expected to be positive and volatile on an
intra-day basis. Market breadth is negative with 706
declines and only 426 advances. Daily momentum indicator
has given a negative crossover and is trading below the
zero line. On the daily charts, support is at 4,200 and
there is a strong resistance at 4,450.
On the hourly charts, a small inverted head-and-shoulders
pattern has formed with resistance at 4,370 and support
at 4,280. The momentum indicator has given a positive
crossover and is trading below the zero line. On the hourly
charts, there is a strong support at 4,280 and a very strong
resistance at 4,331.
Reliance Industries has gained momentum and is likely to
test Rs2,250 on upside. Infosys has support around Rs1,695
and on the upside the stock is likely to test Rs1,850. Capital
goods sector has lost momentum and is expected to move
downwards.
Market may remain bullish
Hold on to long positions
The market will remain bullish in the short term with more choppy sessions. Based on the above rationale, the Nifty is expected to continue its upward momentum with or without early consolidation. The 4399-4448 may act as a tough resistance zone . Once this zone gets cleared, the medium term view will get a fresh upward momentum. This view will get negated if the Nifty makes any weekly closing below 4246. For this week, the Nifty has resistance at 4399-4448 (tough for short as well as medium term), 4499, 4515 (on a weekly closing basis), 4563 and 4650 (very strong for medium term).The Nifty has support at 4350, 4315-4326, 4269 (strong for intra week), 4201, 4248, 4179-4202 (strong for short term), 3920 (strong for medium term).
The market will remain bullish in the short term with more choppy sessions. Based on the above rationale, the Nifty is expected to continue its upward momentum with or without early consolidation. The 4399-4448 may act as a tough resistance zone . Once this zone gets cleared, the medium term view will get a fresh upward momentum. This view will get negated if the Nifty makes any weekly closing below 4246. For this week, the Nifty has resistance at 4399-4448 (tough for short as well as medium term), 4499, 4515 (on a weekly closing basis), 4563 and 4650 (very strong for medium term).The Nifty has support at 4350, 4315-4326, 4269 (strong for intra week), 4201, 4248, 4179-4202 (strong for short term), 3920 (strong for medium term).
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