The Falling Wedge

The Falling Wedge: USD/INR: Outlook for 6th May – 10thMay: The prev...

2013-05-05T22:49:00.001+05:30

The Falling Wedge:
USD/INR: Outlook for 6th May – 10thMay:
The prev...: USD/INR: Outlook for 6 th May – 10 th May: The previous post had promised protection for the pair at 54.60 levels, and as expected...

2013-05-05T22:48:00.004+05:30

USD/INR: Outlook for 6^th May – 10^th May:

The previous post had promised protection for the pair at 54.60 levels, and as expected the pair resisted those levels and rallied up to the 54.03 levels, which was a swift movement of nearly 1%.

Post a rate cut of 25bps and a promise for further easing on the back of better CAD and inflation numbers, the RBI governor has managed to slightly subdue the hawkish tone of its macroeconomic report.

We now have a look at the events for the coming week:

· S&P rules out an rating upgrade:

o S&P ruled out a rating upgrade at the ADB conference, citing slow infra project clearances.

· Congress morale boost:

o A likely win in Karnataka will be a morale booster for the Congress. Also, introduction of Food & Land Acquisition bill in the parliament through an ordinance would further display Government`s resolve. However, the latest railway board scam would slightly dampen this euphoria.

· New slew of reforms:

o A new slew of reforms are likely to buoy the market, with a report ons revision of FDI caps on certain sectors – Defense, Insurance, etc. would help improve the sentiment. Also, a proposal to fast track the infrastructure clearances would further boost the investment sentiment.

· Major flow directions pointing – Inward

o Inward flows for dominate the market for the week. Flows from Bharti – Qatar Foundation stake sell and IKEA proposal clearance and lack of demand from the Oilers may help the USD/INR to stay low.

· Global Market Events:

o US Markets are likely to remain bullish based on positive earnings reports and slight improvements in the Job market

o Action in the European markets likely to remain muted, on the grounds of no major data releases this week.

o BoE policy meet this week would be closely watched, for further signs of easing.

Overall, the sentiment and the market seem to be set for a short USD/INR position.

Over the medium term, the pair is likely to stay in the bearish channel of 53.60 – 54.60 levels. A likely break outside this channel would warrant a move towards the 53.30 level, with an attempt to fill the gap. This entire bearish move would be negated by a close above the 54.40 levels.

Technically, the pair faces resistance from a Fibonacci retracement and Ichimoku Tekan line at 54.03 levels, which should be a good top. 54.10 / 54.20 also appear to be decent tops to sell on rallies. Also, the pair displays a spinning top candle-stick pattern which highlights a trend reversal from the recent rally from the 53.65 to 54.03

The pair is likely to stay within the 53.65 – 54.03 range, with a possible extension to 53.50 or 54.20 levels on either end.

Option strategy:

A decent option strategy would be to buy a bearish Put Spread for the 54.50/53.00 level. This would mean buying a 54PUT and selling 53PUT, to play for the 54 – 53 range. A slightly aggressive and cost effective strategy would be couple this with selling of bullish call spread 54.50/55 levels. This would mean selling the costlier 54.50 Call and buying the low cost 55 Call in the anticipation for the pair to trade outside and below 54.50 levels.

Another low –cost option would be to buy a 53.75/52.75 Put spread.

Happy Investing!!!

The Falling Wedge: Konnichiwa, India!

2013-05-04T12:47:00.002+05:30

The Falling Wedge: Konnichiwa, India!: S&P Nifty India joins the party…. In the previous post, I had mentioned that how the Superheroes (Heads of various Central Bank...

Konnichiwa, India!

2013-05-04T12:47:00.000+05:30

S&P Nifty India joins the party….

In the previous post, I had mentioned that how the Superheroes (Heads of various Central Banks around the World) had saved the financial markets from a severe liquidity crunch. This liquidity combined with near zero interest rates, have propelled this fund flow towards better yielding assets – mainly the Emerging Markets.

With the S&P rising nearly 24% in the past 11 months, on the subdued American recovery coupled with higher hopes of continued QE till the end of the year, and with Japan joining the “QE club”, we now have the Equity markets around the world scaling new peaks. We have the DJIA, which closed 30pts shy of the 15000 mark, we have Nikkei which has gained almost 50% since the September`2012, and we have the European Stock Indices which have gained nearly 20%-30% over a similar tenure.

And as the liquidity wave approaches Asia, we now see the Asian markets like Thailand, Indonesia, Philippines and India being the major beneficiaries. The Indian growth story, which seemed to be stung in Q3`2012, has seemingly found takers, and how! With the Government back into action, cooling inflation, falling interest rate cycle, and cooling commodity prices, FIIs have pumped in nearly $8.5bn in the first quarter of the year. This gush of funds has been mainly buoyed the Stock Indices which has seen a strong run up to 5850 levels after correcting to 5500 in the previous month on the back of aggressive monetary easing by RBI.

A closer look of the chart would show Nifty trading with a bullish channel, and all possibilities of scaling the coveted 6200 mark. The propulsion of the positive events of the near term along with the global liquidity theme into play would help us test the 6150 – 6200 range, which would be a good opportunity to buy Nifty in the short term. So, the adage “Sell in May...” may not come to fore this summer.

Happy Investing!!!

2013-05-01T16:18:00.000+05:30

USD/INR: One of the most interesting & entertaining charts is here....

The USD/INR has become one of the most favorite asset classes over the past year. And why not, it has been a key component of the Asian carry trade baskets!

USD/INR : A Broader picture:

Over the past year, USD/INR has been an highly contested dual between the bulls and the bears.
Bears have been in command ever since the global crisis emerged out of Europe since 2009. This followed by a host of other domestic problems like corruption stung Government`s ever dropping credibility, along with the ballooning fiscal & current account deficits, had threatened India’s credit rating, which would completely flush out the foreign funds. All this had almost painted a gloomy outlook for one of the World`s fastest growing economy, and then ….
…then cometh ‘The Avengers’, saving the World with global liquidity. This Marvel comics like Superheroes, and believers of quantitative easing, mainly Uncle Ben (Bernanke), Super Mario(Draghi) and off late the Japanese Abe(nomics) supporting the global liquidity.This has seen an unprecedented flow of funds to the better yielding assets in the emerging economies and India being one of them was a major receiver of these funds.

However, this wouldn`t have been possible without our very own Avenger, ‘Chidu’ (Finance minister, P.C. Chidambaram). He actually like a superhero, has single handedly revived the ailing Indian sentiment right from managing Fiscal Deficit, wooing global investors with road shows, delivering a host of financial reforms, and saving India from a looming credit downgrade. And as it is said, “Fortune favors the brave”, we had luck tilting Chidu`s way, with the cooling inflation, and drop in the CAD worsening commodities – Gold & Crude.

The Technical Outlook..
As this interesting story finally moves towards its climax, we have the USD/INR pair which is on the verge of a major breakout. The pair has almost being boxed within the 53.90 – 55 range over the past few months. With a host of major reforms and support from nearly $10bn plus foreign fund inflows in the Indian Equities and Debt markets, the INR has finally managed to drift lower, and now stands the test of a fortress like level at the bottom of the triangle, 53.60. The pair should be able to defend the 53.60 support, and should strongly bounce back. 53.60 also forms the 38.2% retracement level of the 57.20 – 51.30 move. The pair has been trading below its 100 & 200 DMAs. Also, a short downside rally to 53.60 seems possible as the RSI (33.65) & Stochastics – Slow (60.080) indicate that the rally still has some steam left. A dovish FOMC and hawkish ECB would help to contain the EUR/USD march, whose strength is highly beneficial for the pair.

The pair is headed for its most volatile period in the second half of the year, as it braces towards major high risk events like, end of QE3, German Elections, and Indian Central Government Elections, change of guard at the Reserve Bank of India, and the India Corporate sector which still don’t seem to be out of the woods yet. And this can be seen as a good buy on dips opportunity.

The only argument, which could put an end to this party, would be more than anticipated rate cut of 25bps, or a very hawkish central bank tone which might see the bonds and the equity rally, propelling the pair to cross the barrier 53.60!

Happy Investing!

The Falling Wedge: India joins the worldwide retreat - In line with t...

2012-06-04T23:58:00.001+05:30

The Falling Wedge: India joins the worldwide retreat - In line with t...: This is a follow up to our earlier post, Hattrick for "Sell in May and Go Away!" . As suggested, NIFTY remained range bound, meeting both...

India joins the worldwide retreat - In line with the expectations!

2012-06-04T23:52:00.001+05:30

This is a follow up to our earlier post,Hattrick for "Sell in May and Go Away!" . As suggested, NIFTY remained range bound, meeting both the ends of the Channel. Although we always echoed a more bearish tone, those who were short on NIFTY would have had a good momentum play of nearly 100points, coupled with some high NIFTY premiums and Implied Volatility levels. Also, we had already projected a RBI CRR cut possibility and as we approach the policy meet on June 12th, we hear of lot of voices on the street, echoing the same sentiment. A Repo cut possibility may not be ruled out, however, the chances of a 50bps CRR cut, weigh higher.

On the basis of the action packed month for the NIFTY, we would still maintain our bearish view on the NIFTY, with an extended falls to 4715 levels with a close below 4815-4825 levels (as we see a trend-line coming in to picture). On the upper end the NIFTY movement would be limited to 4900-4925 levels.However, I would refrain from initiating of any short positions at this juncture.

Here`s why :

We cannot ignore any surprises on the possibilities of a domestic rate cut or probable announcement of QE3. But, the movement in case of such news inflow, would be quick and may not give enough time to the bargain hunters to build a portfolio! Thus, those wish to bottom pick, have a good opportunity!!!

Commodities :

Gold played in the range set for the week, however the weekend move was a complete surprise, which saw a single largest gain of 4%. We expect XAU/USD to cap its rally to around 1630, where the chart meets strong weekly resistance, and movc above it would extend gains up to 1680 levels. A weekly close above 1635 would beat the bearish gold trend.But for the moment we expect it to consolidate around 1602 - 1610 levels for the week.

So, as Asia joins the world-wide retreat, will Sensex buck this trend???

Happy Investing!!!

Hattrick for "Sell in May and Go Away!"

2012-05-27T22:55:00.003+05:30

“Sell in May and go away” adage held true for the 3^rd straight year!! With the D-Street experiencing a major sell-off after infusion of a record high hot money (FII) in the Jan-March quarter, May has rather been a dull month for equities with the BSE losing nearly 1000-odd points in this month alone.

The S&P Nifty has been trading at mouth watering levels, with a P/E of nearly 12-13 times and 11 times its FY14 earnings. With a lot of positive reports and comments from the so called “Contrarian” investors, one may feel pestered to go for bargain hunting. Also, those investors who missed the rallies of 2009 and so on, believing the doomsayers, are eager to jump the bandwagon. But, bottom fishing with bleak macro-economic variables, may not prove to be a wise choice.

It would be a difficult call to predict the bottoming out of markets which is stung by twin deficits, weak government, a burgeoning Euro zone crisis, and warning signals from the Chinese Economy!

Some of the trigger points for the coming months and their probable impacts:

RBI Policy: With the RBI Policy in the coming month, despite the increment of the Govt. to increment the Petrol prices, the possibility of an Interest rate cut remains low, due to a low weight-age of Petrol in the consumer basket. The impact of the hawkish 50bps cut in the rates, and other policy effectiveness will be visible once the Economic growth data for the Jan-Mar quarter is available on May 31^st. Also, the investor sentiment in the rate sensitive sectors like real Estate has been marred by other issues like delayed real-estate approvals, etc. Also, the deposit rates have not been picking up as per RBI`s expectations. So, probability of a further Interest cut stands at 25%. The second option available to the RBI is to announce a CRR cut of around 50bps, injecting approx. 30,000cr in the system. This seems to be a more feasible policy stance, considering the liquidity crunch in the system, with the bank borrowings remaining above RBI comfort zone (in tune of 60,000cr) at over 1lakh crore. Also, this has been further propelled by the RBI selling dollars to control the greenback from inching towards the 56-57mark against the Rupee. The OMO of 12,000cr by the RBI concluded today is an indication of its stance in the coming policy meet. However, the eyes would be more on the RBI`s activity to cool off the $ bulls. Also, the Govt. policy to revise the Diesel and CNG prices may be cheered by the Investors with a 273 point rally. However, don`t expect any strong policy decisions from the UPA stable.

Greece Elections: On the Global front, the Greece elections to be held on the 17^th of June will have a lot of volatility as well as panic selling, based on the various voices coming out of the EU. Although the attempts would be have Greece continue to be a part of the EU. If cues are taken from the French elections, which chose growth over austerity, we might see a similar Greece outcome, with the blooming Syriza`s support, we may see the Holland- Syriza duo forcing the Merkel dominated austerity measure traversed towards a more growth oriented measure.

Also, the slowly improving growth of the US coupled with the warning signals from China, may result the FED to announce a relatively smaller and ultimate round of QE3

All the above positive outcomes may materialize only after mid-June. Till then, the markets may wear a gloomy look. The following charts will help us to understand the future course of the markets:

The breakout post the Descending Triangle Pattern, after a subsequent rally from the highs in Jan & Feb confirms the May sell-off (had tweeted about this pattern earlier) . Although this breakout from the descending triangle has been taken out, we now fast a stiff resistance from the downward sloping trend line joining the tops of the rallies of 2010, 2011, 2012. This lower top, lower bottom formation, confirms a bearish long term trend with strong resistances at the levels of 4950-5000. Nifty also has a strong support formation, thus, we could see Nifty having a strong support at 4800-4775 levels. Therefore, we expect the Nifty to trade in a range from 4775 – 4975, until there is a clear breakout on the either side.

Sensex:

Trend lines and Fibonacci retracements indicates a correction to the extent of 15300-14800. A close below the 23.8% retracement level, at 16220 of Sensex, further confirms our bearish view on the markets with immediate retracements to 15400 levels. Weekly closing above 16300 would falsify the bearishness of the downward sloping trend line, and offer a chance rally till 16900. On a daily basis, we might see a rally up to the 16400 levels, which offer a good opportunity to sell. If the PCR of the NIFTY Jun expiry is to be considered, it would confirm our bearish sentiment.

For the coming week, we expect the markets to adopt a cautious approach, it may be range bound at 15653-16600 levels.

Commodity:

On the commodity front, Gold/$ may rally to 1583-1585 levels, where it may face resistance, thereby retracing to 1565 levels, and a drop below that leading it to 1520 levels.

That`s all for the time being, will try and add a follow up post or tweets depending on time availability.

Happy Investing!

The Falling Wedge: Sensex : An Outlook for the coming week...

2011-12-19T23:36:00.000+05:30

The Falling Wedge: Sensex : An Outlook for the coming week...: As expected Sensex hit the 15750 mark in the 2 trading sessions. A recap of the individual stocks : Pantaloons, Bank of Maharashtra, and HD...

Sensex : An Outlook for the coming week...

2011-12-19T23:26:00.001+05:30

As expected Sensex hit the 15750 mark in the 2 trading sessions. A recap of the individual stocks : Pantaloons, Bank of Maharashtra, and HDFC have partly achieved their targets. Coal India hit the target of 295, it bounced back to 305+ level, and Bharti Airtel hit stop loss, due to a violation of MNP norms.

For the current week, on the basis of Market`s co-relation of downward trend to the India VIX levels, signs a pause in the downfall.This pause is usually followed by a technical bounce back This is confirmed by the chart below which displays some short term bullishness. The immediate targets being 15477 (2 - 3 trdaing sessions), with a stop loss of 15250.

However, there has been no strong indication on the Daily Moving Averages, and the long term trend remains downward with immediate support levels at 15100 (based on a support channel ). This bleak medium term trend is partly due to the widening trade deficit with higher subsidy burdens. The agreement of the PSU`s to cross holding method of disinvestment may improve the Market sentiment, but reaching a consensus on the same may take a while.

Banking stocks should be traded with caution, as a lot of short positions have been building around them. Banking stocks may come under a lot of pressure due to Aviation, Real Estate, & Textile loan book burden. Banking stocks having high exposures to such sector would be on immediate radar of the bears. ICICI Bank being on them.

A follow up on other stocks in later posts.

The Falling Wedge: Outlook for Sensex - Airtel, Coal India , HDFC , B...

2011-12-15T09:56:00.000+05:30

The Falling Wedge: Outlook for Sensex - Airtel, Coal India , HDFC , B...: Current market scenario being too volatile, choppy & directionless provides very less opportunities to decipher long term pattern formation...

Outlook for Sensex - Airtel, Coal India , HDFC , Bank of Mah., Pantaloons

2011-12-15T00:25:00.002+05:30

Current market scenario being too volatile, choppy & directionless provides very less opportunities to decipher long term pattern formations.

Therefore following are some short term trading strategies for the following week; strict stop loss adherence is expected! Most the momentum indicators in tandem with candle stick patterns have been used.

SENSEX – 15750

Average Directional Index along with bearish shooting star pattern indicates probable correction to 15750. Upside targets of 15986 / 16480

Bharti Airtel – LONG - 360

Morning Star candle stick pattern ensures a Bullish Reversal signal, supported by increase in volumes. Stock could see price levels of 355 – 360 in a week`s time. Stop loss at 344.

Coal India – SHORT - 295

Bearish Engulfing pattern, confirmed with Volume trends indicate stock moving towards its next immediate support at 295. Stop Loss at 302

HDFC – SHORT – 616

MACD Bearish Divergence with Candlestick Doji, showed lack of indecision, resulting into the stock following the major market trend. Immediate support at 622

Bank of Maharashtra – SHORT - 41

Bearish Shooting Star Candlestick pattern, bearish MACD Divergence, and 20DMA bearish crossover of 50DMA. Stop Loss at 46

Pantaloon – SHORT -137

Still some pain left, as per the RSI indicator still shows strength. MACD shows bearish divergence. Stop Loss at 152.

Also, look out for the correction in the Commodities segment, especially precious metals like Gold & Silver, with the growth in funding stress for the Euro regions.

ACC Ltd - Headed for a free-fall.

2011-11-09T21:48:00.000+05:30

ACC Ltd has been forming a rising wedge formation since the past one month.
The is price divergence with RSI and MACD histogram observed which is a bearish signal.

Investors with having the stock in their portfolio should exit it. Avoid adding any positions.

Traders can short the stock. Refer to the chart for price specifics.

Avoid Banking stocks in the near future. There is a strong possibility for correction.
The Sensex is testing the breakout levels of 17250. Bring closer stop losses in case a correction takes place.

Retest of the breakout - Opportunity to build up positions

2011-11-03T20:51:00.000+05:30

Much on the expected lines, the markets made a clean breakout above 17250 the last Friday.
As expected, the rally faced resistance at 17750-17800 levels too and is now back again to retest the breakout.

Interestingly, the pullback has been slow over this week. Also today, the sensex rebounded in the last hour of trade leaving a 'Hammer' candle on the chart.
The retest of this breakout might be a successful one. Its time to build up positions in stocks that were mentioned before in the last post that would be making a retest too.

Some individual picks
Bank of Baroda

Though the rate sensitive banking stocks have been under pressure ever since the RBI hike and savings deregulation, BoB is showing some buying strength (see increased volume sticks in the chart).

Refer to the chart for price specifics.

REC

REC has been a classic trending stock. It has been in a downtrend since past one year.
It has made a breakout of the ascending triangle pattern today. Volumes have been rising from past few days supporting this rally.
Reversal patterns like these always point changing long term trends.
Caution: The stock has always been a slow mover (not a trader-friendly one) :)

Markets set for a rally.

2011-10-27T22:55:00.000+05:30

A lot of new developments have been happening on the Global front.
The EU leaders have stuck a deal for lowering Greece's debt burden and trying to reduce tensions of an impending crisis. Also there is encouraging data from the US side of GDP rising and falling jobless claims hinting that the economy may not be slowing down.
Global stocks, Euro, Crude all rose on this news. The Dow rallied 2% to two month highs.
Back home, the corporate results are not much to cheer about barring a few good ones like ITC, Infosys, etc.
The RBI yet again gave what seems to be the last of rate hikes of 25bps much on the expected lines.
The impact of the deregulation of saving bank rates will surely impact the banking sector due to competition and rising cost of borrowing. Therefore, rate sensitives should be traded with caution.
Technically,The markets are set to rally.
There has been a crossover from the 17250 resistance which the Sensex was trying to breach over past few sessions. The positive momentum should continue for 3-4 sessions more with the first resistances coming at 17750 levels.

Among individual stocks,
Watch RIL which may face resistance at 890 levels as mentioned in an earlier post
Interestingly, there are good volumes building up on every rally in the stock which indicates buying strength.

Mahindra & Mahindra has given a clear breakout from the ascending triangle with good volumes
The next target for the stock is 910. Buy on every pullback to the levels of 810.

Bajaj Auto too made a clear breakout above all resistances this week.

Its advisable to wait for a price pullback for trading such stocks. The resistance will now become a support zone.

Similar is the case of ITC. After stellar performance from the results front, there has been a nice breakout on good volumes. Refer to the chart for price specifics

Stock specific: Coal India

2011-10-19T07:52:00.000+05:30

Daily charts of Coal India show a positive divergence with MACD Histogram.
The stocks seems to have traced a bottom at 320 levels.
The stock can be looked for a trade on a 2-3 days span.
Also, it bucked the Sensex yesterday rising 2.8% confirming the positive momentum.

After TCS and HCL declared results yesterday, the markets again seem to pullback in the channel formed before. So its a wait and watch time till the next breakout above 17250. This level is proving to be a solid resistance zone.
ING Vysya mentioned in earlier post has given a nice bounce. Consider moving the stoplosses further with every increase in price hence or partial booking of profits

Sensex nears resistance, time to watch out for a breakout

2011-10-16T00:34:00.000+05:30

The past week was a very eventful one.
After Infosys declaring better than expected results, the markets cheered the stock sending it northwards. The broader index was up 5.2 % (weekly change).
Also on the news side, inflation stubbornly refuses to recede. The RBI has indicated that there will be no rollback of rate hikes and more can be expected.
On the global front, encouraging data came from the US on retail sales front. The scene of Eurozone continues to be uncertain.
Major Sensex components like TCS are to declare results in the coming days.

Technically, on the daily charts, the Sensex is nearing its resistance levels of 17250 where it had gapped into the rectangular formation below (see chart).

After testing the level twice in 2 months and forming a solid base below at 15700, the sensex is yet again testing the 17250 levels. The pattern appears like a triple bottom inside the support resistance bars.
A breakout above this level is likely but the extent of the upmove will be limited. It is because the indicators will start showing overbought levels soon.

The first resistance will come at the 17750 levels. If the sensex returns back to the channel, a strong support lies at 15700 which is likely to be held.

On the sectoral front, the financials had been leading the rally on the back of positive divergences seen in many stocks.

TCS mentioned earlier made a clear breakout above 1070 levels. The rally might continue till the results declaration (The outlook for the whole IT has suddenly improved after Infy results)

Some new observations:

Bharti Airtel

The stock seems to have completed a pullback from the top.
Price was breaking out of the falling wedge formation with good volumes last week.
Also there is a positive divergence observed with RSI and the MACD Histogram.
Refer to the chart for target details.

Mahindra and Mahindra

Of the Auto pack, M&M looks poised for a breakout. A valid breakout should happen on back of good volumes. Its testing the top resistance levels. The pattern looks like an ascending triangle.

YES Bank

Yes bank had been consolidating in the downward sloping channel for quite sometime. The prices spurted out of the channel last week.
Traders should look for a chance of retest in this case rather than jumping upon the stock at current levels.

Reliance Inds
RIL too declared results on Saturday.

Technically RIL too will have strong resistance to cross at 890-895 levels. As support becomes resistance, the strong support at this level has become resistance which RIL failed to penetrate through twice (again an example of retest). The 200 EMA is also a potential resistance point there making it multiple resistance.
Also indicators will start showing overbought levels at that point.
On the other side a crossover of 900 will open up a huge channel for trading (and positive for the market as a whole considering RIL is a heavyweight)

Some interesting picks- TCS, ING Vysya Bank, L&T, Sintex Inds.

2011-09-29T01:01:00.000+05:30

Markets bounced back strongly from 4750 levels this week. The Sensex and the Nifty were up about 2.8% each. It remains to be seen how long will the relief rally last given the F&O expiry and the volatility.
On a broader level, the Nifty resistance is placed at around 5140-5150 levels

On the individual stocks, following look interesting set-ups on the daily charts:

TCS:

Ever since it broke the crucial support level of 1070, it has tried twice to break that level.
Support becomes resistance and vice versa. A breakout above this level can make a quick visit to 1120 levels.

Ing Vysya Bank

ING is another stock quite close to important support levels. Also there was some price-RSI divergence observed which is a positive for the stock. The stock can be added in small quantities with stoploss of 275.

Sintex Inds:

Sintex is another stock near crucial support levels (see chart). The indicators are also in the oversold levels.

On the other hand a breakdown from these level can take the stock down considerably. So a stoploss at 129-130 levels is a must.

L&T:

A breakdown in L&T has provided opportunity to many investors in this blue-chip stock to get in at cheaper levels. As we can see in the chart, even this stock is near important support levels of 1380-1400.

In the last post, had mentioned on Amtek India, the breakout has happened as expected. (10% up today) Profits should be booked at the mentioned levels of 138-140.

Outlook Nifty: 4700 an important support level.

2011-09-24T18:30:00.000+05:30

Indian markets continued to show weakness last week following global cues. The falling rupee and the Fed's cautionary stance on the US economy continued to have a toll on the global markets. The Nifty shed about 5% over the week (4% on thursday itself)

Technically, the outlook of the markets would be determined upon the testing of the crucial resistance of 4700 levels on the Nifty. The upside would be capped to 5030 levels.

As we can see in the above daily chart of Nifty, the markets sharply dropped out of the symmetrical triangular formation last week. It is likely that the 4700 levels should be tested in the coming week.

On the individual stock front, Amtek India Ltd and Maruti Suzuki show interesting formations.

Amtek India is showing a breakout of the Ascending triangular pattern formed over the past two months.
It may head to 138-140 very quickly. Stoploss should be placed at 114.

Maruti Suzuki is forming a rectangle pattern between 1050 - 1140 levels.

The sell off last week again brings it closer to the support of 1050.
Sustaining these levels could open up an interesting oppurtunity as the channel itself is 90-100 points. A breakout above the channel can take the target to 1225-1230 levels very fast.

On a broad basis, the recent fall in the Indian equity markets have brought many stocks especially mid-caps to attractive valuations. Banks, Realty, IT, Infrastructure (as usual) are clobbered a lot in the past month. But since the overall sentiment exists, bottom fishing appears risky. Will update on some more stocks in further posts.

The Falling Wedge: BSE- Flavour of Month : Scams & Debt Crisis

2011-07-31T14:13:00.000+05:30

The Falling Wedge: BSE- Flavour of Month : Scams & Debt Crisis: "Following up with our last post , the Markets did seem to retest the 2008 levels, but as they have been always, just surprised everyone wi..."

BSE- Flavour of Month : Scams & Debt Crisis

2011-07-31T14:10:00.000+05:30

Following up with our last post, the Markets did seem to retest the 2008 levels, but as they have been always, just surprised everyone with a huge recovery!! An jaw dropping 1500 pts. recovery in a matter of a week`s time would have disappointed many sitting ducks! And there are still who feel , cash still remains the best position.

Justifiably becoz the markets have been trading in a tight range, showing no clear direction, or at least considering the recent Glocal factors, has not shown a southward trend, as expected.
Thus, we checked the bellwether`s chart, with a ray of hope for some significant pattern. But we could not find a convincing pattern, apart from a few trend lines here and there. So, for the time being, all that we could demystify from the charts is that whether the Markets have any significant direction. We do so with the ‘Average Directional Index’, which identifies how strong the market direction is.

The ADX is between 0 and 25 (highlighted in the Chart) which shows that the markets are in a trading range. It is likely just chopping around sideways.

We may broadly define this range as 17700 to 19200 or so. Looking at the current Market Scenario, we can hope that downward trend to retire at somewhere around 17800 and then expect some respite thereon.

These are just some of the factors the Markets may react to, in the coming week(s), these are,US Debt Ceiling Issue ,Greece(further) Downgrade, A new flurry of Scams with latest entrant being the Mining Scam & as well as new developments in the LIC Housing Scam , and also Q1`12 Results of few heavyweights!!!

However, as the Great Warren Buffet said , Even average returns can become very attractive in the longer term due to the power of compounding! And for those whom the Power of Compounding has disappeared, is because its working overtime somewhere. Where? Look at the table below….

Chronology of scams in India	*Size (Rs m)**
Bofors scam, 1989	400
Harshad M scam, 1992	6,000
Telgi scam, 1995	20,000
Hawala scandal, 1997	1,000
Ketan P scam, 2001	50,000
Satyam scam, 2008	90,000
CWG scam, 2010	80,000
2G spectrum scam, 2010	1,760,000
Overall corruption	15,550,000
Money laundering	18,860,000

Data source: Wikipedia, Equitymaster

The Falling Wedge: What course would the Markets take – A Path of Def...

2011-06-25T00:04:00.000+05:30

The Falling Wedge: What course would the Markets take – A Path of Def...: "The market is brimming with different views about the movement of the bellwether Sensex. However, there are a lot of developments happening ..."

What course would the Markets take – A Path of Defeatism or Resilience?

2011-06-24T16:33:00.037+05:30

The market is brimming with different views about the movement of the bellwether Sensex. However, there are a lot of developments happening alongside, which as decide course of the Markets.Lets have a sneak peek of the various Global and Domestic happenings.

The US Fed, with its muted set of numbers, has made it clear that there would be no stimulus i.e. `No QE3’. So, we may see the asset markets drifting lower at least for the coming period. Traditionally, June and then from June on, US markets have some seasonal strength developing until the end of July, early August and then we have weak September-October months. So, we may see a stimulus only at the end of August, if the US Markets don`t indicate much strength.

On the other side of the Atlantic, we have, Europe’s Lehman (read as Greece) has finally won the confidence vote, however, its strategy of reducing the debt burden through reduction of the Government spending may boomerang. This is because normally austerity leads to a dampened growth, which would further lead to a downward spiral (a similar situation has been experienced in Greece, in the past year). So a bail out coupled with some structured developmental spending seems the best possible way out .But, as it stands, most economists and the markets believe Greece will default - the only question is when?

We now review the Crude prices and the impact of these two events on the Globe. The phenomenal correction in the Crude prices of 6% was due to IEA announcement to inject 60 million barrels of government-held stocks in the global market. The impact of this was that the world supply immediately increased by around 2.5% for the next month.

However, this move can cool the oil prices only for a period of a month or two. But what beyond that? This can`t be used to expect the cooling of the commodity prices or taming down the stubborn inflation.

On the Domestic front, the political reforms seems to be the last thing on the Government`s agenda, as it tries to clear itself out of the various scams which have surfaced up since January. RBI`s umpteenth rate hike, does not seem to be sufficient enough to help tame inflation. But however, the effect of this hike seems to be unfolding. The D-street Oracles predict a further 50 bps rate hike in this fiscal. The Inflation number is mainly accentuated by the fuel prices which still have a considerable gap in comparison to the global crude price.

Based on this news, we look through the charts for the course taken by the Sensex, which is headed towards the second yearly decline in a decade.

Bearish Head & Shoulders Formation

The current pattern witnessed on the Sensex charts is a Complex Head & Shoulder Top. This is a bearish reversal pattern which has multiple shoulder pairs and thus, necklines. In the figure below, we can see that there have been two target possibilities; where in the Target 1 is seen at 16790 and Target 2 is seen at 16200 levels.

The markets may see a few pullback rallies, which would again make it an interesting trade; however, the pattern failure would only be confirmed with a closing above the 18500 levels.

Any fall below the levels of 17800 (Neckline 1) and 17500 (Neckline2) would have this impending danger of pattern realization!

However, as long as the trend is your friend, you can always enter into profitable trades, provided, the Trend is your friend till the END!

The Falling Wedge: Market Outlook Positive: A Recovery on the cards?

2011-06-07T22:38:00.000+05:30

The Falling Wedge: Market Outlook Positive: A Recovery on the cards?: "The broader markets have snapped the two-day losing streak on Monday and have sort-of reversed directions. The NIFTY (Have switched analysi..."

Market Outlook Positive: A Recovery on the cards?

2011-06-07T20:14:00.000+05:30

The broader markets have snapped the two-day losing streak on Monday and have sort-of reversed directions.

The NIFTY (Have switched analysing NIFTY from SENSEX now - neways they move in tandem J)

Its forming an Inverted Head & Shoulder formation. The breakout though is yet to happen - its around 5600 levels. A sustained breakout should make the NIFTY head to the resistance of 5697 and clearing which, to 5738 levels. The Technical indicators also are positive.

The big question is- Are we beginning to see a recovery in the markets now?

The crude prices were seen dropping since few days

We are seeing a marginal drop in the headline inflation which is further expected to reduce due to base effect in the coming months (and hopefully a good monsoon too)

The earnings growth of the companies have slowed a bit due to margin pressured but not drastically.

Interest rates are mostly at the peak - could be up 50 bps (which is very much on the cards and expected by the street).

Seems to be the perfect time to jump into the market. The inverted H&S pattern is a reversal pattern and can be just the cherry on the cake.

The negatives are from a troubled eurozone which may pose macro risks.

A quick look on some interesting charts we observed:

RIL: Finally breaks out of the range on the upside leaving a pattern.

A quick bounce should be expected as the indicators are positively placed. The Heavy-weight should be a major decider for the NIFTY too.

Punjab National Bank: PNB is one stock better placed technically among the banking-pack.

A crucial resistance needs to be crossed for the upmove.

Sun Pharma: This is one stock that has been a technical favourite. It had broken out of a double bottom and made a quick trade last time. The stock now seems to be clearing the channel resistance line too.

Since the markets are in an oversold zone too, the stoploss must be a tight and a trailing one.

Patel Engineering: It cannot be but co-incidence that another inverted H&S is identified. J

Patel Engg. was also in a huge downtrend since the half of 2010.

The pattern could be a trend reversal for this stock. Refer to the chart for price specifics.

Now a look on some weekly charts

Caution is to be taken here as the period of holding may be of a medium term

Usha Martin : Its showing price divergence where we can see that the price has made an identical bottom but the RSI has made a higher one. A quick jump may be expected for the stock.

A similar situation is in VOLTAS Ltd. Refer to the charts for price specifics.