IS IT BOTTOMING OUT ?

Dear Investors

Markets started on a flat note, without any signals of the in coming ‘storm’. It was again fear of RBI raising rates substantially, fear of lower IIP number (Indian Industrial Production Numbers), Apathy of Indian Government towards Inflation, all this created tremors in the minds of investors leading to massive selling by FIIs, DIIs and retail investors in F&O and cash market leading to massive fall in Nifty and Sensex. Fresh shorts were created across the sectors leading to very high volume day. Nifty tested the most important support of 5750, reached low level of 5740 to close at 5762. Nifty has broken important support at 5778 and has closed below it. The next vital support is at 5690 from where this rally has started.

WHAT NEXT

a) For market to CONTINUE THE ON GOING ‘UP TREND’, Nifty must remain above 5690/5640 levels, otherwise there is every chance that the trend may change in downward direction. The last hope for the bulls is 5597 level (200 Day moving average)

b) In case Nifty holds the 5690/5640/5597 levels and bounce back to 5880, 5960/6003

Levels, one can use this for lightning long positions to get cash reach, because it may be a ‘Dead Cat Bounce’(Not a true bounce , a short covering rally)

c) For markets to get into ‘Bullish Rhythm’ again, Nifty has to close above 6615 with   high volume

d) Violation of 5690 levels will encourage ‘Bears’ to create ‘Short’ positions to be continued up to 5597 and down. Bears should cover 'shorts' if Nifty manages to scale up to

5960/6003

e) 5690 – 5750 SHOULD BE TREATED AS ‘NO MAN’S LAND’

f) Genuine long term investors should start buying in small installments now, and up to 5597, or sit on sidelines with cash at hand.

Traders should not do any adventures in ‘no man’s land’ zone

TECHNICALS

NIFTY PIVOT IS AT: 5803

R1 (First resistance) is @ 5866

R2 (Second resistance) is @ 5970

R3 (Third resistance) is @ 6033

SIGNIFICANCE

R1 may be treated as a ‘Dead cat bounce’ and no positions should be created

R2 may be treated to book profits and create ‘CASH’

R3 may be used to create long term investment buying

S1 (First support) is @ 5699

S2 (Second support) is @ 5636

S3 (Third support) is @ 5532

SIGNIFICANCE

Breaking of S1 indicates that the continuation of down ward correction is on

And no trading and( investment) longs should be created.

Breaking of S2 may be used to create shorts or should be a long trader's  ‘stop losses’

Closing near S3 should be taken as ‘Trend Reversal’ and ‘Bears’ can create shorts.

20DMA (Day moving average) @ 6000
50DMA (Day moving average) @ 6013
200DMA (Day moving average) @ 5597

SIGNIFICANCE

Any close below 5597 will be taken as Negative close for bulls

STOCK SPECIFIC

Keep an Eye On following stocks

ICICI BANK

IDFC

RIL

SBI

STERLITE

And

BHARTI

BOTTOM FISHING

Federal Bank

Renuka Sugar

GMR Infra

Tecpro systems

Jindal Poly films

VVmade lab

Jyothi Lab

RCF

SKF India

Hercules Hoists

EMCO

Alembic

Sahyadri Ind.

Ind bank housing

BILT ( Ballarpur Ind.)

Indsil Hydro

All these should be considered as long term fundamental investment buys at every fall and should be hold at least for 12 months

WAIT AND WATCH FOR BOTTOM, TILL THEN ‘CASH IS KING’

Thanks

Dr. Vasant Bele

 These are individual views . Investors should take their own decisions, writer will not be responsible for losses

 Written and posted on 10th Jan. 2011