WHEN IT FALLS, IT HURTS !!!!!!!!

Dear Investors (Bruised and Deserted)

‘Massacre’ occurred on Indian bourses on last day of the week amidst the ‘Volatility’ leading to a feeling of ‘Lost in the Desert’ in the minds of investors. Nifty open was on a flat note but as the trading advanced it went on breaking supports after supports to close at 5639 which is just below 5650 and far below 5690, which have been acting as strong supports. This is definitely a ‘Warring sign’ for ‘Bulls’

There was ferocious selling across the sectors but mainly, Autos, Real Estate, Banking, FMCG, out of fear of rate hike by RBI. Volumes were astronomical in cash and F&O.

All these uncertainties are causing huge ‘Volatility’. The VXI (Volatility Index) is rising to top levels. Causing ‘fear factor’ to move to upper trend line. VXI has a strong resistance at 24, if not crossed; markets will revert back to upper levels. (.Stock Market and VIX have inverse relationship, means when VIX goes up market will go down)

As all this was not enough, On Saturday night, ‘tired and bruised’ ‘Bulls’ were attacked by ‘Petro Bomb’ by Government of India, which will put ‘Dalal Street’ on ‘Fire’

WHAT NEXT?

Is the main question, after going through the data, it suggests that the markets are in an ‘Over sold’ position. There are few leveraged positions and ‘shorts’ are pilling in cash and F&O.

a) Investors and Traders are not advised to create ‘fresh shorts’ till 5603 is broken on closing basis. Close below 5578 should be used to ‘Go short’

b) Investors and traders are advised to use ‘Bounces’ to book profit and reduce losses in long positions, immediate level to watch for Nifty is 5778.

c) Long term investors are advised not to do ‘Bottom Fishing’ till 5515, which acts as a support before a ‘fresh slide’.

TECHNICAL VIEW

PIVOT FOR NIFTY: 5708

Significance

Pivot points can be used in two ways. The first way is for determining overall market trend: if the pivot point price is broken in an upward movement, then the market is bullish, and vice versa. Keep in mind, however, that pivot points are short-term trend indicators, useful for only one day until they need to be recalculated. The second method is to use pivot point price levels to enter and exit the markets. For example, a trader might put in a limit order to buy 100 shares if the price breaks a resistance level. Alternatively, a trader might set a stop-loss for his active trade if a support level is broken.

Pivotal value should be used as guideline to create long or short positions and Stop loss.

Any wide fluctuation from pivotal levels should be taken as ‘Temporary’ directional’ move because ‘Pivotal Value’ is a fair value for the market the day.

R1 (First resistance) is @ 5778

R2 (Second resistance) is @ 5902

R3 (Third resistance) is @ 5972

Significance

A) Short term traders having ‘long Positions’ should book partial profit at R1 (5778)

And wait on side line for further moves of Nifty.

B) Short term traders on ‘short side’ should watch R1 (5778) as a ‘stop loss’ level to book partial profits and should not create fresh shorts

C) Long term investors and positional traders should start buying only after Nifty closes above    5902

D) 5778-5902 MAY ACT AS ‘No man’s Land’

S1 (First support) is @ 5584

S2 (Second support) is @ 5514

S3 (Third support) is @ 5390

Significance

A)      Close below S1(5584) SHOULD BE USED TO BOOK FULL PROFITS and create shorts

B)      S2 (5514) should be taken as beginning of Bear Market and should be used to surrender all longs and create shorts

C)      S3 (5390) will be a stop loss for BEAR’S to cover their positions. Investors should start buying aggressively around 5330/5390/5415 levels

All these levels correspond with the retracement levels of a rise of Nifty in 52 weeks, Jan 2010 t0 Jan. 2011(High was 6312, Nov.1, 2010 / Low was 4718, Feb 1, 2010)

 Nifty Retracement levels

68.8% Retracement is @ 5703

50% Retracement is @ 5515

38.2% Retracement is @ 5326

(What is Retracemen, and how to calculate it, will be given in separate post)

5330/5344/5380, Levels correspond with the beginning of the on going ‘Bull Phase’

It should act as a strong support for ‘Continuation’ of the same.

Pivot Retracement levels

Pivotal High was at 6317 on Nov. 5, 2010

Pivotal Low   was at 4743 on Feb 5, 2010

Retracement levels for Pivot are

68.8% Retracement is @ 5715

50% Retracement is @ 5530

38.2%Retracement is @ 5344

Also note the moving averages

20DMA@5967

50DMA@5985

200DMA@5606

Significance

Note that market is trading very close to 200DMA @ 5606(Friday’s close was 5654)

Closing below 200 DMA is a Bearish signal

CONCLUSION

Watch Nifty movements carefully, it is expected to have ‘High Volatility’ at and around 200DMA (5603).All positions should be with strict stop loss. Close below 5603 should be looked up on as ‘Short term Bear Trend’ No investment buying till 5530 or 5690.

IMPRESSIONS

 Market realities are ripe for one more ‘consolidation’ phase at a lower range of Nifty

 5584(R1) – 5778(S1)

STOCK SPECIFIC

All suggested stocks should be bought for long term investment purposes

Preferably, in small quantity, during corrections

Traders should keep strict stop loss at 5 to 7% below purchase value

RIL

ASHOK LEYLAND

BHARTI

M&M

HINDUSTAN ZINC

HINDALCO

Polaris

Techpro systems

Sintex Ind.

United Phos

TTK Prestige

SyndicateBank

Ramkey Infra

Jyothi Lab

United Bank of India

ARVIND

Ador Fontech

Hercules Hoist

Camphor and Allied

Khaitan Chemicals

Blue Star

At Friday’s closing values

TO HAVE A SOFT LANDING USE STOP LOSS

Thanks

Dr. Vasant Bele

All the views are personal, take experts opinion before investing,