BURNING UNDER THE ASHES

Dear Investors

 Markets opened flat, weak attempts were maid by the Crippling Bulls to raise the

 Nifty to 5272 levels but yesterdays fire was still ‘Burning Under the ashes’

 Nifty could not sustain even a small gain and was hammered just short of

 important support level, 5180(5196 was the low), The momentum was so fast

 and unpredictable that during last hour Volatility had reached to its peak,

 Traders were booking smallest profits while ‘Bears’ were enjoying the ‘Panic’.

 Nifty closed with some loss at 5225, maintaining the support of 5200

 (a psychological relief to bulls)

What Next

 It has become most difficult to predict market movements, you can not forcast

anything In situations like this where there is ‘Fear and Panic’only.This can

 take markets to any levels without any ‘Technical’ or Fundamental’ basis.

 Market has taken support at 5200, if this does not sustain, then the only

 Significant support is at 5060

 Day Traders Be Cautious

Though there are chances of making money in this type of market, the margin of

safety Is very low, it will require great vigilance to ‘Time the Trades’, for long term

 investors also bargain hunting has become difficult because prices are

falling below the fundamentals and technicals  of the stocks , leading to daily

 losses, “this is not right environment for traders”, because if you buy from a trading

 point of view, you could possibly see the markets at 5,000-5,100 levels and

 you would lose out. This is creating fear in the minds of ‘Day Traders’ too

Medium term ‘Positional’ Traders (15 days)

‘Positional traders can buy in most of the sectors except ‘Reality’ for a

 ‘Pull back’ in next few sessions. Market is in extreme oversold position

and ‘Sellers’ too are not willing to go short at these levels. One can

 expect a sharp ‘bounce back’ to be used to book profits in long positions,

 only warning is .’Greed’ should be avoided as the bounce may be

used by ‘Bears’ to create fresh short positions

This is not a Trader’s, either ‘Short or Long’, market

Long Term Investors (12 to 18 months)

There are number of stocks, with good fundamentals, priced below the book

 value and / or very low PEs(PRICE TO EARNING RATIO). One can take

 positions as ‘Investors’ and go on doing bargain hunting, but you need

 to have lot of patience and be prepared for short term jolts. All this depends

 on Inflation, Interest rates, Liquidity and Budget

Advice is………..

At this level traders are advised ‘Not to Go Short’ or do ‘delivery’ base selling

in market, as there may be a ‘Bounce’ to the levels of 5380/5400

Watch the levels 5180/5150 as short term bottom leading to a Pullback to the levels of

5330/5400. Traders can use this range to create profits , Buying can be done at 5150

to Book out at 5400, while Bears can create fresh shorts at 5380/5400

Technical View

PIVOT FOR NIFTY; 5231

R1 (First resistance) is @ 5266

R2 (Second Resistance) is @ 5307

R3 (Third resistance0 is @ 5342

Significance

Today market tested the R1 Intra day, but could not sustain. Crucial resistance is

 @ R2 (5306), if this is taken out then R3 (5342) can easily be achieved.

Short term long positions can be taken above R1(5266) and continued up to R3(5342)

As the markets are in a oversold position , there is every chance that a bounce

 to the levels of R3(5342) is possible within next few trading sessions

S1 (First support) is @ 5190

S2 (Second support) is @ 5155

S3 (Third support) is @ 5114

Significance

S1 (5190) is the most crucial support level, if maintained on closing basis on Friday,

’ Traders can take long positions for a bounce up to 5330/5380

Break below S2 (5155) will be the first indication of one more ‘Sharp down Trend’

which may take Nifty beyond S3 (5114) to the next vital support at 5060

VXI (Volatility Index)

PIVOT IS AT: 24.92

Significance

 VXI closing above 24(close was at 24.82) indicates very high volatility leading to

 bouts of  panic selling. If markets are to consolidate then volatility should drop down

 below 24

DMAs(Day Moving Averages)

5DMA @ 5317

20DMA@ 5545

50DMA@ 5800

200DMA@ 5627

Any pullback, if at all has to occur, should cross the 5DMA(5317). Nifty is consistently

Closing below all the moving averages indicative of medium term ‘Down Trend

’Even though pullback takes market to the levels of 5317/5330/5380 or 5449,

all this will be used by Bears to go short, because ‘Main Trend’is DOWN .

Change in trend will be only above 200DMA (5627), which looks difficult in this

 ‘Nervous’ market conditions

COMMENTS

This is not the time to buy for short term pullback , use the bounce to exit positions

This is a time to buy for longer term period as the India story is still very much intact.

One has to do creeping buys in Banks, Cap Good, IT and Pharma. However, because

of technical reasons and nervous traders, panic may set in and take markets to

lower levels. People should utilize that for investment buy, because if you are talking

of say a long bull market, these three-four months of panic and falls should be used

 to create a long term portfolio

,one should not miss the opportunity, only advise is, buy in small lots , do not

 wait for exact bottom, because you can not time the market

IMPRESSIONS

‘PULL BACK’ (BOUNCE) IS ROUND THE CORNER

Stock Specific

ICICI BANK

AXIS BANK

INDUSIND BANK

CENTRAL BANK OF INDIA

RIL

HUL

Mphasis

Hexaware

HCL Tech

Polaris

Jyoti Structure

EMCO

Elecon Eng.

Artson Eng.

Graphite India

Greavs Cotton

Celestial Lab

V Guard

GMDC

Petronet LNG

IPCA lab

Biocoan

LUPIN

Sumeet Ind

Arvind

Positions can be taken in all these stock for expected ‘Pull Back’ with a

stop loss at 5160 and Profit booking around 5380. Some of the Mid and

Small cap cos. can be hold from investment angle for longer period

Thanks

Dr. Vasant Bele

All the views are personal, please consult experts before investing