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Dear Investors
Last week market closed below important support levels on Nifty at 5400
and Sensex at 18000.Even though Sensex after going below 18000 closed
at 18008, Nifty could not regain the levels of 5400 to close at 5395.Now it remains to
be seen ,if Nifty survives the 5300 or not
Last week was disastrous for traders and investors. Even ‘Bears ‘were not
sure of the next day’s situation leading to a very high ‘Intra day’ Volatility
There was flooding of the negative news flow like……
Australian ‘Storm and Floods’
Improving US
Raja’s arrest
2G/3G Scam news flow
Earning season, below expectations
FII selling
PM’s Remark on Inflation and Growth
And
Technically weak charts
Hammered ‘Nail in the Coffin of Bulls’
What Next?
PART ONE
Next Week
Before taking calls for next week one has to understand the
‘Fundamental’ (Given Above) and ‘Technical’ situation
Nifty/ Sensex moves
The ‘up trend’ and gains of 2010 were washed out in first few weeks of 2011
.Last few week’s movements of the Nifty were ‘Violent’ with heavy ‘Volumes’.
Nifty broke below significant levels of 5600, 5515/18800, 5480/18300
and 5400/18000 in rapid succession. In doing so Nifty created a
‘Lower Top and Lower Bottom’ pattern on technical charts, suggesting a
‘Short term Bear Trend’ (Down Trend)
VXI (Volatility index)
During last few weeks there was increase in daily ‘Volatility’ which
Ultimately crossed the important resistance of 24. VXI (Volatility index)
Traveled to the top with formation of
‘Higher Top and Higher Bottom’ indicative of uncertainties in the
minds of both ‘Bulls and Bears’
DMAs( Day moving averages)
5DMA@5456
20DMA@5650
50DMA@5841 -- (SENSEX: 19478)
20DMA@5650
50DMA@5841 -- (SENSEX: 19478)
200DMA@5626-- (SENSEX 17820)
Nifty is sailing far below 200DMA, as well as all the other moving averages
for last few trading sessions.
Indicative of inability of the ‘Bulls’ to push markets beyond immediate
resistance levels. This shows that Every ‘Bounce’ is used to,
either book profits (If any) or create ‘short’ positions
Putting all these things together
The possibilities for next week are…………………………………..
A) Bear (Negative) Scenario
, Nifty, after breaking important level of 5515/5449, Market has gone in to
a ‘Structural’ change. Bulls are unable to keep their head above water level and trying to hold 5330 as a support for survival. If 5330 is broken
then there will be SOS (Save Our Supports) cry. Which will set a panic situation?
B) Bull (Positive) Survival Scenario
Nifty should not break below 5330, on closing basis. Budgetary expectations
and wish full thinking of traders should take Nifty to the levels of
5515/ 5580/5600 with good volumes. This will keep ‘Bulls’ alive, though
in ICU (Intensive care unit)
C) Once Nifty stops falling below 5380/5330 levels, for next few trading
Sessions, it should move in a ‘Range’ 5449- 5580/5600 and consolidate
(With life support), to Move in next higher range.
Possible out come of A, B and C depends on,
1) Global situation(Egypt/US/Australia and others)
2) FII flows , flowing in or out
3) Political stability of Government
4) Desire to implement important policy decisions
5) Budgetary allocations
And
6) Any new ‘Scam’
So pray ‘Heavenly Powers’ to rescue ‘The Bulls’ and ‘Control the Bears’
COMMENTS (For the week)
Coming week is most crucial for markets as GDP data will be released
on Monday, Earning season will come to an end (no more shocks from earning)
still it is a period of crisis, because no body knows when next scam will come
to the surface or who will get arrested, so also which country will get hit by
storms or floods. Even though there are Number of uncertainties my suggestion is
“Dear investors these are the times to create ‘Wealth’ by entering in to best stocks,
With medium to long term view in mind, you may get 100/150 points fall(up to 5200) in next few
days but as it is always said ‘You can rarely find exact bottom’ or
‘You can not time the markets’ one has to make a small beginning in panic
situations.likely to arise in next few days.If so i think...
‘Your Time Starts Now’,
take a deep breath and start ……Do not keep
small companies as targets, catch ‘Large and Mid caps’(which have lost 35to40%
PART TWO
Market on Monday
Friday was a disastrous day with panic selling; there might be a ‘Technical Bounce’
This can be utilized to book profits for Friday’s long positions or Getting in to Long
Day trade with stop loss at 5330. Nifty may bounce back to the levels of 5440/5515.
In case of a close above 5500 one should carry long trades for next day, with a
trailing stop at 5400. and targets of 5580/5620
Bears can utilize ‘Bounce’ to create fresh shorts till Nifty is below 5515, and
carry short trades to the levels of 5330/5280.
Technical View
PIVOT FOR NIFTY: 5440 SENSEX : 18158
R1 (First Resistance) is @ 5511 R1@ 18391
R2 (Second Resistance) is @ 5627 R2 @ 18777
R3 (Third Resistance)is @ 5698 R3 @ 19007
Significance
If Nifty sustains above 5515 (R1)(18400) then one can carry long positions
till 5627(R2) (18777)This is also a 200DMA for Nifty
Any close below R1 (5511)(18100/17900) should be taken as bear continuation
and shorts can be added
Close above 5627(R3)(18580) will indicate a significant change in the ‘Sentiment’
and Bulls can think of adding long positions
Bears should close all the positions at and around 5630
S1 (First support) is @ 5324 S1@ 17775
S2 (Second support) is @ 5253 S2 @17542
S3 (Third support) is @ 5137 S3 @ 17159
Significance
The gap between R1/S1 (5511/5324), R2/S2(5627/5253)R3/S3(5627/5137) is
getting wide indicating amount of work ‘Bull’ has to do, to get out of the ‘Bear Strengths’
All the supports are below the crucial level of 5330, from where this ‘up move’
Had started, so once this level is broken S1/S2 and S3 will be TAKEN OFF in panic
Move. So support at S1 is most significant to keep ‘Bulls’ in the race.
VXI (Volatility Index)
PIVOT IS AT: 23.71
Significance
It is nearing the important resistance level of 24
R1/25.46, R2/26.52,R3/28.27
Indicate the probability of rising Volatility leading to ‘Panic Situation’
DMAs
5DMA 5456 * 20DMA 5650 *50 DMA 5841 *200DMA 5626
Significance
Nifty is trading below all the moving averages indicative ‘Bear Strength’
The first sign of change over of the ‘Baton’ will be at 200DMA
This again is a ‘Herculean’ task for ‘Bulls’
IMPRESSIONS
There is some light at the end of the tunnel. If Nifty sustains 5330 /5380 levels
During next one or two trading sessions then it may try to reach significant
levels. As there are no more negative events in site, Bulls may push the markets
to higher level It is expected that Monday will give good bounce.
Stock Specific:
Play for bounce in………
ICICI Bank
SBI
RIL
ITC
Indusind Bank
Infosys
Polaris
Sterlite
Hindalco
KEC International
Blue star
Arvind
Alok
Suryalat spinning
Nelcast
Graphite
EMCO
Ador fontech
Tecnocraft
All the longs should be supported at reasonable stop loss (5 to7%)
at stock specific and Nifty level
BUY GOOD COMPANIES IN THEIR BAD DAYS
Thanks
Dr. Vasant Bele
All the views are personal, investments to be done after consulting your experts
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