Next week (July, 11 to 16, 2011)
Dear Investors.
The ‘Dream Run’ started in last week could not go through the end of the week
as, on the last day of the week, markets collapsed from one psychologically
Important level to another vital support level, keeping investors and traders
guessing during the week-end about the next course of trade.
After seeing a breath taking rally from 5200 to 5700 and good amount of
Consolidation for first few trading sessions in a 5630/5690 range, Nifty broke
away the range with good volume and spread across the sectors to test
levels above 5700 , Friday was the day of ‘Magical Mania’, when Nifty had
a last lap towards 5743 , 200 DMA , which failed by few points!!! , the
pain of failing was such that, within last few minutes market saw ferocious
profit booking, taking markets below 5700 and then way below 5700
to the level of 5660, from where the ‘Ride’ had started.
What Next:
Nifty closed at 5660 with a weekly gain of 0.60% and Sensex gaining
Around 0.55% closed at 18858, both ending the week way below
Psychologically important level of 5700 and 19000 respectively.
The rise and fall of market on Friday was so dramatic and unexpected
That traders and analysts have started doubting that, whether the
‘Dream Run’ from 5600 to 5740 was an Aberration and the Friday’s fall is
an Abortion of the up move, seen during last few trading sessions.
We will have to wait till next week to get answer to this question
The week gone by was marked by number of events ‘Globally as well as locally’
The likes of …..
-Fall in crude prices and Government - Greece accepting the Austerity package
-Changing duty structure in oil and gas -China increasing the rates
-FM speaking of 8.5% growth - ECB (European central bank) rate hike
-Fall in food inflation -Better manufacturing numbers in US
-High export growth -Greece getting fires tranch of package
-FII putting fresh money in market - Portugal’s downgrading by rating agency
-Cairn Vedanta deal going through
-Positive noises for FDI in retail
-FDI Increase in Media sector
-Murli Deora resignation on CAG report
- DGH remarks on RIL
-New mining policy
Markets scaled higher on the back of all these divergent news flow on
a strong support of FII. Now it will be a the testing week for markets to face
some of the events and news flow across the globe in
Coming weeks also
The lingering effects of last weeks news and events will be added by the
News and events during coming week like…….
-Result season starting on Tuesday
-IIP Number
-Progress of monsoon across the country
-The news of China inflation at highest level in last three years
-Gaddfi threatening to attack Europe
-Portugal’s downgrading and rise in rates in Spain and France
-Discouraging jobless claim data
-Forth coming FOMC meeting
-US CPI number/ Retail sell data
-Debt discussion in US
All in all next week will be the test of Indian markets, all depends
on how we sustain the pressure of events and news flow across the
world? It will decide, whether the ‘Dream run’ of last few days was
a true reversal of the trend or was an ‘Aberration’ in the down trend.
Technical aspect:
-Nifty is going through the retracement of, high of 5944 on April 6th and the
Low of 5177 on Feb.11 2011.
-Nifty had a good amount of consolidation in a range of 5560 -5660
( which marks the 50% and 61.8% retracement levels respectively).
After crossing 5700 in last week Nifty tried to take out 200 DMA at
5743, which failed by few points. Though the move was significant
and important technically, the fall back to, 61.8% retracement on the
same day is equally important, indicating that markets are not ripe
enough to take away the 200 DMA and needs some consolidation in
Higher range of 5660-5720.
-Sustaining above 5660/5700, for some more time will give strength to
move towards 5850 (78% retracement) and 5900.
-If Nifty breaks below 5660, which is 61.8% retracement level, it will
have strong support at 5600 and then 5569 which is 200 Day EMA
as well as 50% retracement level.
-As long as Nifty trades above 5569(200 day exponential average)
It will remain in an up trend.
-If Nifty breaks below 5600 with volume on closing basis any time
during next few days, it will have a strike at 5560 and 5515 levels
-To remain in a long term up trend 5480 will be the last Bastian which
should not fall .
Watch some levels:
200 DMA @ 5743
200 Day Exponential average @5569
Immediate resistance @5683
Next level on upside will be @ 5710 and 5740
Close above 200 DMA (5743) will open the doors for 5820/5850
Range
On correcting from currant level Nifty will have
Support @ 5630(10 DMA) and then @ 5594.
-As long as 5569 support is maintained Nifty has all the chances
To move towards 5700 and above
To me:
On one side I feel: last few days FII numbers, Volume and across the
sector buying is an indication of a strong market sentiment and there is
every possibility of Nifty revisiting the 200 DMA@5743
On the other hand; This looks like to be a ‘Technical rally’ based on the
Extreme oversold conditions and attractive valuations across the sectors.
As
This rally is on the back drop of threatening Inflation, higher interest rates,
Possibility of earning down grade and Government apathy. The only factor
propelling the market was strong FII inflows, the ‘Hot money’.
One has to keep in mind that ‘Hot money does not remain for long
period’ it always flirts where the opportunity is. Let us hope we are
not in the hands of ‘Flirters’
Technical rallies do not bother about fundamentals, they go by
Resistances and Supports and technical data of the past moves.
So traders should go by the technical levels as long as Fundamentals
are hazy and doubtful.
Coming earning season and monsoon news will decide where
we are placed and where we go from here on wards, till that time
Ride the Trend with caution and care.
Market strategy:
Avoid creating shorts as long as there are no signals of break down.
Long positions are advised in
FMCG(ITC,HUL,Castrol, Colgate)
Banking(Axis, BOB,Federal, Indusind and Yes)
Auto( Tata motors and M& M)
IT(TCS, HCL Tech, Polaris, Hexawareand Mphasis)
Cap Goods/Infra;( Punj LLoyed, Suzlon, Techpro systems,Ramkey,
GMR and Rel Infra)
Telecom: (Idea, Bharti)
Pharma(Ranbaxy, Sunpharma recent, Ind swift lab)
Dish tv Ador fontech
Tilaknagr Ind Mahindra forge
GMDC V-Guard
Hercules Hoist Voltas
United Phos Tata Chemical
Elgi equipment EMCO
BOSCH Arvind
Keep proper stop loss and book profits at regular
intervals
Read market on Monday as a separate blog
Thanks
Dr. Vasant Bele
All the views are personal, invest with caution and after
Consulting experts
