Friday, March 4, 2011

Technical outlook: Global repercussions turns on the heat...

Market Outlook: Indian markets expected to open up in green on the back of constructive global support and easing domestic economic stability as inflation stands lower after long time. Domestically higher crude prices and high inflations are still a concerns for economic growth. Global markets are supportive as US mkts witness biggest gains since Feb 18; Nasdaq up 2% and Asian markets trading higher; Hang Seng, Nikkei gain. Overall outlook for the markets today is that of cautious optimism as the bulls must hold the Nifty above the 5480 levels sustain ably to manage an upmove in the coming session wherein market has a strong resistance at 5600.

Crude Update: Crude prices retraced from early lows but were below the 29-month highs reports that Libyan leader Gaddafi has agreed to Venezuelan President, Hugo Chavez's peace deal helped cool down prices. The Arab league has said that Chavez's peace plan is under consideration. It is trading at USD 101.92 per barrel.

Global events to watch

Þ Employment Situation

Þ Factory Orders

Global indices Update @ 8:

Dow Jones : 12258 (+191.4)

NASDAQ : 2798 (+50.67)

Nikkei 225 : 10751 (+165.3)

Hang seng : 23171 (+282.2)

SGX CNX Nifty : 5595 (+41.00)

INR / 1 USD : 44.96

Technical outlook: Global repercussions turns on the heat...

Yesterday's follow thru was a good one. Not only because the high of the earlier day was exceeded but also for the fact that the dips did not go anywhere near the daily pivot levels. Recall that the daily pivot has been rising from around 5350 levels and the index too has managed to stay comfortably above the weekly and monthly pivots at 5380-5400 levels. This has kept the bias to the upside. Like we wrote yesterday, the budget has certainly succeeded in removing the seller from the fray for now. More short covering occurred yesterday as the news about Libya seeing some peace flashed during the day. Brisk upward moves that led to a premium of about 35 points at one stage (future over spot) clearly showed it to be of a short covering nature. This narrowed to about 5 points or so which widened again to 16 points towards the close as day traders that were short also appear to have surrendered. Could this have now left the market a bit hollow? The fact that crude prices continued to remain up shows that the danger from that area has not played out yet. We should therefore keep an eye on the Oil market trends during the day to see the effects on our index trends also. In case the market declines, there may not be much cushion beneath the current prices.

Today's pivot shifts to 5530-40 and that is quite near the last finish. The resistance from moving averages is still a bit away, around 5640 levels or so on the daily charts. Hence there is room to continue higher if there is continued upward push. Hourly charts show support for declines around 5460/5420 so there is sufficient cushion during declines too. Market is seeing much increased intra day volatility that is making deductions more difficult. At such times, stops get easily triggered and trend moves are sharp but short-lived. All these make day trading difficult. Readers should move with some caution.

As mentioned in yesterday's letter, bank Nifty is running into resistance near 11000 levels. Tread with some caution here too as the last four sessions have seen some good gains accrue and leaders like SBI and ICICI have stopped moving up.

STRATEGY FOR THE DAY: While overall trends continue to maintain some bullishness, the rally has run on a few sessions. With weekend ahead and long holders in profits and possibly shorts covered, it is possible that higher levels today may not last. Hence avoid chasing stocks up during the day. One can (and should) still look to buy intra day dips as the trend remains up. News flow is mixed and hence two-way pulls are visible leading to heightened volatility. Keep checking progress of Oil as it will impact the trends. Sugar is staging a rally and can be looked at. Auto stocks are reacting well to better monthly numbers. Maybe some more momentum could be seen there today as well.

Stocks to buy if market is strong


Post Budget 2011 announcement, the PSU Banks have been witnessing some good bullish action and this one too joined the bandwagon last session. Yesterday prices shot thru the roof, breaking out from a two month sideways range and closed near the highs. The rise was backed by strong volumes and indicate emergence of fresh buying here. Go long.




Buy above 101

2.5 points

105 / 107

Or dips to 98

2.5 points

101 / 103


This fertilizer counter was back in action yesterday, renewing the bullish action seen in recent sessions. A small correction earlier held support at the crucial 200-EMA and managed to bounce back yesterday on fresh buying. Momentum has jumped up as well and volumes are looking good. Buy.




Buy above 272

3.5 points

277-78 / 281 / 284

Or dips near 267-66

3.5 points

272 / 276

Stocks to sell if market is weak


This counter has not seen much of a rally since its listing a year ago. Prices have been on a sustained decline over the last several months, forming a sequence of lower tops and bottoms. Yesterday they hit yet another new all time low at 110.6 and closed near there. Continuing to look weak, go short.




Sell below 111.5

1.5 points

108.5 / 106.5

Or rally to 113.5

1.5 points

111 / 110


Buy Nifty above 5560 stop 5530 target 5627

Buy Nifty on dips near 5475 stop 5455 tgt 5538


Buy Renuka around 76-78 stop 75.50 tgt 81

Sell Welcorp around 182-184 stop 185 tgt 177-75

Stocks in Action for the day: Steel Strip Wheels, Hindustan Dorr-Oliver, Assam Company, Kemrock Industries, Bajaj Auto,

Steel Strip Wheels has achieved sale of 8.42 lakh steel wheel rims in February, 201 1, up 19.70 per cent against 7,04 lakh rims in the same month a year ago. The company has also achieved a production of 8.51 lakh wheel rims during February, 2011 as against 7.02 lakh during February, 2010.

Hindustan Dorr-Oliver has bagged orders worth Rs 1284 million from various PSU's and its global arm DavyMarkham has bagged order worth 11.33 million GBP.

Assam Company India has entered into a farm out agreement with Sismo petrol and R3 in Colombia, for exploration and production of the block ANH El Triunfo located in Casanare, Colombia. As per the agreement ACIL will acquire a 70% working interest in the Block and Sismopetrol and R3 will retain the balance 30% share.

Kemrock Industries has entered into joint venture with Netherlands-based DSM Composite Resins AG for the production of specialty composite resins in India. The duo will invest $25 million in the joint venture.

Bajaj Auto’s total vehicle sales rose 21.66 per cent to 3.26 lakh units in February as compared 2.68 lakh units in the same period a year ago.

Gati is planning to sell its shipping business for Rs 200-250 crores, reports ET Now. The funds are likely to be used to re-pay debts. The company’s current debt burder is at Rs 400 crores.


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