Monday, March 7, 2011

Technical outlook: Running into resistance...

Market Outlook: Indian markets expected to open gap-down on the back of instability in the government activities as DMK step backs its supports on last weekend. Domestically higher crude prices and high inflations are still a concerns for economic growth. Global markets are in mixed version as Asia trading mixed; Hang Seng flat, Nikkei down 1.2%. Overall outlook for the markets today is that of cautious optimism as the bulls must hold the Nifty above the 5400 levels sustain ably to manage an upmove in the coming session wherein market has a strong resistance at 5500.

Global events to watch

Þ Consumer Credit

Global indices Update @ 8:

Dow Jones : 12169 (- 88.32)

NASDAQ : 2784 (- 14.07)

Nikkei 225 : 10551 (- 141.7)

Hang seng : 23437 (+28.80)

SGX CNX Nifty : 5490 (- 57.00)

INR / 1 USD : 44.99

Technical outlook: Running into resistance...

The levels around 5600 proved to be difficult for the market to negotiate past as had been indicated by the substantial build up in the calls at that price strike. We saw this continue into Friday, as another 21L or so was added further at this strike, now making it the strike with the highest OI. Can this mean we have a top around this level for the moment? The 200 dma was placed at 5610 and that is the point up to which we saw the prices rally. On Friday, the prices also broke beneath the daily pivot for the first time since budget day. We can take that as a kind of a hint that price trend may be weakening? But it also seems like the market may be shooting for some ranged moves ahead as we are also seeing good amount of activity in slightly out of the money puts and calls. IVs have been on the retreat and hence this may also be one of the possibilities for the week ahead. We have, after all, seen a brisk pullback into resistance (the moving average band on the daily charts too were near 5600 levels) and lots of shorts too may be covered. But with no news to short, we may not see any aggressive shorting either.

This means the prices may now become a little more sensitive to news. And, given that there isn't anything much by way of news or events scheduled locally, market could become sensitive to overseas news. Be particularly wary therefore of Oil prices as these can impact the trends quite a bit in all markets and all asset classes. There may also be a tendency towards opening gaps this week if reliance on overseas news become greater. All these will cause problems for overnight traders. It also goes without saying that any local bad news can take the markets down as the cushion of short sellers has been removed. That said, one must also point out that the prices have been trading at support zones for the past four weeks. We did fare well last week and the candle pattern for the week too is a good one. What is therefore required is for some good follow thru beyond the 5550 levels. Weekly pivot is now at 5460 levels and as long as that is not being lost, we can continue to be bullish and use dips near the weekly pivot to buy in. Pivot for today is placed at 5560. Now, that is just above the value resistance area. So today, do take longs only if index can successfully move past and hold above this level.

Stocks are wearing a completely mixed look. Hence there is no sector bias visible at the moment. It is possible that a time may be approaching when one may have to have a long and short position going on at the same time as trends appear to be rather varied. It is even possible that stocks may jump up and down while the index holds largely still. Point here is, we cannot go into the week (or today) with a bias of any kind.

STRATEGY FOR THE DAY: Open may be flat to better. Since we are trading comfortably above the weekly and monthly pivots, we shall continue to maintain a bullish bias and look to buy intra day dips into support. For that one can use the levels mentioned in the Table. Stock action may be quite varied and may require some proactive moves to capture the trends there. But since momentum seems to be lacking right now, it is better to use the Table levels to trade in stocks too.

Stocks to buy if market is strong


This midcap retail counter has been witnessing some steady buying participation for past few trading sessions. The sharp spike iin volumes helped prices regain the value region around 54 levels indicating potential buying opportunities today. The momentum has revived inviting us to go long in this counter. Buy.




Buy above 55.50

1.5 points

57.50 / 59


After bottoming out towards the end of the February the prices are on the way up. The sharp climb upwards witnessed last week saw the prices overhaul the descending trendline resistance highlighting the intensity of the bullishness. The close above the resistance level invites us to go long in this counter.Buy.




Buy above 73

1.5 points


Stocks to sell if market is weak

This counter has not seen much of a rally after the sharp decline witnessed in Feb 2011. The steep fall pushed the RSI below critical 40 levels and since then the momentum never really recovered. The last few sessions have seen attempt to recover overwhelmed with supplies suggesting intense bearish sentiments. Go short.




Sell below 157

2 points

154 / 152

Or rally to 160-161

2 points

157 / 155


Buy Nifty above 5560 stop 5530 target 5627

Buy Nifty on dips near 5475 stop 5455 tgt 5538


Buy Hind Zinc around 1320-30 stop 1318 tgt 1345

Sell Maruti below 1275 stop 1285 tgt 1260

Stocks in Action for the day: Mercator Lines, Amrutanjan, Sanwaria Agro Oils

Mercator Lines’ Singapore based step-down subsidiary Mercator Offshore has entered into a memorandum of agreement to sell its 350 feet jack-up Rig with scheduled delivery in Q4 of financial year 2011. MOL has delivered the rig to the buyer in Singapore.

Amrutanjan Health Care has bought pulp-based flavoured fruit drink brand Fruitnik for Rs 26.2 crore, marking its foray into the Rs 1,500-crore fruit juice market. The Chennai-based company, famous for its pain-relief balm Amrutanjan, earns most of its revenue from ayurvedic and allopathic over-the-counter products, primarily in its home market-Tamil Nadu.

Sanwaria Agro Oils has approved issue of bonus shares in the ratio of 1:1 i.e. one equity share for every share held.

NMDC has signed a contract agreement with consortium comprising Siemens VAI, Austria, SVAI India and NCC, for turnkey execution of a sinter plant complex. This is the first contract amongst the nine main technological packages for the 3 MTPA integrated steel plant at Nagarnar in Chhattisgarh and the cost of the project is about Rs 760 crores.


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