Tuesday, June 21, 2011

TECHNICAL OUTLOOK: Bears on a rampage...

Market Outlook: Indian markets are expected to open on a flat note with no clear direction from global markets as well as domestic events. On the global space US markets end higher amid low volumes and Asian markets trading higher; Nikkei, Hang Seng gain. Investors worldwide are more risk-averse because of the European crisis and this will result in the market trending lower over a period of time. On the overall basis we expect Indian market trade on cautious note with support near 5190-5220 and any positive breakout would be expected only after 5420.

Global events to watch for:

Þ Existing Home Sales

Þ FOMC Meeting Begins

Global indices Update @ 8:

Dow Jones : 12080 (+76.02)

NASDAQ : 2629 (+13.18)

Nikkei 225 : 9437 (+83.06)

Hang seng : 21669 (+70.17)

SGX CNX Nifty : 5260 (- 04.50)

Gold (USD/t oz.) : 1541.7 (+01.20)

Nymex Crude (F) : 93.45 (- 00.48)

INR / 1 USD : 44.99

TECHNICAL OUTLOOK: Bears on a rampage...

Don't say that you were not warned! Ok, we had not really anticipated the kind of fall that came but that is not possible either. But there were enough indications that matters were bearish. Now, was it a case of the last straw on the camel's back? See, market was already primed for a decline from the last week and yesterday, news agencies played up the Mauritius part and then GTL happened, dropping an unbelievable 60%! It is not as though the company is a stranger to such declines! In Mar 2000, the stock fell 42% during the month. But 62% in a day does take the cake however! There was talk that the company was facing a liquidity crisis, that lenders had liquidated shares pledged by the promoters, that a major Mauritian shareholder had pulled out, that the company was struggling to raise capital, and that it had defaulted on interest payment to banks and institutions. Management denied all these. But share has closed near the lows, suggesting that the market is not buying into the MD's talk. If the stock price does not recover much of the losses over the next few sessions, it could mean that the company is facing some serious problem which makes the stock unattractive even at this valuation. FIIs hold 16.5% of GTL's equity. We don't know if anyone of them sold yesterday but they don't take things like this lying down. You can bet that they will bail out as soon as prices recover any. GTL looks to be dead. Make it a permanent short on rallies now.

PCR continues to get torpedoed. Now down to 0.98. That is definite bearish territory. IVs move to 22.5%. OI builds in 5100 Puts now. Traders pile on 5300 Calls. Everything here is pointing to more bearishness. Create bearish strategies, using spreads.

In our weekly letter, Trend Trader, we had mentioned that the break of 5350 would carry index to near 5050 levels. That window has certainly opened up. The decline of yesterday missed the Feb low by a whisker. A break of that would continue the bearish pattern now on the weekly charts. So, something is bigger is afoot here. Lets not treat this lightly. Nov10, Jan11 and Apr11 have all been lower tops. Clearly, no one seems to be wanting to buy this market.

The foray lower yesterday shows up as a shadow on daily charts. Like we mentioned yesterday, support cluster is around 5245 and market has closed above this. Daily pivot for today is 5280 and that needs to be crossed and held if recovery has to take place. Instead, if we find the prices dropping beneath 5240, then the story would probably continue. Then 5050 it is. Within this month? Possible. Conditions are amenable for it. So don't shut that out of your thinking. Should one chance the arm and buy here for a rally? Well, at least wait for prices to be trading above the daily pivot to take this trade. Don't forget the stop below 5240. Afraid to short lower if declines continue? That would be most people. But if that does happen, then shorting is exactly what you would have to do. Put in a stop and do it. In trading we got to keep our emotions at bay. That is the key.

STRATEGY FOR THE DAY: 5240/5280 pretty much divide the day into the two zones for day trades. Expect volatility as no one is sure about whats going on. Short covering moves could be pretty sharp so day traders, be vigilant! Stocks were stoned and odds are about similar in most of the sectors. Banks have not fared so badly in the fall, so there could be some trades brewing there. Check out Yes and BOB as they were rather well placed yesterday. There are more stocks hitting supports so maybe some rally may be due after all. Be on the look out for this.

Stocks to buy if market is strong:

AMARA RAJA BATTERIES: Despite a massive fall in the market last session, this counter survived the day to end on a positive note. Prices continue to maintain a higher top and bottom formation on the daily time frame. Momentum readings too are in sync. We recommend going long.




Buy above 215

2.5 points

219 / 221-22

Stocks to sell if market is weak:

AMTEK INDIA: Prices collapsed sharply last session on the back of heavy selling and closed near the days low. The fall has completely negated the recent buying attempt and has come crashing down, breaking below an important rising Gann line intermediate support. Consider going short here.




Sell below 82.5

1.5 points

80 / 78.5

Or rally near 85

1.5 points

83 / 82

GIC HOUSING FIN Prices have been consistently stepping lower on the short term time frame. Yesterdays fresh fall renewed the prior decline and has moved away from last weeks sideways moves. This dip has also led RSI to turn down afresh from 40 levels. Expecting a further fall here, sell.




Sell below 105.5

1.5 points

103 / 102

Or rally near 107

1.5 points

105 / 104


Sell Nifty below 5240 stop above 5280 target 5185 – 5160

Buy Nifty above 5280 stop below 5245 target 5335-5360


Buy Yes Bank above 293 stop below 288.90 tgt 299-301

Sell LIC HOUSING around 219-220 Stop above 222.20 Tgt 214-212

Stocks in Action for the day: GTL, Jai Corp, NIIT Tech, HCL Tech

GTL -Religare Finvest sold 4.43 lakh shares at Rs 140.73/sh -Aerolite Advisory Services sold 7.80 lakh shares at Rs 133.94/sh -Cosmos Advisory Services sold 7.53 lakh shares at Rs 134.2/sh -Crosslink Trading Services sells 6.07 lakh shares at Rs 147.37/sh -Plasma Advisory sells 7.53 lakh shares at Rs 180.4/sh -Adroit Financial Services Pvt Ltd buys 1 lakh shares at Rs 150.24 (Avg) -Greenfridge Prop sells 5.78 lakh shares at Rs 143.64/sh -Savya Sachin Estates sells 9 lakh shares at Rs 132.37/sh -No sellers name present in shareholders list

SBI Chairman -SBI-Oman Pvt Equity Fund expandable to USD 1.5 billion versus USD 100 million -Aware of need to improve asset quality, will keep eyes fixed on net NPA number

Jaipal Reddy on Draft CAG report -No comment to make on the leakage of Draft CAG report -Draft CAG report is not the final report -Draft CAG report does not make any reference to gas pricing -Oil Ministry will approach Draft CAG report with an open mind -DGH is not capable of handling tech & financial issues of this size -CAG's recommendations can be taken up if in final report -Will try to answer to draft CAG report as soon as possible -Do not see draft CAG report impacting Cairn-Vedanta deal -Will try to take Cairn-Vedanta deal to CCEA this week -RIL-BP deal under Oil Ministry's consideration

Deccan Chronicle: Deccan Chronicles Holding buys 27.76 lakh shares at Rs 62.74/sh

Surana Industries: Board meet today to consider funding option for expansion projects

F&O ban: Kingfisher Airlines

Deccan Chronicle, KS Oils out of F&O ban

GAIL, Uttarakhand co in pact to set up two 350-500 MW plants

HCL Technologies, Xerox sign 5 years partnership agreement with an undisclosed amount

Siemens India bags an order for Rs 165 crore from Delhi Cargo service Centre

Cargo Service Centre enters strategic partnership with NIIT Tech for building integrated cargo complex

Promoters of Nagarjuna Fertilizers to up stake by 13% by investing Rs 30 crore & co’s public shareholding to come down by 10% post hiving off the oil refining business & merging with Kakinada fertilizers (ET)

ONGC set to invest USD 7.7 billion in KG basin hunting for partners,& plans to increase gas production to 30 million cubic metres a day in five years (ET)

Company Law Board has rapped Birla Corp for entering the capital market business without clear approval from its shareholders (FE)

Maharashtra Pollution Control board issues stop work order to Indiabulls Real Estate’s Elphinstone project in Mumbai: CNBC Awaaz

Cognizant technology solutions & Capgemini are among the bidders in talks to buy Oracle’s India based financial services unit with an undisclosed amount (ET)

Bajaj, Hero Honda, TVS to setup assembly plants in Africa – ET

DoT panel accepts majority of recommendations made by TRAI on M&A rules with DoT also backing the 30% limit on merged entity’s market share instead of 40% (BS)

Navi Mumbai SEZ to get final nod in July saving the cost by as much as Rs 100-150 crore (BS) ((Jai Corp in focus))

IOC holds back advance tax payment on back of delay in price revision & uncertainty on subsidy

Cotton Prices fall 37% on high acreage & inventories, falling from Rs 61000 to Rs 38000 per candy (BS)

Realty firms slash margins to cut inventory with margins to come down to 3-10% from 30-50% (FE)

Tea Majors set to hike prices by Rs 5-7 per kg to offset input costs – FE

Magma Fincorp to cut securitization exposure by 50% with the recent Rs 440 crore infusion from KKR (FE)

Fertiliser Ministry has sought clarifications from the Committee of Secretaries on a proposal to hike urea prices by 10% in the draft policy on urea decontrol (BS)

Govt likely to permit FDI in multi brand retailing only in the six big metros keeping other cities out on the back of political concerns (BS)

BSNL would have lost several crores since 2008 by not charging other telcos for telephone messages carried on its network (Mint)

ABG Shipyard has ventured into ship ownership after losing a takeover battle last year for Great Offshore to rival Bharati Shipyard (Mint)

PE major Capital International is leading the race to invest Rs 400 cr for less than a 5% stake in L&T Finance holdings which is set for an IPO possibly within 3 months (TOI)


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