Tuesday, June 28, 2011

TECHNICAL OUTLOOK: Positive start to the week....

Market Outlook: Indian Markets are expected to open in positive terrain on the back of global constructive trends and lower crude prices. On the global space Wall St up as banks rally but gains could be brief while Asian stocks rose and the euro held its gains as investors cheered an agreement by French banks to roll over Greek debt, a move that could lessen the chance of a disorderly default by the nation at the heart of Europe's debt crisis. On the overall basis we expect Indian market trade on cautious note with support near 5420 and any positive breakout would be expected only after 5560.

Global events to watch for:

Þ Consumer Confidence.

Þ State Street Investor Confidence Index.

Global indices Update @ 8:

Dow Jones :12043 (+108.9)

NASDAQ : 2688 (+35.39)

Nikkei 225 : 9681 (+103.2)

Hang seng : 22114 (+72.60)

SGX CNX Nifty : 5560 (+23.50)

Gold (USD/t oz.) : 1500.2 (+03.80)

Nymex Crude (F) : 90.95 (+00.34)

INR / 1 USD : 45.10

TECHNICAL OUTLOOK: Positive start to the week....

For the record, we did have a downside gap open. But the quick recovery from those initial lows to a strong close at the end of the day was something cheery and should no doubt help matters along for today, especially since the US markets are trading well at the time of writing of this report. Not that the Us markets are such a big influence at this juncture. But one finds that news in the direction of the existing trend is always helpful. So, right now, strong US markets are a signal in the upward direction and hence could be of help. We had also indicated that there could be some good action in the Bank Nifty as well and that is indeed the case. The index went up rather nicely yesterday as well and continues to hold out promise of more in the days ahead. It was joined by Auto and Oil Gas indices yesterday and with all of them having sufficiently well weighted items on the index, there was no doubt about how the day will end.

That said, the Nifty has now moved up sharply for the last three sessions and is also up 7.25% from the recent low. Not an insignificant move, that. Not too many people would have taken a bet for a higher expiry after early last week. Now it is beginning to appear as though lower expiries would be difficult! Such is the stuff that market is made of. Looking at Gann angle resistances on the daily chart of the Nifty future, we find that the area between 5585-5609 is difficult terrain for the index. Recall that the latter level is also the recent swing high. So we are certainly reaching resistance zones here. Be careful with long positions- time to tighten stops.

The action in the options would of course have us believing otherwise. The big addition to 5600P was something of a surprise. Can only think that this is some sort of hedge against an already long future. To think of this as an aggressive short put position will presume that a very aggressive trader is in action. Possible but not too probable. considering that much of these put positions have been added not at high prices but at lower ones (@ 75-80), chances of this being a long put is certainly there. So we need to be a bit alert because somebody much be perceiving some topping action here. We already stand warned with the Gann angle scenario.

Revisiting our positional play trades, Nifty is long from around 5280 and Bank Nifty buy clicked above 10600 (see letter of 24th for details on these trades). Both trades are now in good profits. But no sell signals are emerging as yet. So the correct action is to revise our stops even further upward. On the NF this should now be around 5450 while on Bank Nif we can revise upward to 10850. Bank Nifty has crossed an important resistance line yesterday and this will remain so unless it falls beneath 10970. Hence more aggressive traders could keep the stop at that level too. But realize that it would be an aggressive stop.

Stocks moving based on news/rumors include Jet (reduction in ATF prices) and Oracle (delisting at 2600). We mention these two among several others where we hear news and rumors because these are two charts where the price moves appear to be validating the bruit. Going from the chart to the news, we feel EKC pattern is certainly indicative of some fresh interest coming into the scrip. hence be on the lookout here for some good news to come thru. And, as in the past, Suzlon has once again validated our view that there is consistent accumulation in the stock around the 45 area. It is holding that level yet again and trying to put together some fresh upmoves.

STRATEGY FOR THE DAY: Market trends continue to look good but after a decent sized move it is time to protect what we have gained. So tighten the stops on existing positions and if they triggered let them go. If the prices go up after they get triggered out at stops, so be it. Don't chase them down. Markets give one or two warnings before the actual event. If a well placed stop gets triggered out, then consider that a warning from the market about the trend status. In stocks look at specific stories indicated above as well as our usual daily picks coming to you either as a part of this letter or thru SMS advisory.

Stocks to buy if market is strong:

H T MEDIA Prices have been trapped in a tight sideways range over the last one and half months. Despite few attempts to breakout higher, the counter has been fizzling out each time due to lack of follow thru. Yesterday we saw yet another sharp rally that has led to a much better close compared to last few sessions and indicates possible breakout once again. Look to go long.




Buy above 166

1.5 points

168 / 170 / 171

or Dips near 163

1.5 points

165-66 / 168

SHOPPERS STOP This retail counter formed a positive reversal pattern on the daily time frame last week and were attempting a fresh rally. This action was confirmed last session when prices bounced up well and closed on a positive note. The pattern still holds and we could see some more upside action here. Buy.




Buy above 440

4 points

446 / 450

Or dips to 436-35

3.5 points

441 / 444

Stocks to sell if market is weak:

WHIRLPOOL Last couple of weeks saw prices moving in a down to sideways range, facing strong resistance of 200-EMA. Previous week saw some attempts to rally, confirmed by long lower spikes on the candle chart. However they failed to produce an upmove and buckling under fresh selling, they turned down to close lower. RSI has dipped down as well. A fresh sell signal has triggered, go short.




Sell below 243

2.5 points

239 / 237

Or rally near 248

2.5 points

244 / 241


Buy Nifty above 5541 stop 5514 for 5613


Buy Central bank above 120 stop below 118 tgt 123-24

Sell HDIL below 154 stop above 156.10 tgt 150-149

Stocks in action for the day: Pipavav, Nagarjuna Fert, HCL Tech, Cairn

Tata Motors -To move SC against West Bengal govt -Says undue haste shown by govt is not conducive to upholding law

DoT panel -Asks TRAI to reconsider 2G spectrum pricing -Says current price must be made applicable now-Not easy to determine market price of 2G spectrum

Cairn Energy -Approves removal of non-compete fee-Deal to be completed in 2 tranches-1st tranche: Initial sale of 10% in Cairn India -2nd tranche: 30% stake sale subject to govt nod -Removal of non-compete fee reduces sale price to USD 7.85/ci -Gross procedes for 40% stake now at USD 6.02 billion -Sale of 1st tranche to be completed by July 11 -Vedanta to hold 28.5% post 1st tranche -Cairn Energy to retain 52.2% post 10% stake sale

Anil Agarwal -Vedanta believes initial 10% purchase shows commitment to India -Await successful completion of proposed transaction

Govt keen to cut flab on PSU boards: Exclusive -MCA works to ease norms in this regard Number of industry directors on PSU boards may be cut -Norms specify 7 directors, 50% as independent -MCA discusses proposals with SEBI, Department Of Public Enterprise -MCA feels too many directors slow decisions -ONGC has 17 directors versus Cairn India's 7 -Air India has 12 directors versus 7 on Jet Airways board -PSUs complain large board slowdown decision making-Govt to cut multiple reporting requirements for PSUs

HCL Tech announces extension of partnership with Finzsoft solutions to deliver high value tech solutions

Surana Industries board approves to raise USD 100 million or equivalent to any currency via issue of equity shares

Oudh Sugar Mills board meet on June 29 to approve issue of preference shares on a private placement basis

Man Industries promoters to file a joint plea with CLB stating they have no objection if CLB passes final order (both the brothers fighting for control over the company)

NTPC defers USD 500 million bond issue on high interest rates, company willing to pay 9.25%, investors ask 9.6% (DNA)

Asahi Songwon Colors sells part stake to Dai Nippon, deal at premium to the CMP of Rs 103/sh.

Nagarjuna Fertilizers restructuring plan an attempt to thwart Zuari Industries with the promoters raising stake without paying a penny (DNA)

Tata Group’s retail arm Trent looking to expand with Spanish based Inditex ending the JV with Italy’s Benetton group (TOI)

Pipavav Shipyard renames itself to Pipavav Defence & Offshore Engineering co

Listing Today: Karma Energy , Weizmann Forex

F&O ban: GTL , Videocon Industries

Amtek Auto has allotted 1.68 crore equity shares on conversion of warrants at Rs 178/sh


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