Friday, June 10, 2011

TECHNICAL OUTLOOK: Range continues to torment.....

Market Outlook: Indian markets are expected to open with a negative sentiments on the back of expected IIP Data scheduled today. On the global space US equity markets snap 6-day losing streak and Asian markets trade mixed; Nikkei gains over 1%. We expect Indian market support in the range of 5450-5375.

Global events to watch for:

Þ Import and Export Prices.

Þ Treasury Budget.

Global indices Update @ 8:

Dow Jones : 12124 (+75.42)

NASDAQ : 2684 (+09.49)

Nikkei 225 : 9585 (+118.4)

Hang seng : 22449 (-159.8)

SGX CNX Nifty : 5512 (- 09.50)

Gold (USD/t oz.) : 1544 (- 01.00)

Nymex Crude (F) : 102 (- 00.58)

INR / 1 USD : 44.72

TECHNICAL OUTLOOK: Range continues to torment.....

The "nothing" day continued into yesterday. We did get a bit of a scare when the 5500 levels broke but looking at the total lack of follow thru on that trade, it was obvious that no major longs were really built up in the market. In quite a similar manner, the break of the day's high on a rally from that low also saw minimal action upward showing that there were no shorts set up either. So there you have it, the story of this market. A look at the volumes will also convince you what the scene is- it is quite pathetic. We had mentioned that the best way to approach this market would be thru short options. The 5500 straddle for example, keeps losing about 10-12 points every day. A short strangle 5600-5400 as another example loses about 3-5 points daily. This is another one to sell. No doubt there is risk attached to shorting options but so it is with long futures too. Once you enter the market, there is risk. Period. Decide how much of it you can handle and then choose your weapon.

There are plenty of those who are looking for the "sure thing" in the market. Those of you who are client managers or servicing institutional clients will know what we are talking about. They always say things like "tell me a high probability trade". This is utter nonsense. Every trade has exactly the same odds of working out unless you are the one who is running the scrip! It is our job to assess a possibility, take a position and then track it to see whether that possibility is likely to play out in the manner in which we visualized it. If it does, we keep it; if it doesn't, we exit. That is all there is to it. Do not be among those who make trading a stock a bigger issue than this. On a longer time frame scale you have to just ensure that you are more often correct than wrong. That ensures making money. No need for any "sure shot" stuff. No need to have a "high hit rate" or that kind of nonsense. People twist trading the markets completely out of context many times.

There are enquiries with us whether the Nifty is making a small inverted head and shoulder pattern at the bottom? It does look like one. On the intra day charts it is seen at the end of a good decline. So it is at the correct position as well. No harm in following a breakout of this one if it happens. Of course that will be above 5600 levels only. By then we will get other breakout signals too and hence the pattern will not really matter- except for the target implications. It suggests a target up to around 5800. Now this should tie in rather well with the build up of call OI at the 5800 levels. It seems to us, though, that if you want to play the pattern for this month, then it is better to do so with a long5800 call rather than long futures. At least, that way your loss will be restricted to about Rs.8 or so.

Situation on the charts is a bit tricky. The daily charts have the NF as well as the Bank NF butting against resistance of the moving average bands on the daily charts. However, they are placed at support on the hourly charts. This is dicey and hard to decide which way it will move. Possibly news or some event would trigger it. IIP numbers are due out today. Will they do it? No idea. But 'get idea' by keeping track of it!!

L&T looks good on the charts with its ability to hold on to recent gains. Declines in market have not been able to dent its uptrend status in the short term. Yesterday we heard some news about possible divestment of the financial services wing for 1750 cr or so. Maybe that should help push the stock higher. Punj Lloyd is in Ban list in futures. Should be coming out soon. Those with funds should buy in cash and then switch it to futures later. Stock seems to have developed some legs. Going into ban could be an indication that interested people may have built some longs.

STRATEGY FOR THE DAY: As discussed above, no particular bias exists for now. So approach with caution. If it appears as though we shall have another dull, low volume day, then better to attempt some short options as a trade for the day. Trading NF or Bank NF seems to be a little more risky proposition right now owing to lack of movements. So keep stops small. No point in risking more when clarity is less. Oil marketing stocks are losing ground suddenly. Look for shorting opportunities. But upstream oil stocks are placed better. So could be a pair trade opportunity too?

Stocks to buy if market is strong:

BAJAJ ELECTRIC: Prices moved up well last session, exceeding the resistance of 38.2% retracement at 254 along the way. Having closed above it, prices have now triggered a fresh buy signal here. Momentum has received a fresh boost and volumes are tending to pick up. Expecting a further rally here, go long.




Buy above 257

2.5 points

261 / 264

Or dips near 254

2.5 points

258 / 260

BGR ENERGY: This counter showed a nice upmove last session and despite market choppiness, managed to close with most of the gains intact. From the chart we note that prices are attempting to rally after a prior substantial fall from April 2011 highs. With yesterdays push, prices look set to move higher. Buy.




Buy above 493

5 points

501 / 505-06

Or dips to 488-487

5 points

494 / 498

Stocks to sell if market is weak:

S KUMARS NATIONWIDE From the daily chart we infer that prices have been consistently finding it tough to exceed strong valuation resistance around the 70 levels and forming multiple tops around that region. Yesterday too prices turned down after hitting the same level once again. RSI has turned around from 60. Sell if lower.




Sell below 67

1 point

65.5 / 64.5

Rally near 68

1 point



Buy Nifty above 5551 with stop 5530 for 5595.

Sell Nifty if below 5490 stop 5516 for drop to 5430.


Buy Essar Oil above 132 stp 130 for rise to 136

Sell Asian Paint around 3100-3125 stop 3160 for drop to 3020

Stocks in Action for the day: JSPL, Maruti, Jyothy Labs, CESC, Bajaj Fin

West Bengal issues ordinance : -To acquire 400 acres of Tata Motors land -Ordinance Amends section 48 of Land Acquisition Act Mamata Banerjee -Land to be returned to farmers -Tatas can build their factory over remaining 600 acres Tata Motors says: On Singur Ordinance-Not aware of such a development -Do not want to comment unless we have studied the ordinance

GoM on coal ends; no final decision taken Coal Ministry says -Final decision on coal in next meeting on July 2 -To collect data on all important projects by July 2

Prashant Bhushan -Expect Dayanidhi Maran to be charge-sheeted & jailed -Maxis money for Sun TV appears to be quid-pro-quo -Bhushan lawyer for S-Tel, part owned by Sivasankaran

SEBI passes consent order against Reliance Securities for code of conduct violations Reliance Securities -Will not register new clients for 45 days -Will pay Rs 25 lakh towards settlement charges

Unions in the Manesar belt have been getting stronger. Hindustan Motorcycle and Scooter India (HMSI) was the worst hit. Workers in this belt are amongst the highest paid. Local politicians also involved.

Ex-dividend: ITC (Rs 4.45/sh), Bata (Rs 4/sh), Shriram Transport Finance (Rs 4/sh), Birla Corp (Rs 3.5/sh)

F&O Ban: Deccan Chronicle, Kingfisher Airlines, KS Oils, Punj Lloyd

Bajaj Finance board approves QIP of 75 lakh shares, also approves issue of 75 lakh warrants to promoters

Gujarat NRE Coke board approves raising USD 60 million via FCCBs

CESC picks up 4.8% in Resource Generations, an Australian Listed Mining Entity for USD 10 million

Reliance Communications to launch undersea cable system, can expect to spend Rs 650 crore – BS

PE investors Actis, Apax, Bain in race to acquire stake in Jyothy Labs, talks with management to delist the company in few years– BS

Maruti Strike threatens to spread in other auto companies – ET

GAIL may spend USD 2 billion on acquisitions including shale gas assets in US, Aus to meet fuel demand in India

JSPL’s Chhattisgarh unit comes under Ministry of environment & forests scanner – ET

Unity Infra plans to raise Rs 150 crore by selling some part of its stake in one of its projects – ET


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