Monday, June 6, 2011

TECHNICAL OUTLOOK: Week begins with bearish bias…

Market Outlook: Indian markets are expected to open with a flat sentiments and trade in positive trend. Good news is on Monsoons expectations could be the possible trigger in the near term. On the global space Wall St Week ahead- Market stalls but investors calm and Asian markets trade lower; Nikkei falls 89.15 pts. Overall outlook for the markets today is that of cautious optimism with 5480 levels as a major support and key resistance near 5560.

Results Today: Geogit BNP Paribas Financial.

Global events to watch:

Þ No Major action for the day.

Global indices Update @ 8:

Dow Jones : 12151 (- 97.29)

NASDAQ : 2732 (- 40.53)

Nikkei 225 : 9409 (- 304.4)

Hang seng : 22950 (+24.00)

SGX CNX Nifty : 5544 ( 00. 00 )

Gold (USD/t oz.) : 1546.7 (+01.00)

Nymex Crude (F) : 100.1 (- 00.12)

INR / 1 USD : 44.85

TECHNICAL OUTLOOK: Week begins with bearish bias…

Like Friday's letter had mentioned, we continue to look for some pullbacks. Even though the market tried on Friday morning to go higher it gave up soon thereafter and sought lower levels by the end of the day. The overseas markets have remained subdued into the weekend and there is nothing much to cheer as we step into the new week. On the daily charts, the price rise on the NF has brought it to the level of the moving average bands and then halted there. So, going by that evidence we should be seeing some more declines in this week. Now the problem is that since the prices had risen in almost a vertical fashion thru the last 5-6 sessions, they have not created any interim support zones, even on intra day charts. hence there is no support really until we go back to the earlier support (the rising Gann trendline from the May10 low). this is around 5420 levels only. So understand that the reaction could continue towards that target and the trend may still remain unchanged. We mention this fact because people generally confuse between directional moves and trends. The last week's rise, though powerful, has NOT changed the trend status. It has only reversed the directionality. It is easy to reverse directionality and this happens frequently. The expected decline in this week would be one more reversal of directionality. What it will also be a potential resumption of the main trend (which is still downward). To that extent we do have to remain watchful about the whole situation.

But that is about the macro part of the trend analysis. Coming to the more immediate situations, we look at the situation in the intra day charts. Here we find that a decline could meet with supports around 5470 levels first, where we find the 1x1 up angle as well as the 50% retracement of the recent rise and a Square of 9 price line. so that should all combine and be good enough to halt the decline initially. If this is lost, then we can reassess. It seems more like we could consolidate between 5600 high reached last week and this first support zone around 5470. So we suggest creating some range strategies between these levels and it is best traded by some short option strategies like a short strangle. May be a bit difficult to trade using Futures so be a bit circumspect there. Would pay to lock in smaller profit ranges. Also look at the ranges offered by the Table this week. We think that range will play out rather well. Many people are aware of the price pivot method (because it is widely available). Many versions are available and we use, what we feel is a better extension of the popular method. Problem is most traders don't value this pivot method, possibly because it is so freely available? Our advise to readers is not to knock it, for, we have found it to be very effective in denoting supports and resistances for the day. We often refer our readers to use the levels given in our Table on days when we feel the market will range. It can also be used on other days as well (not to conclude that it can be used only on ranging days). We carry an extended list of stocks on our website for our registered users and we exhort our readers to use it.

Bank Nifty is in a similar situation as the NF. 10650 is the first support for the day and moves below that would carry it towards 10580 or even further this week. Almost all the bank sector futures are similarly aligned with the Bank nifty. The ones that seem set to outperform on the downside (i.e. go down faster than the index) are Idbi, Axis and Uco. Check these out for shorting candidates. Bucking the trend could be IndusInd. Pair trade chaps can look to this.

STRATEGY FOR THE DAY: Bias is towards the bearish side although we may not see any sharp moves. It may be more like some ranging action with a downward bias. Possibility of action shifting towards the small and mid cap stocks as they have fared well in the last week. But double check on this before diving in. It is a dangerous territory! No sector bias for the bullish side is visible so gainers today could be very stock specific. As directed earlier, take recourse to the Table levels to get some buy or sell points today for major stocks. if volumes are very low, then better to move to the sidelines.

Stocks to buy if market is strong:

ESCORTS: This auto counter has been in a state of gradual descent. With some momentum gathering over last three sessions one can witness active selling participation in this counter. The prices have moved beyond the value area region triggering some downfall in store. Look to go short in this counter today.




Sell below 125

1.5 points

122 / 120

or Rally near 128

1.5 points

125 / 123

GAIL The bears have steppe dup the gas and are increasing supplies at higher levels. The failure of the recent trendline breakout to accentuate an uptrend signifies the bearish interest underlying this counter. The negative lines are turning upwards signifying the renewal of negative momentum inviting us to go short.




Sell below 439

3.5 points

433 / 430

Or rally near 443

3.5 points

437 / 434

Stocks to sell if market is weak:

UFLEX With counters from the packaging sector flexing their stuff over last week one could see this counter complete a trounding pattern on the daily charts. With breakout being effected strongly on Friday one can expect to see some bullish activity in this counter today. Trade with a bullish bias above current levels.




Buy above 199

2.5 points

202 / 204 /206


Sell Nifty around 5530-40 range with stop above 5554 for a drop to 5490-5475.


Buy Punj Lloyd abon dips near 62.50 stop 61.50 tgt 65

Sell Idbi below 130 stop 131.50 tgt 125.50

Stocks in Action for the day: Crew BOS, IGL, Wendt, Persistent, Rel Infra

Finance Ministry Sources: -No nod for Reliance Infrastructure ECB for Bandra-Worli sea link -RBI not in favour R-Infra ECB for BW sea link -R-Infra proposed USD 375 million ECB for BWS link

IDFC, Khazanah Plan Infra Development JV in India IDFC says -To hold 19.9% of equity in JV; Khazanah to own 80.1% -JV to focus on India's road sector -JV to invest in Jetpur Somnath tollways To invest in convertible instruments issued by JV

US based Sprint telecom to buy 74% stake in a JV firm Sprint telecom India floated with Persistent Systems acquiring in two tranches totaling to Rs 6.2 crore (FE)

International Coal Ventures eyes 59% stake in Mozambique coal firm, deal estimated at USD 1 billion

Balrampur Chini buys back 1.2 cr shares as on June 1 for representing 85.26% of the buyback size of Rs 110 crore

Crew BOS board approves divesting stake in wholly owned sub Villa BOS Products & Crew Bos Far East

Jubilant Life receives US FDA approval for Donepezil Hydrochloride tablets 5mg & 10 mg

Sujana Towers board approves conversion of 2.7 cr convertible warrants to equity shares at a premium of Rs 10/sh

Indiabulls Real Estate seeks shareholder and creditor nod for scheme of arrangement among Indiabulls Eeal Estate, Indiabulls Infra & Power, & Indiabulls Builders

Indraprastha Gas (IGL) hikes CNG prices by up to Rs 0.55/kg w.e.f. Saturday midnight

Raheja group looking to sell Crossword Bookstore – BS (It’s a 100% sub of Shopper’s Stop)

Maruti strike in Gurgaon plant on Saturday, talks with workers union to resume today – BS

Ashok Leyland May total sales at 5,725 units vs 6,502 units (YoY)

Wendt India open offer at Rs 1366.34/sh (CMP Rs 1476.75/sh)

REC plans to raise USD 1.7 billion via FCCB and ECB by November – ET

Govt approves automatic 49% FDI nod in DTH while increasing the overall cap to 74% - FE

NIIT board acquiring balance promoters stake of Evolv Services –

Colgate board to consider first interim dividend

F&O Ban: Deccan chronicle

Sistema gets cautious, defers listing in India

Sree Sakthi Paper registers 31% jump in profit

Elder Pharma to launch 32-35 new products

CIL wants change in coal distribution policy

RIL faces risk of losing bellwether tag


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