WEEKLY TECHNI VIEW

A  FEW WORDS ABOUT TRADING AND SHORT TERM INVESTING :

A few days back we suggested in our conference call that it is high time to be in cash by at least 70% IMMEDIATE action could have benefited if we compared stock prices ten days back and that with yesterday except perhaps an ONGC or ITC or jubilliant food kind of VERY FEW stocks.

It is never AN EASY job to liquidate ones portfolio in one go as there are so many reasons like A PSYCHOLOGICAL ATTACHMENT or PRICE at which buying was done AND other sourse of information that the trader / investors might have which could have been suggesting him about a new high for the SENSEX / NIFTY  / the company he is holding.

BUT the idea is to try and catch maximum return from the price movement on both sides using TECHNICALS but most important reason that a trader/ investor CAN NOT react immediately is the belief that IF we go wrong in our prediction of a larger fall HE will miss the BULL RIDE BUT that is wrong as all readers MUST have noticed our buy side calls in the 400+ points up move in NIFTY in the last month.

So what try to convey is that even if we go wrong we will be EXTREMELY flexible and we will surely move with the markets very swiftly and if the market moves up from here we will catch stocks which are going to go up with relative EASE.

 LET US AGAIN TAKE A VIEW AT THE LARGER PICTURE :

WE strongly believe that INDIA growth story is intact AND have set very high targets for SENSEX in the LONG run but the major issue is that if we take a simple example of NIFTY even if NIFTY is to touch 7000 or 10000 in A FEW YEARS if we buy NIFTY at 5800 and IF we are to see  say 4500 NIFTY in a year or so can a trader hold it ? and better  thought is that if THE TENTATIVE target for NIFTY is 4500 WHY can not we  start buying it from say 4800 ?

For stocks it would be even difficult to HOLD or buy at current market price because if we are to see a larger fall from here it will be surely possible that some companies will never grow from the bottom so we will have to be EXTREMELY careful in selecting FUTURE WINNERS .

WE are presenting charts of FTSE and SENSEX which we presented here in October 2010.

url :

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi4hepLgo_JL1x96vWhBszCkgnxq_AtQMnVaUv8gY3Mz-IBurIcsXyM7wBvN3gji0Libg_dvtQqUrUpzi7FSPekovinjCq32bIwPRex_WawB2af3QEsbpoKPKbrTEb4BJcqTpok9nIOEYvq/s1600/FTSE+100+QUARTERLY.JPEG

SENSEX QUARTERLY CHART AS ON 10^TH OCTOBER 2010 :

Have a careful look at our projections made in October 2010 and look at the DOWN SIDE progress SENSEX has made in last seven months.

Remember such projections has been made on an observation that SENSEX has been copying FTSE chart since VERY LONG , such copying can be called as MIMICKING.

TECHNICAL VIEW FOR THE WEEK STARTING 02-05-2011 :

In our  weekly technical view dated 18^th april 2011 we presented BSE IT chart and said this,

“AN IMPORTANT CHARACTER OF BEAR MARKET :

With the spread of internet and television media and with the availability of so many charting softwares etc. the subject technical analysis is getting immense popularity BUT my experience suggests that market itself behaves like a living entity and as it is REFLECTION of collective psychology when a LEVEL is published to most traders it DOES NOT work or A NORMALLY functioning indicator stops working.

We are trying to show you a typical character of bear market.

In the following chart of BSE IT we can see that there was a clean buy cross from the EMA band which we have used succesfuly in BULL MARKET but the latest buy cross has failed miserably in a single day on Friday .

So a typical buy call which is known to ALL has failed which suggests that WE ARE IN A BEAR MARKET RALLY ONLY.”

The reason of such failure of NORMAL technical tools was our observation that market is reacting ADVERSLY to the companies which declares quarterly numbers.

Here are two more examples of this “ RESULT SYNDROME “

There are more examples like this but this proves a point that “ OBSERVATION” is the key in stock market prediction also it proves that “ MARKET “ knows a lot more of future fundamentals and perhaps market is pricing in next 2-3 quarters results “ NOW “.

Also such negative reaction to stock prices gives us another confirmation that the last rally was “ BEAR MARKET” rally only.

SENSEX  AND NIFTY  :

On daily chart of SENSEX 19171 has been broken for more down side confirmation SENSEX will have to close below 18976 then the earlier highs around 18700 can give support BUT as it has happened in stocks like AXIS BANK , LARSEN AND BHEL if SENSEX can not find supports around 18700 OR if it takes support around 18620 which is the value of 200 day EMA but the recovery from their remains weak and sensex closes below these support area then it will be DECISIVE “LOWER TOP “ for sensex on weekly chart.

For nifty these levels are 5623 and  around 5600 as shown on the NIFTY chart 5623 is the value of 200 day EMA and the earlier highs are around 5600 so a close below these levels will decisively confirm a “lower top” for NIFTY on weekly chart.

FOR any upside movement NIFTY will have to close above 5912 and SENSEX will have to close above 19500.

Looking at the different sector indices this BULLISH scenario looks to be unlikely but EVEN if this happens the 80% retracement levels for sensex and nifty will remain bigger hurdles.

Here are charts of two major index movers AXIS BANK and LARSEN & TOUBRO and one can see that earlier supports DID NOT work for them which is EXTREMELY bearish confirmation of lower top for these stocks.