Oct 132011

The bearish signals that came through on Wednesday were rendered void yesterday by the strong up-move yesterday. This is exactly why we never pre-empt the market. It has always paid well to wait for the breach for the previous days low (or the previous days high in a bullish case). If you did notice, Wipro was relatively weak in yesterday’s strong price action for the IT stocks.

The focus now shifts to the critical 5170 on the Nifty. As long the market stays below that level, the next leg being a sharp to the downside remains.  Watch out for the USDINR cross rates. The level of 48.3 is an important and a reversal around that could mark an important turning point.

Whenever I have doubts whether we are in a bull market or bear market, I always revert to my prop indicator of the indian economy. It still says we have not reversed and quite a distance from it. (See Nov post on the reliability of this indicator)

India barometer

We still see short-term positives in HUL, Bharti and Syndicate – if market provides the right environment we will try position ourselves long here for some quick gains.

 Posted by at 2:42 am
Oct 122011

Nifty(4974.35): Yesterday’s price action on the Nifty was a mildly bearish set up. The index got repelled from it’s 50 day SMA and closed near the lower third of the range.

Nifty - Daily Chart

So what I had projected on Oct 3rd is still a possible count as long the Nifty stays below 5170. The volume footprint tells us that if Nifty drops below 4950-40 zone the likelihood of Nifty dropping to 4855 is a strong possibility. Given that we have Infosys results today, be ready for a quick drop if Nifty breaches this level.

Talking about Infosys, the CNX IT Index saw a much more significant bearish price action.

CNX IT - Daily Charts

The pattern formed on the daily charts was a bearish engulfing candle at the end of potential wave 4 end and the beginning of a wave 5. You would I recall from my CNBC interviews that I’m expecting CNX IT to drop to about 4800.

So how do I convert these to actionable strategy:

Nifty: If Nifty drops below 4940, I would sell with stop above the first hour highs or a 35 point stop whichever is further for a 1-3 day price objective of 4855. If it drops right below this level out of the gate – I would buy Minifty 4600 Oct puts between 25-28 with a stop of 15 for a price objective of 70-75. Do Nothing unless Nifty breaks 4940.

CNX IT: The weakest amongst the IT stocks to me is Wipro. I would sell Wipro short and use 363 as stop at a daily closing level and look for 280 in the next 6-8 weeks and 320-15 as price objectives for the short-term (1-4 weeks). Again do nothing unless yesterday low is broken.

PS: All levels correspond to cash/spot price unless stated otherwise.

 Posted by at 3:00 am
Oct 032011

Just a quick chart check.

Nifty - Daily chart

If the sub-divisions marked are correct, we should see 4750-20 get breached soon, may be as early as this week. For medium to long-term please check the September and August post.