Mar 202011

If you thought the key price action of last week's trading activity in the Indian bourses was Reliance's drop on Friday, that is not entirely true. The CNX IT index's steady price erosion over the last week is actually more important.

CNX IT Index - Daily Chart

All through the corrective declines since the March 09 bottom, not once did this index drop below the 200 DMA. Yet another, sign that this is not a mere correction.

Infosys, the technology heavy weight has an interesting price chart.

Infosys - Daily Chart

The stock gapped below its 200 day moving average on Thursday and ended the week firmly below this level.

Reliance the stock on which the hope's of the bulls are pinned, established a firm downward sloping trendline and the stock has started to drop strongly.

Reliance - Daily Chart

While the talk of the week was the apparent resilience of the Indian market during a crisis , it was actually the bears who were scoring.  This is the first time since 2008 that all the sectoral indices  are trading below their respective 200 DMA!!

  14 Responses to “Bulls surrender their last frontier”

  1. Probably the market’s way of wishing us Happy Holi !!! (By the way the dominant colour of Holi is Red !!!) 🙂


  2. Jai Bala, Rakesh Junjunwala mentioned in an interview that he did not see any retail investor participation in the entire 2009-2011 bull run. Interesting observation is not it?
    How can an important uptrend cycle ends with out them? Any comment on this Jai Bala?

  3. Hi Kishan,

    The term, any retail investor is a bit subjective isnt it? It is more a relative term. I agree that retail participation has been low compared to 03-08 and this rally has been one of the most hated rally because of the low participation – I’m sure Rocky just meant to say there are not excesses like before when house wives and taxi drivers were in the market. Several of my ex-clients, who are still retail brokers, I know that their business picked up sharply after May 09 when Indian markets went limit up. Possibly they are not trading futures contracts like they did in 07-08 but certainly retail participation has been active in the cash segment.

    Hope that makes sense.

    Best regards,

  4. Jai Bala, Understood the point

  5. hello sir good observation about retail investors

  6. Jai,

    Interesting observations regarding IT index.

    I believe contrary to what you have written. Index trading below 200 DMA is bearish. But, it depends on the cycle underneath. In a Bull market, if you buy an asset below 200 DMA, you get a very handsome return in next 12 months. However, in Bear market, prices keep drifting down. CNX IT has been below 200 DMA in 2004, 2005 and 2006. However, anyone who would have bought at those levels would have benefited immensely. The caveat here is whether we are in Bullish phase or Bearish phase !

    In my opinion, if I have to take a call on IT index, I would say that we are in a strong Bullish cycle. Cycles take time to pan out and hence we need to watch what happens in the next few weeks. It takes a lot for markets to turn from Bullish to Bearish and I feel that stage is far from here.

    Nice to read your views here. And I agree with your comments made today about Crude and Nifty relations. Majority of analysts are over blowing the direct relation between these assets. Sadly you were cut short by the Anchor.

    Raunak Agarwal


    • Hi Raunak,

      I agree about your context and 200 DMA, I’m not disagreeing with you. I was bullish on the markets since FEB 09 and went nuetral in November 2010 and turned bearish end of November.

      The anchor was running against time – if the question had been asked as the previous question, they would have had time and I would have been able to complete my thought 🙂

      Good trading to you,

  7. Thanks for your reply Jai.

    I think more than time, Anchors don’t want to hear about Technical guys speaking about Fundamental relations of markets. 😀

    What they fail to understand is that everything is related and relative.

    Anyway, don’t you have RSS enabled on your blog. Will be much easier to track new posts posted.


  8. hello sir interesting conversation between both of you.sir what is your take on trading pivots in day trading if not in-front of charts

    • Zubair,

      Compared to someone who punts aimlessly pivots give a better picture WRT to entry and exits. But they are not anything spectacular. Even here if you trade in the direction of 1 time frame higher, you will stand to benefit. Remember, all these are tools, how effectively you combine your tools depends on how good a workman you are 🙂

      Good trading,

  9. Hi Jai,

    I have been following your advice on air and here. Thanks for the great work.

    I have created an index stock position at 5400. Today’s closing above 5500 is giving me a hard time. Due to the quantity involved waiting all the way to 5690 (mentioned by you) will become very painful. I can hold my shorts for months — thats not a problem.

    Should I cut my position around 5500 and take a loss OR are you quite confident that we will see below-5400 levels in coming weeks. So I get to cover at cost at least…I can hold for markets to go up and take the U-turn back.


    • Hi Deepesh,

      First of all, what comes on air is an opinion, not advice 🙂 If you are able to use that profitably, good for you. I cannot provide trading advice for anyone without understanding their risk profile.

      Here are some useful pointers. If some trading position was giving me sleepless nights – it is a clear indication that I’ve bitten off more than I can chew 🙂 I would cut my trade size to a more manageable level. Secondly, having entered a trade, I would never fold the trade unless my predefined stop loss level is reached. I would also punch in my stop losses into the system or broker terminal rather than a mental stop – it takes the emotion off the trade.

      Now coming to my opinion – I think the corrective rise is at a mature stage and a decline should start anytime. The corrective rise was meant to spend a little more time than the decline. With today’s move the corrective rise from 5177 has exceeded the number days it took to decline by one day and Nifty is very close to resistance of 5550-5600. If I were you, I would either stay put OR If getting out and getting back in seems more comfortable, I would wait for previous days low to be violated before jumping back in.

      Hope that was helpful.
      Good luck with your trading,

  10. Thanks for your comments Jai. Much appreciated.


  11. Hello,

    When people start talking about new highs and correction over and stuff like that and the market starts behaving as if there was no stopping it (which is about now I would think – maybe a few days here or there) then is the time for all good men to come to the party. 🙂


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