Feb 152012

Nifty(5416): Markets despite being overbought, continues go up on receding momentum. The move from early February is like an automobile coasting Β on residual inertia of motion even though the vehicle has run out of gas.

Nifty(Left) and Bank Nifty (right) - Daily Chart

While this is very unhealthy and the markets will sooner or later drop vertically once the residual inertia is over, prudent risk management and patience is an absolute must. The retracement will completely erase the last leg of this short-term move. That leg started at 5077 and that will be some sort of guaranteed level we are going to see once the correction sets in. We will watch for a big one day reversal pattern or 5325 for confirmation - do not know which will be the case.

Having said that this move is clearly a powerful wave in the short term. What does it mean in the higher time frame? Is it a sucker rally that is correcting the entire decline from Nov 10 to Dec 2011 as I'm assuming it to be? OR is it the beginning of something bigger? The answers for that will come through ONLY when the correction starts. Stay tuned.

Nifty support : 5325, 5210 and 5077. Resistance: 5440 and 5495

Open Position: Long Coal India @326-328 Tgt 360 Upgraded stop 320 at close

 Posted by at 8:44 am

  14 Responses to “Technicals 15th Feb 2012”

  1. Jai,

    What do you say about the action today. Have we crossed into the buy zone? Is there a line in sand where you think the market will be very bullish. Thanks, Vivek

  2. Also ECB is expected to inject more liquidity into the markets at the end of this month. Since many people are saying that this is liquidity driven rally by FIIs, not sure if these factors are making any difference. Thanks!

    • Hi Vivek,

      Remember all these QE’s and LTRO’s will have an effect for sometime and then will have no effect. Remember, many emerging markets, frontier markets topped just days after QE2 announcement in 2010 (Nov 3rd QE2 announcement and Nov 1- Nov6 market tops). All we have to do is react to price action nothing else. Unfortunately, my vacation time coincided with this bounce back and we have NOT been part of this rally. There are always opportunities all we have to do is wait couple of more days before getting aggressive.

      DOW 13,000 will do the job pushing emotions to the extreme (it already is πŸ™‚ ) – that looks probably today or tomorrow. Bunds have peaked, DXY close to a bottom, PM’s may have peaked, just equities left to catch up.


  3. Jai,

    Have to admit – I got rolled over by the train. It was a high speed freight train!

    To be fair, got lulled into thinking that calling trades on technicals is easy and a very low risk trade. I guess its a BIG reminder that sometimes, liquidity can kill everything else.

    As they say – markets can remain irrational for long…..can you remain solvent ? πŸ™‚


  4. Dear Jai,

    we fully agree that now juicy part of the rally is done … but we could have gone long thru calls on some stocks which given the breakout so that atleast we could have some catch up… if in any case sudden u turn taken by the market …. losses wud have been very limited.

    Can u pls share ur view or some stock where we can take long trade thru calls.


    • Jai,

      Can you please share your view on TATAMOTORS? After the results people are giving insane targets, but I think it is really stretched.


      • Hi Vivek,

        They may not be wrong with respect to TATAMOTORS. The possiblity of 312 to 340 is there. The pullback from 285 to 240 if its orderly without any big gap down or reversal, I would think 312 to 340 is a good possibility.

        Hope that helps.

  5. Dear Jai

    There seems to be a bearish harami candle getting formed on Nifty charts.Can we try to short it using puts and get out once yesterdays gap gets filled. If the correction has started we can go long once Nifty continues moving below the gap

    • Need a follow through. If you do not want to wait for follow through, try 5500 put – seems very cheap at 35-36.

      • i waited till the end of the day and the bearish harami changed to a bullish candle so avoided. the trade…

        • Good and lucky the bus did not run over πŸ™‚ This is why it is never a good idea to preempt the markets.

  6. Sorry all, I’m running a temperature. Not able to post anything today but if there is anything to be done will alert by SMS.

  7. Jai

    No new posts now a days. Just wanted to draw your attention towards Commitment of traders report. There are a huge built up of short positions by Commercial traders as opposed to longs by retail and large traders.

    prateek sinha

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