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Archive for March 2011

NIFTY FUTURE

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Fibonacci averages have long been considered a strong indicator for various trend identification , trend reversal etc. However the averages which are widely used are 5,13,55,200 etc.

I have tried the following two Fibonacci averages to identify LONGER TERM TRENDS in the market(NIFTY). These are 89 DEMA and 233 DEMA.

Fibonacci series includes: 5,8,13,21,34,55,89,144,233,377…etc

Specifications:

If you look at the chart below:

  • The red line is the 89 DEMA.
  • The green line is the 233 DEMA.
  • BEARISH CROSSOVER = IF 89 DEMA crosses 233 DEMA on the downside.
  • BULLISH CROSSOVER = IF 89 DEMA crosses 233 DEMA on the upside.

Historically:

Whenever the intersection of the red line and green line has occurred on the daily charts of Nifty the trend for the markets have reversed.

Point a: BEARISH CROSSOVER: This happened at the start of the bear market of 2000. The prices were in significant downtrend after that period, as we can observe from the chart.

Point b: BULLISH CROSSOVER: This marked the beginning of the strong bull run of 2003. Even the sharp corrections (lower circuit) in the markets could not change the downtrend.

Point c: BEARISH CROSSOVER: This marked the end of the bull run from 2003-2008.

Point d: BULLISH CROSSOVER: This was the start of the sharp rally from 2009 March lows, wherein Nifty came close to breaking the all time highs.

Currently:

The moving averages are in a very close distance of breaking the sharp rally. The difference between the two averages is just 85 points.

If the crossover happens on the downside, I think there is a definite case of a movement of atleast 10-15% down on Nifty from that level.

However for Nifty to sustain the strong rally, we need to have a swift and high price movement on the upside very soon, only then we can change the falling direction of the averages.

These are potent signals for our market, if it gives a bearish crossover, a retest of 5250 and below can be a likely case.

If the averages manage to turn then we are in for a retest of 6000+ levels again or higher.

Just to put the facts correctly: Such crossovers have happened 15 TIMES since the year 1996. And it has given a hit ratio of 100%. So this is definitely something to watch out for.

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Written by Kunal Bothra

March 29, 2011 at 12:31 pm

Posted in Market Update

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“Crude” Reality

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Brent crude has consistently stayed above $ 110/bbl despite the disaster in Japan and it is safe to assume now that crude will continue to stay at such elevated levels as long as the unrest in the oil producing countries continues to simmer. The Libyan ruler Gaddafi continues to call the shots even as NATO is carrying out targeted air strikes within Libyan territory. The Yemeni President, after firing his entire Cabinet, has offered to step down but the protestors are intent on regime change. The situation in Bahrain has turned serious following the entry of Saudi troops to quell the uprising in Bahrain. The Saudi King has taken pre-emptive measures by announcing economic benefits worth $ 36 bn for the “betterment” of his people.

We remain positive on upstream companies like ONGC and OIL India as they have a neutral-positive correlation with crude prices. Moreover, both the stocks look undervalued at current levels. The state owned OMCs (IOCL, BPCL, HPCL) would continue to bear the brunt of uncertainty on subsidy sharing which would keep their shares depressed. Pending resolution of its acquisition by Vedanta, Cairn India should benefit from the huge rally in crude prices. Latest indications from the Govt. of India point towards letting the deal go through and leaving the contentious issues to be settled through arbitration.

The huge calamity in Japan has resulted in closure of ~1.5 mmbbld of refining capacity and has led to rise in diesel and fuel oil spreads. It is expected that Japan would use diesel, fuel oil and LNG for fulfilling its energy needs to replace the nuclear plants that have been shut down. Indian refiners, being diesel centric, should benefit from the surge in diesel spreads. Reports of a fall in gas production from KG-D6 are acting as a dampener on RIL; however, its refining & petrochemical divisions are performing well.

We however believe that the global economy is not strong enough to withstand elevated crude prices for a considerable length of time.

From the desk of : Deepak Darisi

Written by Fundamental Side

March 28, 2011 at 2:55 pm

Trendless Trend

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Lackluster & low volumes is the only description that can describe yesterday’s trade, but some buying activity was seen in select midcap stocks. Many technical parameters are pointing towards a weakening of the trend. As global markets have closed positive our markets are good, but the big question is whether this can be sustained. Based on Nifty levels, 5445 will be the resistance for the day & 5380 could be a critical support level.

There could be further rise in directional movement if markets trade away from these levels. To maintain the upward trajectory today Nifty needs to stay above 5450. Any increase in  volatility does not signify much unless, eventually it breaks out of the range of 5225 or 5545 levels on closing. Based on the chart formations a strong tussle between the bulls & bears is currently underway.

Caution is advised on any trading position as markets likely to become very choppy as a series of false breakouts have been observed in many stocks. From here-on the markets needs a strong reason to breakout from this range & only then can we could see an increase in momentum.

Written by Rakesh Gandhi

March 22, 2011 at 1:57 pm

Market Momentum

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Markets today have once again shown signs of nervousness and the trend that I have been noticing for the last few days is that volatility is key without any conclusive direction. There have been many false signals emerging in last few weeks.

To maintain the upward trajectory today Nifty needs to stay above 5450, below which it could once again go down to 5400. The increase in  volatility does not signify anything unless, eventually it breaks out of range of 5225 or 5545 levels on closing.

Based on the chart formations a strong tussle between the bulls & bears is currently underway. In last few weeks we have seen domestic scams, outflow of funds from emerging markets, rise of crude on Middle East concerns, Japan earthquake and tsunami coupled with the scare of nuclear fallout effects thereafter and the RBI policy, out yesterday. All of the news flow has been absorbed while markets traded between this range of 5225 & 5550. From here markets needs a strong reason to breakout from this range bound trading & only then can we could see increase in momentum.

Written by Rakesh Gandhi

March 18, 2011 at 12:34 pm

Innings under Consolidation

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After the sharp fall witnessed in the first month of the new year, the Indian benchmark indices for the last few weeks have been consolidating in a range.

The moves in such consolidation have been very sharp and swift.

The idea of a rangebound market is a difficult one to comprehend in terms of a trader’s point of view, because in such cases he is likely to lose more money than in a trending market. Ideally for any ‘trader’ in such markets, with each losing trade the trading capital has to decrease, but as the human feeling of inevitability grows, the size of the bet goes higher.

It is however noteworthy that there are always three types of trends in the market, uptrend, downtrend and consolidation. Yes, consolidation is also a trend in the market.

Let us take a closer look at consolidation pattern: After a sharp trend in the market,(either uptrend or downtrend), the markets likely fall into consolidation. Now why does this happen.

Generally as the market witnesses a sharp rise/fall in prices, there are a lot of new investors and traders who enter into the market and with each win their bet goes higher and higher. After a critical level has been attained by the market, either in terms of a new resistance being broken, or a new support being breached, the sentiment just intensifies and we see a flurry of activity in select stocks and indices. At every breach of a support or a resistance, the activity intensifies, because there a number of stop loss orders for shorts or longs, respectively, which gets triggered, and investors are looking to exit and book their losses. However, there are a section of investors who have a slight different perspective in such times. They believe that either the market is highly overvalued or highly priced in a rising trend or they are of a belief that the stocks have been hammered to pulp, and that this is a strong level to start nibbling in from a longer term perspective. Either case will lead to a strong bout of volatility in the market, with the markets trying to find a suitable top or a bottom.

The type of consolidation also differs in different market conditions. For those who trade on breakouts or breakdowns, their portfolio becomes subjected to a lot of whipsaw, as markets either have a contracting range of a expanding range during consolidation.

Also in such range bound markets, the technical indicators generally provide a mixed picture of the markets, hence I believe that the best way to sail through such times is to trade light, and nimble. Adhere to the stop losses and trade only liquid stocks. In falling markets liquidity generally diminishes thereby making it difficult for the investor to exit his full quantity of stock at lowest impact cost.

Written by Kunal Bothra

March 14, 2011 at 1:12 pm

Posted in Market Watch

Tagged with , , ,

Markets Today

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Though the indices opened with a gap down yesterday, an immediate recovery was seen in the early morning trades. Volumes were low while indices closed near the resistance level. As we had been discussing in last few days 5400 and 18000 is now trend changing level between the band of 5225 to 5545. On upside 5545 & 18500 is key level above which we expect market to touch 5700.

We have been mentioning this possibility for the last few days as the expected completion of bullish pattern will be seen once the market closes above 5545/18500. Further momentum is also likely to increase as soon as 200 DMA is crossed.

It would also be worthwhile for traders to watch how the bank nifty behaves near the breakout level of 11100. Today markets have already attempted to cross 5545 in early morning trade but at this point are trading at 5500 levels which is a cause of concern. To maintain the upward trajectory today Nifty needs to stay above 5450, below which it could once again go down to 5400. The increase in  volatility does not signify anything unless eventually it breaks out of range of 5225 or 5545 levels on closing.  Based on the chart formations a strong tussle between the bulls & bears is currently underway and believe the bulls may come out on top.

Written by Rakesh Gandhi

March 9, 2011 at 3:22 pm

Posted in Market Watch

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CEMENT BLOCK

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CEMENT MONTHLY –February 2011

 

 

 

 

 

 

 

Industry as a whole has performed better in the month of February v/s previous month. ACC, Jaiprakash Associate & Dalmia Cement dispatches grew by 17%, 36% & 20%  YoY respectively mainly on account of capacity expansion. However, most of the other cement companies reported a YoY sales growth of 3.5% to 5%.

The recent change in the tax structure from 10% excise duty to 10% ad valoreum duty as well as 30% hike in the coal prices by coal India negatively affected the sector. In response to this, cement companies hiked cement prices by Rs.6-10/ 50 kg bag across regions. In lieu of rising raw material cost, cement industry has already raised the prices by Rs. 25- 40 for a 50-kg-bag in the last two months. As the industry has learnt to maintain price discipline, we do not expect prices to soften for the coming few months. We expect a better cement demand in FY12E v/s the current year mainly due to increased infra spending by the GoI. We retain our POSITIVE stance on the sector. We have NEUTRAL rating for ACC , BUY on Heidelberg Cement & SELL on Shree Cement.

From the desk of AMI SHAH

Written by Fundamental Side

March 8, 2011 at 5:53 pm