Wait for a reversal signal – patience pays

Wait for a reversal signal –  patience pays

The Nifty ended in deep red near its important support level on Wednesday as weak cues from global markets and the depreciating rupee weighed on sentiment.
The Nifty has been moving downward for more than a year. The downtrend reversed in January this year when the index rallied smartly from 4,530 to 5,630 in a span of just two months.
“At current levels, chart patterns looks extremely bearish and one needs to remember that bottoms are formed in such gloomy situations. “However, at this stage there is no such indication of a bottom being formed but, indices remaining in a range for few days at these levels could make case of some early signals of a bottom formation. From a trader’s perspective,  the view is that the stage is set up for a bounce bank if the Nifty sustains above 4,960 levels and the Sensex above 16,400.

Based on long term charts 4750 to 4800 remains very strong support and Nifty is unlikely to fall below this in absence of any further negative news flows.

Bank nifty has seen low of 9000 and momentum traders need to watch 9500 levels very closely as a move above this will be very clear indication of  a positive trend building up. There can be very frenzied squaring of short position seen once Bank Nifty sustains the above mentioned levels. In this depressed period,  systematic trades with a very strict stop loss should only be initiated however, medium to long term investment can be initiated on dips on a regular intervals in small parts. Looking from a long term perspective If it is about risk-reward, I think this zone provides a favourable risk reward ratio.

Stuck in short range

STUCK IN SHORT RANGE

There was some upward move seen last week but, such optimism was tempered when it came under renewed selling pressure on Monday. Globally markets were down owing to continued European concerns. While day-to-day fluctuations are reducing investor risk appetite it would be difficult to see the trend change soon. We have been advocating bearish view after the close of Friday and advised traders can short with stop loss of 5300. A sharp decline was seen in momentum stocks like Lovable, Dish TV , Delta corp and VIP inds which is indicating that bulls are also acknowledging the weakness. Markets are currently stuck in a small range and for Nifty future 5100 and 5300 can be considered as short range and between these range bias remains negative. If Nifty manages to break out from this range there could be a very sharp move on either side for minimum 3% to 4%. Based on short term charts averages 5100 will act as strong support and if indices sustain below 17000 and 5100 there could be sharp decline in subsequent days. A renewed buying interest can be expected only once these global concerns trim down otherwise market are likely to become lackluster in coming weeks.

Markets are poised for an upward swing

Amid high volatility Indian markets have closed with loss of 1.34% for the week however, it was the gap up opening of Friday that managed to bring down 2.8% of losses for the week.

In the last two months, markets have been consolidating with so many gap-up and gap-down openings. There are sign of divergence in momentum oscillators, indicating we could see bottoming out around these levels.

Further, looking at charts of last few weeks, the 50-share Nifty index has to close above 4,950 lveel, otherwise it could see a further downside. The market have found support between 4700 and 4750 levels however, it is only stability above 4,950 which could once again raise hopes for bulls to enter the market.

On the long term charts 15,650 on the Sensex and 4,675 for the Nifty are very important levels to watch out for. Based on charts perspective these are the lowest levels since 2010 and have significant down side impact if it breaks.

The chart patterns, oscillators and short-term averages suggest that the indices are poised for an upward swing up to 5100. This looks difficult but, not impossible as bears could become uncomfortable above 4950.

I would like to reiterate that these tussles of bulls V/S bears is getting interesting and will only get over on a close below 4750 or above 5175. The sectors like realty, metals, IT and RIL could see a sharp rally in the swing expected on a close above 4950.

Indian markets may open with a gap-up

 Indian markets may open with a gap-up on Monday

The August expiry closed almost 12% lower which is an exceptional case in the last few years. If we look back, since 2008, it is for the first time the markets have closed with such a heavy loss in a single expiry. In the last week it was the Metal index & the BSE Banking index that lost the most by more than 4 per cent.

At the end of the week we saw narrow gains for most global indices. Investors were cautious before Bernanke’s speech to see if he will set out a plan that kick starts the stumbling US economy. Well, after the speech US markets recovered almost 4 % from their day’s low.

Based on charts, long-term trend is already spoiled as we have been indicating since first week of August. As we watch very closely on charts 4,750 turns out to be a long-term support for Nifty and it is utmost necessary that we get relief rally from the current levels, otherwise the sentiment could get more nervous.

Looking at the closing of US markets after the Bernanke’s speech there is good possibility that markets could open with some gap-up on Monday. In this bounce if Nifty manages to hold 4,875 next week we can expect a relief rally to further build-up, otherwise the down-trend will continue.

Next major support that appears as per the chart formations is 4,650 on Nifty and 15,650 on the Sensex. The volatility is likely to increase in next week as we have two holidays during the week and hence there could be a series of gap up or gap down openings.

Nifty could head towards level of 4,800 or lower

Nifty could head towards level of 4,800 or lower after US credit ratings downgrade

Indian market has been trading with a negative bias since past one week amid the uncertain environment in global markets. On Friday Indian market broke below the critical levels of 5,250 on Nifty & 17,500 on Sensex with high volumes and with negative advance decline ratio of 1:5 which is a big cause of concern. It added further pain to many of the stocks which have broken below their 2009 lows.
Like one gets excited about upside at higher levels it is time to get excited for the downside. Looking at the long term charts, markets have been trading in a broad range for past 12 months and in this period they have made a formation of descending triangle.
This bearish formation has completed on Nifty closing below 5250 on weekly basis. This formation has potential to take Nifty to the level of 4800 or even lower. Many of the global markets have also broken their important support levels that were not seen in last many months.
In coming weeks market could get very volatile before it finds a significant bottom and there will be bouts of up & down days but, a change of trend situation based in on technical study will take some time.
Any bounce will find difficult for market to stay above 5450/18050 levels as that has become pivot level looking at the formations and moving averages of last two years. Due to the gloom and doom situation around the globe, everything could become negative so it is better to not to hurry and wait for markets to get steady at lower level before commitment in long position.
Our markets have fallen on the global concerns and reasons for change of sentiment could also be something global.

Range bound with positive bias

Range bound with positive bias

Market saw another bearish day yesterday in the aftermath of Infosys result & poor IIP numbers. The drag of 12th -July has retraced almost the 40% rise that we had seen from 5195 on 20th June to 5740 on 8th July. Now indices are very near to its strong support zone between 5450 & 5500. Looking to the daily chart structure, the very short-term outlook can now become positive only if Nifty futures manage to cross 5600 otherwise the downtrend will continue. On a longer-term perspective, the chart suggests that we are once again stuck in a band above 5450 & below 5750 with a positive bias. However, this bias can turn negative once Nifty closes below 5450.
Today after a gap up opening markets have attempted to cross the resistance level of 5600 but, failed & is currently trading at 5585. Looking to the advance decline ratio, which seems encouraging (2:1) at this point of time, gives a sense that indices are finding good buying interest at lower levels. In the coming days, the market is likely to become choppy with stock specific activity increasing as result season has begun.

Trend reversal likely below 5250-5350

In my last blog on 13 May 2011, it was clearly mentioned that markets staying below 5500 could see levels of 5400 which is a very strong support. May expiry started at level of 5750 & now stands at almost 7% down in this expiry. In the current expiry, banking stocks have been worst hit and from the frontline stocks, SBI is the biggest loser down by almost 25%.

From the first week of May, as previously mentioned by me that indices can go up to 18000 / 5400 after it breaches the level of 5700 / 19000. Since last few days markets have started trading below 5400 levels. Outlook based on the charts seems bearish as long as it stays below 5400 and further, the situation will become more bearish if it does not sustain above 5350. Short term oscillators are showing some signs of optimism but it needs support based on the key levels.

If indices manage a bounce back & later sustain above 5460 there is a strong possibility of resumption of uptrend. Tomorrow being the first day of June’s Future Option series, it needs to be monitored very closely for any early indication of change of trend.

Market Outlook

We have witnessed three range bound days after a falling streak of nine days. Now, it would seem difficult for the markets to regain their lost trend, but not impossible. Today a possible  increase in volatility can be expected, post the announcement of IIP numbers. Indices are already in a downtrend as indicated in last few days and a bearish trend is likely once it sustains below 5500.

There are three possibilities likely from the current levels as mentioned under.

1. There could be the next leg of a downtrend if Nifty future breaks below 5500 & does not recover.

2. There will be an upward move if Nifty futures manages to breach 5625 as there will be a very aggressive unwinding of short positions.

3. In the event that markets fall below 5500, it can find support & can bounce from 5400 & 18000 as these are extremely strong support levels which will probably not be broken easily.

Markets today

Yesterday, the US markets were at their best levels since March 2009 but, locally our markets ended below the short support level of 5800 which is now a cause of concern for traders. The April F&O expiry started at 5860 & than made high of 5945 during the month, but then could not gain further & tapered down to make low of 5693.

Markets have seen good consolidation being range bound for April after the sharp rally from 5350 levels till the top formed in April. Market needs an immediate bounce above 5850 for regaining the lost uptrend that started in month of March. Based on technical chart  pattern & averages next support on Nifty at this point in time is 5750 & weakness will continue as long as Nifty remains below 5850. Further,  Intermediate trend could be at risk if Nifty sustains below 5700 and does not bounce back thereafter. The long term averages & charts suggest that dips should be bought as structurally the trend is bullish.

Turbulence ahead of result season

Last week was truncated to a 3 day trading week, but we witnessed huge volatility as markets made a low of 5735 & high of 5930 within a day, a decline once again towards the weekend to close at the 5824 level. After the sharp rally from 5350 markets has closed around the 5800 level for the last three weeks. The  short term trend will be at risk once nifty futures sustain below the 5800 level and the medium term trend could be at risk only if Nifty futures break the 5700 level.

Wild stock specific movement can be expected in next few days and hence caution is advised, as markets experience high turbulence ahead of the of result season. Long term averages are in favor of bulls though very short term indicators point towards a downward move.