Sunday, June 21, 2009

Trading Opportunities

A breach of 4400-4450 did happen last week.

The breach took the nifty to 4206 thus achieving the target of 4250.

What next?

1. As per the extracting triangle theory, leg d (488pts and ongoing) is greater than leg b (417 points). The d leg may continue for some more time.The e leg which would follow would be less than the c leg (600 points).

2. The nifty may dip to 4000-4150 levels before a bounce.

3. It may be a time for the pre-budget rally. The monsoons have been delayed and they will definitely have an impact on agriculture. India remains an agrarian economy with more than 70 pc people depending on agriculture for their livelihood.

4. The amount of rains that fall is not important. It is the temporal and spatial distribution. In layman terms, the area over which the rains have fallen and the timing of the rains. We are now on the brink. A further delay of more than a week means serious trouble.

5. Having said that, if monsoon sets in as expected in 2-3 days, the relief the rains bring in and the pre-budget rally would lead to a sharp upward rally till the budgets.

6. This could lead to trading opportunities of 12-15 pc profit. I would prefer sugar stocks and the PSU stocks for trading purposes.

7.I would prefer o buy on dips in the next 3-4 days before this settlement. The short covering rally which took place on Friday was on lower volumes. Indicating further downsides in the coming week.

8. US indices have gone into sideways movement suggesting that up move is limited. This could be the lull before the storm.

To sum it up, if markets correct further, buy on sub 14000 levels on the sensex, stick to quality stocks, exit on 10-12pc profits and also keep a strict stop-loss.

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