Saturday, July 18, 2009

At Crossroads Again

It was a spectacular rally this week. We bounced off 3918 and are at 4374 in no time.

So where could we head from here?

Results are pretty decent. TCS results beat the street. They have tightened the Operational efficiency. In plain terms, cost cutting rather than new orders.
For me, the most significant result was that of IBM. IT looks to have arrested the downward spiral. When the recession ends IT will bounce back the strongest because of pent up demand. The companies which make use of recession induced belt tighteneing will be the ones which will prosper more. Infy and TCS lead the way.Infy too had increased profit margins.
Larsen Order Book size was smaller than expected. They have a sufficient order book to execute. Not a matter of concern.
Monday has the RIL-RNRL hearing in the Supreme Court. That will set the trend for the week. Chief Justice of India will head the bench hearing it, KG Basin Gas is the key to India's economic success and this needs a speedy resolution

If we see the elliot waves and take this entire as a down move
we have Wave 1 down 4693- 4143
Wave 2 up 4143- 4484
Wave 3 down 4484-3918
Wave 4 up 3918 - 4390

Now wave 4 should have ended at 4267. In extraordinary cases, it can extend upto 80 pc to 4370 with margin of error of 2-3 pc.

This means we are at crossroads.

Also, 4484 - 3918 tooks roughly about 6 sessions. Faster retracement means trend has changed and the above countis invalid. This means Monday-Tuesday we should cross 4484.

The monthly pivot is at 4375 and we cross this 4609 else 4058 - 3825.

So, all 3 methodologies suggest we are at crossroads.


Lets see how the eclipse plays out. Thanks to Natasha for the below link:

India is better placed than other economies because of domestic demand. P/E of 15 at EPS of 800 would suggest 12K is ideal for buying. Closer to 15K risk reward starts veering more towards the risk part.

Markets keep throwing buying opportunities. The trick is to keep cash in hand and keep holding.
Holding shares for 5-10 years at least make people rich.

1 way of doing it is the Free of Cost concept. Suppose you buy 100 HDFc Bank at Rs 1000. When it goes to rs 1500 sell half. (Depending on market conditions)

50 shares cost you Rs 500 now. Again, when market dips buy 50 shares to make your shares 100 in number.

Every year, you will get 1 exit and entry point. So at no point, you have no shares and your cost keeps coming down. Once it comes to some ridiculous low price and is blue chip stock, keep it and forget it. The dividends will pay you big time.

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