Saturday, May 1, 2010

Three Downward Triggers to Watch For

As expected, the expiry happened around 5250. There are 3 major triggers to be watched over for the month of May. The old adage goes "Sell in May" and go for a vacation. We did not have the customary Jan-March correction so we are due for one in May.

The 3 triggers are:
1. European Sovereign Debt problems
2. 2G Auction scandal.
3. US Goldman issues.

Lets take them 1 at a time.

1. European Sovereign Debt issues.
It started with Greece and is spreading to Portugal, Spain and Italy. Spain has an unemployment rate of 20%. There have been ratings downgrades for Portugal as well as Spain. Things could spiral out of control pretty fast. Its not the first cockroach that causes the panic. Bear Stearn came out in March last year. It was Lehman in September that sparked the panic. Greece has been hogging headlines for 3-4 months now. The next country to go down will cause panic.

2. 2G scam
This makes Bofors look like a picnic. Bofors was 64 crores. 2G should be 40000 crores. The scam is simple. Issue spectrum in 2008 at rates which are of 2001 era and issue spectrum on first cum first served basis. The audacity is mind blowing and further the leaks which show that PM advice was ignored. The Telecom Minister should go and along with him the Prime Minister. Divestment total proceeds are marked as 35000 crores this year.
Its up to the Opposition to make the government pay.

3. US Goldman issues.
Goldman is the big daddy of investments in the US. Talk of criminal investigation and all makes people nervous. The way the markets tanked on past 2 Fridays gives a fair idea of what is to come.
This may be the weakest of 3 downward triggers, but cannot be ignored.

4. RIL-RNRL dispute verdict is expected to be out next week. I somehow feel SC will uphold the High Court verdict in favor of RNRL.

All in all, the reasons for the market to go up seem to be diminishing. Results are out of the way.Good monsoons can be one big trigger.
Gold hit all time highs at about 1182$. In rupee terms available at Rs 1670 per gram. This may be one last chance to get in at these rates.

1. 5200 is a very strong support. Multiple reasons to support this. Max OI is at 5200 put. It is a monthly pivot level. the 50 EMA comes around this level. The 5 week low ema which is often the last support is at 5189, as also the Bollinger Band bottom at 5189. I expect 1 more bounce from 5180-5200 levels to maybe about 5250-5270 levels before breaching those levels.

2. We are moving in a downward channel, with support around 5180.Breach of these levels should take us to 5050.

3. The NMA indicator has given a sell. It gave a sell, then a buy and now again a sell. Such see-saw happens just around a major trend change.

1 comment:

  1. hello nishit ji,

    sir, i am from bhopal. i am new in market. i want to do trading in nifty either intraday or swing. here i need your help. kindly tell me how usefull nma signals in this regard. or tell any other software that gives buy/sell signals. one more request please tell me any good site or mentor where i learn basics of technical analysis. my email id is please help.

    thanks and regards
    sanjay kaushik