Sunday, July 31, 2011

Game Changing Week possibly ahead

The coming week is rife with multiple possibilities. The Deadline for US Debt deal is August 2nd and any delay out there could spell doom for the markets. Lets explore all possible Technical and Fundamental Factors.

1. I had a look at the Elliot Waves and they paint a somewhat bleak picture in the near term.

Assuming the rise from 2252 to 6339 was Wave 1 and Wave 2 started in November 2011.
Wave 2 will be sub divided into A, B and C.
Wave A was 6339 - 5177 = 1162 (November beginning to Feb beginning a period of 3 months)
Wave B was 5177 to 5944 (Feb beginning to April end a period of almost 3 months) and Wave C commenced from end of April.

C -1 was 5944 - 5196
C - 2 was 5196 - 5740
C -3 on going

If this is the case then C-3-2 will end soon and the dreaded C -3-3 will start with a massive gap down.

A Wave was about 1200 points so C can be 1200-1800 points giving targets of 4200 and 4800. This will be the buying opportunity of a life time.

2. India Infoline is coming up with Debentures offering up to 11.9 % interest per annum. A small exposure can be considered.

3. Gold is sustaining at new highs. In case of a sharp dip when debt deal gets announced, it would be a buying opportunity.

4. The 5500 - 5700 Range has been broken giving a target of 5300 as first target. 5400 would be a support area and shorts can be covered here and fresh shorts taken on bounces.

5. Event based trading is always difficult and one should always trade hedged.

Sunday, July 24, 2011

Nifty: Technicals for the Week

The Markets ended up 52 points on the Nifty thanks to a stupendous rally on Friday. The coming week is important because RBI policy announcement on Tuesday, then important Results to come, F&O expiry and then US Debt Crisis Resolution. Lets take a bird's eye view about the Technicals.

1. The Markets are still trapped in a range. I see a break out happening above 5700 or below 5500. Till then its a range bound market with a negative bias not withstanding the Friday rally.

2. We run into a the downward trend line joining the tops from 6339 at 5660. We need at least 3 closes above this to declare a breakout.

3. The 200 DMA comes in at 5718. There is a cluster of resistances from 5650-5720 to clear.

4. Let us look at Elliot Waves. Assuming,
Wave 1 was 6339 - 5177
Wave 2 A was 5177-5944
Wave 2 B was 5944- 5195
Wave 2 C can be till 5962
This is the alternate count.

Preferred Count is
Wave 1 6339- 5177,
Wave 2 5177-5944,
Wave 3 5944 - 5195 and ongoing which can be subdivided into
Wave 1 5944- 5195, Wave 2 ongoing. This count could be invalidated above 5944.

5. The Standard indicators are all in Downward momentum and its is an Option Writer's market.

6. Looking at fundamentals, I feel this is the last rate hike. Reason is growth is slowing down, Inflation is showing signs of being tamed.Also, I have been noticing that Banks have been very stingy in hiking Fixed Deposit Rates. This means that they expect Rates to come down within next 6 months. The Reverse Repo rate is already at previous highs. The Repo Rate last time went till 9 % and now is at 7.5 % so, we are approaching the end of Rate Hike cycle.

7. The entry into Gilt funds or NCDs of India Infoline at 11-11.5 % Rate of Interest is a good entry point now.

8. Gold has been very bullish and technically is looking awesome on the charts. Buy the dips and year end I feel we could see 1800-2000 dollars.

9. I am confident the Debt Ceiling will be raised soon and there could be an initial breakout or false breakout soon.

Trade hedged and trade light.Expect volatility the next week, and expect some big bang announcement next weekend.
Supports at 5500, Resistance at 5700

Wednesday, July 20, 2011

Chart of the Day: Bollinger Band Contraction

Bollinger Band contraction means breakout or breakdown coming. Check out the last time when they contracted before breaking down. Watch 5709 and 5521 closely. Break of either implies good movement in either direction.

Sunday, July 17, 2011

Gold has given a breakout Technically

A few weeks back, we had uploaded a presentation on Gold. Lets re-visit the presentation and a few short terms pointers.

Gold has given a solid Technical Breakout by Closing above the previous Intra Day high of 1577 dollars, 3 days of the week and on a weekly basis. The next target should be the psychological 1600 USD mark.

The previous top at 1577 dollars will now work as a support.

How do we play Gold from here?
The Rupee has strengthened against the Dollar to Rs 44.54 on the back of the so-called FII inflows. This means that whenever there is a sell off in the markets Gold will rise in rupee terms.

For Gold to rise, even if it remains at current rates in USD terms, the rupee weakening will do the trick.

If we look fundamentally, for Gold things are looking up even more. The European economies continue to flounder, the US will have to go for QE-3 soon.

One should look at Gold as an Investor and continue adding Gold at every dips or when one has some extra cash to put away. 1-2 gms at a time all add up at the end of the day.

Technically, the markets are in a range. Expect the range of 5500- 5650 to break soon, giving targets of 5400 and 5800 on either sides.

The Results are out and the early ones are not too great. Usually, the better results come out earlier.

So, enjoy the rains.

Wednesday, July 13, 2011

How to Use Covered Calls

Individual stocks in your portfolio may be going nowhere also. Can you generate some profits without selling your stocks and losing out on dividends or bonus issues? Covered Call writing may be just the strategy for you.

Continue Reading at:

Sunday, July 10, 2011

Technicals for the Week: Key Week Ahead

Last week, I said it was Consolidation time and the markets closed about 0.6 % up for the week. The coming week kicks off the Results season and is a key week for the Markets. We have the Infy and TCS Results, IIP numbers and the inflation numbers.

1. The rally has reached a crossroads now. The markets have retraced by 73 pc the fall from 5944 to 5195. They have kissed the 200 SMA and corrected. Sustaining above 5750-5800 means a new new bull run has started.

2. The Indicators like Stochastic, RSI on a shorter time frame all have given sell signals. This implies at least a correction to the whole up move from 5196 to 5740.

3. If its merely a correction then targets could be 5532, 5468 and 5404.

4. 5605 was a resistance many times and will be a support now. The largest correction has been 95 points so far in this up move. So below 5635 we can expect steeper fall.

How do we play it?

For fresh upside wait for the 200 SMA to be broken. This comes at 5742. This is crucial because previous high of this rally also is at 5740.

On the downside, 5635 followed by previous low at 5610. So, we wait for breach of 5600 for shorts.

Supports will kick in at 5588 and 5543.

Trade light and wait for decisive signals.

Sunday, July 3, 2011

Technicals for the Week: Time for a Breather

The Markets have zoomed from a low of 5196 to a high of about 5705, a jump of 509 points on the Nifty in about 10 sessions. The Technical Indicators are now in the overbought zone and time maybe for a breather for the markets.

1. We could label the down move from 6339 as a A-B-C correction. A was 6339-5177, B was 5177-5944. C could be sub divided into Wave 1 5944-5196, wave 2 is ongoing. Wave 2 could be subdivided into A from 5196-5705 and Wave B may have started. Assuming it is Wave B of 2, targets could 5511, 5451 and 5390.

2. Taking time into consideration,

Wave A = 6339 - 5177 = 1162 points (74 sessions)

Wave B = 5177 - 5944 = 767 points (39 sessions)

Wave C, Wave 1 5944 - 5195 = 749 points (50 sessions)

Wave 2 has lasted about 10 sessions so far.

3. The short terms stochastic have given a sell call.

4. The Bollinger Band has been touched on the upper side which is first indication of a sell signal.

5. The trend line joining the tops of 6339 and 6151 was touched at about 5705 and we are seeing a reaction from those levels.

6. The 50 EMA at 5518, the 200 EMA at 5575 and 20 EMA at 5491 should be supports for this correction.

7. Gold has given a decent dip and this is an excellent buying opportunity to buy UTI Gold ETF at about 2100 levels. It has corrected about 100 rupees from its top.

8. The Global problems are still not over. QE-2 has ended and the Greek Debt rollover has just postponed the inevitable. Use the rally to pare the longs.