Sunday, July 19, 2015

Time for some correction

The markets have been rallying since hitting 7940 and it is time for the markets to take a small breather. Let us see what can be the triggers for the correction.

1. The markets broke through the falling channel which had a height of about 600 points. Technically, the markets should rally up to 8900-8950 levels considering the breakout from the channel at about 8350.

2. The FIIs have turned positive and become net buyers for the past entire week.

3. The Parliament session begins on Tuesday and is expected  to be stormy with Vyapam and the Lalit Modi issue hogging the limelight. The land bill is most likely postponed to the winter session and the GST Bill if it is passed is a big positive.

4. The monsoons have turned into a deficit and are at a minus 6 pc level. Still, the things are not  too alarming.

5. In the very short term, the expiry is cose by and usually the markets cool off before expiry if they have been  bullish earlier.

6. A correction of about 200-300 points is very likely and most welcome before the markets try for 8800-8900.

7. If the markets continue to rally from here, the rise would be unsustainable and may lead to a sharp fall.

There are now 2 options before us:

1. The markets rally to 9300-9500 and make a new high or

2. Rally till 8800-8900 and then fall to 7500.

In case of either of the options, it does not make sense to buy now but wait for some minor correction to buy.

8300-8400 level would be a somewhat safe level to add positions.

All the positives have already been factored and we may see an intra day rally before some correction.

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