Detailed Nifty Analysis 24 Jan 12

1. Detailed Nifty Analysis 24 Jan 12

2. A brief round up of the immediate past views on Nifty: TGT hits. Advised at 5400 5000. Also told below 4950, Downside till 4400. 4950 breaks Given long at 5155 We go short (news based) At 4740 which goes wrong. Exited 4900 4500 comes

3. Markets moving up. 10% rallied. Is that bullish? A 10% pullback alone does not make a case for a bull market. Markets have everytime pulled back ~15% from lows and have been making lower highs and lower lows. 5200. 4750. 4500. What are these? The lows. 6300. 6000. 5400. 5150. What are these? The highs. What is a bull market? A market with higher lows, higher highs. What is a bear market? A market with lower lows, lower highs. 5200 to 6000 Then why is it looking like a bullish market? The reason is only one – The pullback rally has been non-stop and very broad. 4750 to 5400 4600 to 5150

4. The current wave structure No bull run is complete without a final vertical rally. Similarly, no bear run is complete without a vertical fall. As it is clear from the chart that 5280, the channel resistance, should hit, and should be seen critically. A decisive move above 5300 would mean that the downchannel is broken and markets are now bullish. Note that bullish does not mean immediately bullish. May dip after 5300 but that would be an area to buy. The downchannel has been very linear in nature. If 5300 breaks, then this would indicate that 6300 to 4500 was only a consolidation of a quick 2200-6300 move and tgt 8000.

5. The possibilities ahead Case 1: Nifty breaks touches 5300 and makes a higher low > 4700. Case 2: Nifty breaks touches 5300 and makes a lower low < 4500. Case 3: Nifty breaks 5300 and moves directly up.

6. Summarizing Nifty’s Technical Observations Nifty is in a downchannel and therefore has been bearish since over an year now. There can be 2 cases: 1) It is a part of 2200-6300 pullback, which means tgt above 5300 -> 7000, 8000. We say this because a perquisite of a consolidation phase is that it should be linear channel, and that it is. 2) It is not a part of 2200-6300, which means it is an independent new wave, and the downchannel should end by a crash. 5280 is a very important level, which if breaks could cause the downchannel to end. Else a touch and go would mean 2 possibilities – 1) 4700 and then 5300 and then 7000; 2) 4400 then 4000 then 5300 and 7000. If Nifty moves directly above 5300, it may directly become bullish. The breadth of market, and non-stop movement from 4700 to 5150 is something new.

7. The younger sister, Bank Nifty: Like main Nifty, Bank Nifty is also in a downchannel. This is a fact, and NOT a view. The channel resistance of this downchannel is 10,200. If it breaks it, then that means it is out of the downchannel. There is a possible Reverse HS in the making, and a corresponding resistance exists at 10,350. Combining 2) and 3), we see that even if 10,200 breaks, Bank Nifty won’t rally immediately. If Bank Nifty does not breaks 10,200, a lower low maybe possible. If not a lower low, then atleast a higher low of 9000 zone could be the case. Once past 10200, 10350… 14000-15000 should be the next areas.

8. Dravid for team Nifty – SBI. In a downchannel. 2070 is the level in SBI above which it should come out of it’s downchannel. Unlike bank nifty, and nifty, SBI has been seeing a base building pattern indicated by orange. Lower lows, same highs means a base is building for a major rally. The resistance of 2070 coincides with the base’s resistance. Hence it is a resistance made by 2 different reasons. Once above 2070, expect a major rally in the stock.

9. Dhoni for team Nifty – Infosys. Batting against M. Infosys is not in a downchannel. But it is also making lower and lower lows, assymetric in nature. There is a possible M formation, indicated by black. Per this M formation, if 2550 breaks, 2350 should be the immediate target for it. There is a double top at 2900. Traders may long Infosys till 2550 holds. And certainly above 2900.

10. Sehwag for team Nifty – LT. Blessed with a recent V. The father of all capital goods and construction sector, LT. It is in a non-parallel downchannel. It recently made a V pattern. Note that whenever it made a V, it rallied. Whenever it made an inverted V, it fell. The same has formed at current levels. The V indicates that there should be a rally and it has become a buy on dips sort of a scrip. The upside maybe capped to at 1600 zone because of the implications of downchannel. Note that in past, whenever there is a V, it did not rally immediately. It did rally but after a few dips, with higher lows.

11. Pathan for team Nifty – Maruti. Just out of the downchannel. Poor results. Growing competition. Good margins by selling just 1 engine – 1.3 LtrDDiS in all cars. Attractive marketing. Foolish customer base. All in all – a good case for going up. The stock just came out of a downchannel, and has sustained above that. Now, going forward, it should either move above 1180-1190 where it could be bought for tgt1 1300+ or it should be accumulated around 1050-1030. Going forward, given that the interest rates have clearly peaked and there should be a rate cut cycle… It should be a buy. The stock and the whole sector could give index atleast some cushion.

12. Laxman for team Nifty – ONGC. Making a base. Out of a falling wedge. Since it was a wedge, the bandwidth of the movement range has already reduced, which can lead to easy upmoves. Immediate resistance 280. Above this, a 10% move is possible. Could give Nifty a very thick cushion. Should become a strong pillar of support, and puller of rally.

13. Sachin for team Nifty – Reliance. Confused unlike Tendulkar. Terrible performance in Q3. Q4 performance is a replica of Q3. Desperate measures like buyback are being taken to save the stock from getting beaten down. Company seems to have lost faith in the core business and is finding new areas of growth. Technically too it seems confused itself, and very confusing too. It is making Nifty a confusing game too. The stock seems to have said NO to technicals and is moving on its self-defined path. Whatever it is, it is headed down and needs more moves for a definite view. A bleak view is that above 840, tgt 920 zone. Else, 700, 650 are not impossible.

14. Zaheer for team Nifty – Sail. Just out from a downchannel. Sail, a biggie in metal space, has been on a downchannel since september 2010. Has fallen continuously from 235 to 75 in this fall. On immediate basis, it has a resistance of 98. Above 98, 110 is the target. Other metal stocks may follow the trend. Could be a pillar of support of the rally.

15. Summarizing 5280, 5300 on Nifty FUT are important levels. Watch closely. If breaks, it may rally immediately or dip a bit. If that happens, upside is intact. If does not breaks 5280, and falls, then 4700 type levels are possible. If situation worsens, 4400 is possible too. LT, Maruti, SAIL, ONGC, SBI look strong. Bank Nifty has upside resistance of 10200, 10350.

16. Why were technicals much more accurate in Nifty till 2009? Ask anybody about Nifty, he will say – “oopar ka slbhi hit, neeche ka bhi”. Why so? (Just my personal views, need further read) Nifty is now based on free float stocks. Which means – if tmrw promoter changes it’s total holding, the free float will change. Stocks are given weightage which maybe modified. I personally have not seen any blue channel giving info about that. Stocks are quickly replaced by the stocks which might not be of the sector even. Now, how can somebody imagine similar contribution of an auto stock to that in place of a telecom stock? Sensex is a much better index for calculation. $ Re and Euro have made the equation much more complex. These have made MT analysis difficult. Long term and Short term analysis remain unaffected.