Sunday, September 30, 2012

Weakness Still Visible on Nifty... Time to Remain Cautious

The Nifty on Friday opened with a gap up opening and never looked back. After opening at 5684 and went up to make a high of 5735 at around 10:30 and after that it was all a consistent slow and steady downtrend for the index. It finally closed at 5703 to close about 54 points in the green but about 30 points off its high. Considering that the opening itself was 35 points up, closing 54 points up does not show any significant strength.

Attached above is the daily chart of Nifty. As suggested on Thursday, the Nifty was waiting for a correction and weakness is already visible on the charts as a bearish divergence was there between the price and the RSI. But a correction was not what the market wanted. The market wanted to deceive some more buyers before going down again. While the Nifty has gone up today, it is still not showing strength. The divergence may continue one more time. But it is at these times that the buyers need to remain cautious. Every rise in the Nifty should be used as a selling opportunity.

Seen above is the daily chart of Nickel on MCX. As can be seen from the downward sloping yellow trendline, Nickel has never crossed 980 since March of this year completing 7 months now below that trendline. Notice that all this while the RSI has never gone past 60 except in the end of August which was really the first sign that Nickel is back in an uptrend. September finally saw Nickel prices go above the 7 month old trendline but overall it was a rangebound month for Nickel. The prices have remained above the trendline, yet finding significant resistance at 980. The RSI, however, is showing no signs of weakening and is showing a lot of strength till now. Looking at the pattern and the previous moves that Nickel has made, it seems that the moment 980 is broken through, Nickel is looking good for a target of 1030-1035. A stop loss of 930 should be maintained for this purpose. 

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Friday, September 28, 2012

A Correction on the Cards

The Nifty closed a quarter of a percent down today losing about 14 points from its previous value. After a reasonably decent opening at 5673, it continued to move up in the morning trades to make a high of 5693 before noon. It remained in the positive till about 2 in the afternoon when the bears took over and pushed it into the negative territory. A last ditch effort to remain in the positive came in the late afternoon trades but could not sustain and the Nifty closed at 5649.50, 14 points in the red.

Attached above is the daily chart of Nifty. Shown on the chart is a trendline sloping upwards connecting the early June, late July and early September lows. Also shown on the chart are two indicators, the MACD and the RSI. Another line is shown connecting the last two most recent highs and a corresponding highs made by the RSI in the same period. As can be seen from the charts, the Nifty made a higher high while the RSI failed to do so in the corresponding period, thus showing a bearish divergence. The RSI has turned downwards and has just penetrated its 9-period signal line, indicating a sell, albeit mild. In the last 20 days, the Nifty has gained almost 500 points without any major correction, a gain of almost 10%. At this stage, a correction is long overdue and signs of weakness are already visible on the charts. A downward correction may take the Nifty back to the upward sloping trendline which could provide support to the Nifty close to the 5400 levels. A steeper downward move could take the Nifty down to the dashed blue line which lies at 5360. This is the line which has provided support to the Nifty once and resistance to it 6 times in the last 9-10 months, a very significant support indeed. So, till we get to that point, it's just a sell on rise market and when we get to 5400 nearabouts it's going to be converted into a buy on dips market.

Seen above is the daily chart of Silver. Silver in the last 45 days itself has shown a rise of almost 12000 points, a rise of almost over 20%. By the looks of it, and using the Elliott Wave Principle, I think we have just entered wave 4 of this uptrend. And if this is a wave 4 then I would expect that the correction would not be very deep (maximum 38%). Secondly, according to the rules, wave 4 should not enter the price territory of wave 1 and the highest point of wave 1 was 56337 and we are a long way from there. A 38.2% retracement, as shown can bring Silver down to 60142. The 23.6% retracement level lies at 62255 and the last 3-4 days, even though have shown a spike below that level but never has Silver closed below it in this correction. This suggests that this 62255 may be a tough level to break. The two consecutive green candles in the last two days show that the price is ready to move up again. An upmove from this point may see Silver finding resistance near 64000 levels and if it crosses that, it can go right past the previous high of 65670 too and my next target for Silver then would be around 68000. But it all depends upon whether the wave 4 correction is complete yet or not. And believe me friends, only time and the markets can tell that, not mortals like you and me. All in all, by the evidence that we've got till now, I would be a seller in Nifty and a buyer in Silver. 

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Wednesday, September 26, 2012

The _____________ is BACK!!!

Whenever movies come out with a sequel, they always have almost the same names but some words are added/changed to signify that it's a sequel. For example, when the new "Golmaal" came with a sequel, it was named "Golmaal Returns", and thus, the sequel to "Hera Pheri" was named "Phir Hera Pheri". It was probably taken from the naming of English movies. Like when the sequel to "The Mummy" came, it was named "The Mummy Returns". But the most famous phrase of them all was in the promos of Terminator 2 when it was said that "The Terminator is back". It was repeated last week when Harbhajan Singh routed through the English batting order and Sir Vivian Richards commented, "The Turbanator is back, and with a vengeance". And it is going to be repeated again and I don't know who's going to give what name to it, but friends, I'm very happy to say that I'm back. 

 And obviously, the question must be going through everybody's minds as to where was I all these days what was I doing. Well, it's a long story and I won't go into the details. But I'll just say that I was busy with opening a few other verticals in my business. I wanted to start sharing my knowledge by teaching Technical Analysis and I started my own Technical Analysis Academy. I wanted to share my knowledge with people all over the world and I've started writing a book. I wanted to contribute in the improvement of people's wealth and I've started giving research calls in MCX to our paid clients. So, if you can bear a commercial, anybody who wants to subscribe for the research calls in commodities (MCX) or if you want to enrol in the next batch of the Technical Analysis course that we are starting, do send in your queries to and I'll get back to you. 

 Yes, I'll be back with my view on the markets and my view on selected stocks and commodities from tomorrow. But my view would be limited to positional views. The intra-day views, of course, would be given on a paid basis. But one thing is for sure, whether you pay or not, this blog is going to be free and you would love reading the posts on a daily basis. So, keep visiting. And yes, please do subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future. 

Happy Investing!!!