Small Downfall Still Expected

As expected, the Nifty did go down today. During the day the Nifty did try to go up but could not go above yesterday’s close. It did manage to reach there but turned down again to close near the lows of the day.

Today we have the 30 minutes chart of Nifty with us. In the last 3 days we have seen that the Nifty has remained within a very narrow range. It may be consolidating within the range. What will happen after the consolidation is over is anybody’s guess. It has support between 5000 and 5010 and resistance between 5070 and 5075. This gives us a total range of 75 points. Once the Nifty decides to move outside this range then it gives us a target of another 75 points in the direction of the breakout. Of course, these targets can easily be overshot too depending on the momentum.

Let us look at the pros and cons of this range. The pros first. The Nifty had gone up about 450 points in the current rally, on the daily charts, without any meaningful correction. A correction/consolidation is healthy for the market. We want the Nifty to consolidate and catch up its breath before it starts running again. We don’t want it to keep running, become breathless and then collapse. So in that regard this consolidation will be good for the market and the results will be known once the Nifty crosses 5080.

And the cons? The latest rally, which was today’s rally, failed to reach its earlier highs near 5070-5080 and that signifies that there is weakness in the markets at higher levels. Another interesting observation on the charts is that it has made a small bearish/inverted head and shoulders pattern within this range. This pattern, though, has not been confirmed yet. A break below 5000 will confirm this pattern. The target for this bearish head and shoulders pattern will be about 4940. At this point, there seem to be more negatives than positives in the short term.

There are a few charts which are giving buy signals and have been discussed below. But one’s own discretion is required because we are expecting the broader market to come down a little. Please note that some of these stocks may be available at a cheaper rate in a day or two but the buying signals remain valid till the stop loss level is hit.

Aditya Birla Nuvo is showing some signs of improvement, as can be seen from this daily chart. What looks positive for the stock is the support for the Relative Strength Index (RSI) near 40, as marked by the circle. A move above 1500, which may or may not come tomorrow, should be positive for this textiles stock. A stop loss of 1375 will be prudent while waiting for a target of close to 1700, where it will meet the resistance line.

Arvind Mills, on the daily charts, has broken through its resistance line accompanied by huge volumes. This is bullish for the stock. The RSI is close to 80 and it is generally advised to wait for a pullback before buying. But seeing the chart, we can see that Arvind Mills has closed near the highs of the day without showing any signs of a pullback. Under these circumstances, it can be bought at the current levels with a stop below 50 for a target of between 65 and 67.

Hindustan Constructions has been moving within a narrow range between 110 and 140 since the last month and a half. It is now near the top of the range and may break out of this range. If it does it gives us a target of close to 170. A stop loss below 125 may be safe. But this stock should be bought only if it were to go above 140. Ignore the movements in the first 30 minutes as they are subject to volatile movements more because of global cues than because of technical or fundamental reasons.

Another very interesting chart of Jindal Steel. As can be seen from the chart, the price has been making lower highs while the RSI has been making highs at almost the same level, if not higher. This is known as a bullish/positive divergence when the price is going down but the RSI is going up. Now it is close to its resistance near 2300 after a pattern which looks like a double bottom formation. Not only that the RSI which was finding resistance near the line has broken through it which gives an indication that maybe the price will follow. Buy only if it crosses above 2300 with a stop loss of 2100 for a target somewhere close to 2750.

Petronet LNG has been in a narrow range between 60 and 80 for a better part of this calendar year. It now seems to have broken out of the range, while the volumes, though increasing, remain significantly low. Not the kind of volumes one would expect to see with a breakout. So, one can take a risk using her own discretion to buy near current levels with a stop loss near 74 for a target of near 100.

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Markets Down, Panic Up

In the past week the markets have lost a good 500 points on the Nifty and nearly 2000 points on Sensex. The swift downfall in the two indices has rattled a large number of investors.

As we have very often pointed out the surest way to win in the market is to control the emotions of GREED and PANIC. Investors who can conquer these will in the long run conquer the markets.



The question facing most of our investors now is “What to do now?” Well, there is no easy answer to this. The markets will do what they have to do.

We are in a long-term bull market. So far the market has not given any indication that the long-term trend has changed so we must assume that the primary trend continues to be up and hence any correction in the market should be taken as an opportunity to buy particularly for those investors who had missed an entry earlier. But any buying should be done only after one gets a confirmation that the Short-term trend has turned up. It is not wise to buy in a falling market.

We at SURAKSHIT SECURITIES have been trying to give you honest advice for the past seven years. We are now embarking on many new initiatives. First of these have been sending out a Newsletter to our clients. We hope it is proving of educational value to you. We shall welcome suggestions from our esteemed clients on how we can provide them better services. Do feel free to put up your suggestions on this site or else write by e-mail at sspl.mahesh@gmail.com.

Col. (Retd.) Mahesh Sharma

Nifty seems to have broken out of the channel shown by the blue lines on the daily chart of the market index. The Nifty fell by more than 200 points on Friday and almost 500 points in the last week. Such a sudden decline can bring about a relief rally. If any relief rally comes, it should find resistance near 5800. Prices above 5800 will convert this resistance into support. Crossing 5800, at this point of time, looks like a distant possibility. The Nifty may find support near the thick black line, which has been providing support and resistance to the Nifty since the last year or so. This line currently stands at 5500.

Hindustan Constructions has corrected from a high of 276 in the beginning of the month to 190 on Friday, a correction of more than 30%. 190 also happens to be a good support for this stock. This may be a low risk buying opportunity since our stop will remain very close. One may consider buying near 190 with a stop below 180. It seems as if the stock may find some resistance near 220, though, the target remains much higher.

Volumes decreasing with each successive top remains a sign of weakness in Petronet LNG. Though, 100 is a support for this stock but in the absence of buying volumes, it could easily be broken. Once below 100, it may continue to fall till it reaches 85.

Happy investing!!!