Commodities Now Looking Good

The Nifty after touching a high of 5777, just short of the previous high of 5815, has turned down again and closed 55 points in the red and has come back into the range of 5630-5730 that it was moving within. As of now, there is nothing to suggest that the Nifty has finished its uptrend and therefore we shall wait for some more time before taking short positions again. However, there is one thing that is causing concern. On 1st Nov, the Nofty made a high of 5649, while the next day the low was 5682, a gap of 33 points which was still unfilled. The lowest low the Nifty had made since then was 5679. Today, it made a low of 5677 and thus has come back into the 'uncharted territory'. This suggests that the gap may now be filled. While it should find support near 5650, but a move below that would be bearish.

US Elections Today - How Will The Markets React

Finally, the day has arrived. The campaigning is over and the battle between the two candidates is over. The war, however, hasn't ended. The next battle will be fought between the voters and it will be they who will decide the fate of the two candidates, President Barrack Obama and Mr. Mitt Romney. As of now, on the eve of the elections, the situation stands that Obama may have a slight advantage over Romney. Now the question is how are we affected as investors by what happens in the US? This post is written just to help us understand the consequences of the US elections.

How To Get STAGGERING Returns?

Nifty went up for the second successive day today closing 25 points in the green. As mentioned yesterday, there are signs visible that we may not go down further and that the trend might reverse from the bottom made yesterday. Though, a pullback to 5630 was expected even in case of a bearish trend but the fact that it made a high of 5650 and that it even closed above that level of 5630 (closed at 5645 today) makes it look like the trend may have reversed now. If I have any short positions, I should be closing them now and start buying in small quantities. A confirmation that we are in an uptrend will come when the Nifty closes above 5730. We should be looking to fully invest our money at that stage.

A Sudden Bullishness Seen on Bearish Charts

In the first half of the day, the Nifty was still uncertain about which way to go. It opened slightly in the positive, came down in the red, went to the greener territories again and then back into the red. Just like a yo-yo. But then a surprise came. The Nifty suddenly started going up at around 1 pm and then there was no looking back for it. It went up as if it was never bearish. But does that mean the bearishness is over. Maybe, but we would need more confirmation before we change our view to bullish. What's going to happen in the future, only the market can tell us. We can only make predictions and predictions can sometimes go wrong too. The only mantra to success is that we recognise the change of trend as early as possible and not try to fight the markets when the markets have proved us wrong. Maybe, just maybe, what we saw today was the first sign of the trend changing.

Water, Fire and Darkness - Thanks to Sandy

So, the Nifty was indeed waiting for the RBI credit policy to act as a trigger to break the range. It finally went below the lower end of the range at 5630 and closed well below it at 5597, almost 68 points in the red. Well, some people would argue that it could be because of Hurricane Sandy too. I don't deny the fact that Sandy might have had an effect but had that been the case, the market wouldn't have traded in the positive before the credit policy was made public. The mayhem started at 11.

Maybe The Credit Policy Will be The Trigger

Another narrow range day for the Nifty today. Opened with a slight gap up, continued its way down most of the day but showed a smart recovery of about 20 points in the last hour of trading and closed slightly in the green - just 1 point up. As of now it is continuing to trade in the range of 5630 to 5725. The cabinet reshuffle had virtually no effect on the Nifty. Maybe RBI credit policy will act as a trigger for the breakout from the range. Let's see whether it does happen tomorrow or not. The market is expecting the rates to remain unchanged or at the most a 25 basis points cut in the CRR.

Still Rangebound, A Range Breakout to Decide Direction

It was again a narrow range day for the Nifty. A total intraday movement of 56 points (1%) but a better day, nevertheless, because it traded with a negative bias all through the day before recovering some of its losses in the last hour. I say, a better day because it went in the direction which we expected. And as long as it fulfills our expectations, it keeps us happy. And that's all that we desire from it. Just keep giving us profits if you want love from us. I still don't understand why the Nifty is still holding up. What is it waiting for - a cabinet reshuffle or the RBI monetary policy. Well, if it's one of those things then a move - this way or that - is coming soon. A move above 5725 would change (probably, though I don't like to change my views often) our bearishness.

I'm not attaching the chart of Nifty today as there is nothing new to show. However, as always am doing the daily analysis of some of the stocks. Friday seemed to be at bad day for the banking stocks. I say that because on my stock radar (the stocks that I regularly monitor), there were 13 stocks which closed 3% or more below their previous closes and out of those 13 stocks, 6 were banking stocks. Surprisingly, amongst all this negativity surrounding banking stocks, our buy call on OBC yesterday fell only by Rs.4/- and is still looking good for a move to 350.

Attached above is the daily chart of Reliance Capital, which has already come down quite a bit off its previous high. But, as we can see from the chart, Reliance Capital rose from a low of 315.10 in end of August to a high of 472.90 in early October, going up by 50%. Going up by 50% in 6 weeks is a big move and a big move is always (invariably) followed by a big correction. The same scenario was seen in Jan-Feb 2012 when the same stock went up 114% and then underwent a correction of 78.6%. This time too, after a move of 50%, I feel a correction of at least 61.8%, a Fibonacci ratio, is called for. The 61.8% correction will be completed at 375. That means a downward movement of Rs.42 (10%) from the current level of 417. Whether to stay away or to stay short - your call.

Attached above is the daily chart of Karnataka Bank. As seen from the chart, an inverted hammer formation on the top followed by a red candle signifies that the uptrend may have come to an end. And what an uptrend it was - a rise from 78 to 138 in six weeks, another big increase of 78%. And as I said before, a big move is followed by a big correction. In this case a 61.8% decline would mean the stock could come down to 101 whereas a 78.6% correction would translate into a level of 91. I see some good support for Karnataka Bank between 100-102 adding to the fact that 100 is a psychological support too and would expect the stock to come to 101, at least.

Andhra Bank's daily chart is seen above. An 8 month old trendline tested 4 times in the past was broken through but could not be sustained and today it came back below the trendline. In the process Andhra Bank has also made a pattern, which could be referred to as a double top, was also formed but would be confirmed below 105. A target for this double top formation would be close to 95 and I expect support to come in between the 93-95 levels.

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