Archives : MARKETS WEAK. NIFTY 5676-CRITICAL SUPPORT.21/12/2007
MARKETS WEAK. NIFYTY 5676-CRITICAL SUPPORT. 21/12/2007
Markets started the week, correcting, and as a result broke many supports and has taken critical support at the 5676 for the Nifty and 18886 for the Sensex. This is a critical support which had come in quite handy when the market corrected last two times and rebounded after taking support at this support. So this support at 5676 assumes significance and if that is broken then we will have to look for the correction from 17171 for the Sensex and 5070 for the Nifty respectively.
IFCI FREE FALL.
The IFCI stock is now in a free fall. On Thursday, it fell by 23per cent or around Rs.23 to close at Rs.76 after the company’s expected strategic stake sale fell apart. However, frenzied unwinding of long positions on the counter saw the stock coming out of the ban period in the derivatives segment. The stock has been a punters delight. For investors who have been locked in with the stock at higher levels there seems to be no way out except to hope for the stake sale talk to resurface. A year ago, the IFCI stock was quoting at Rs.10. The news of 26 per cent stake sale to a strategic partner had put the stock on a different trajectory and it hit a high of 120.
SHORT SELLING ALLOWED.
The Securities and Exchange Board of India (SEBI) on Thursday allowed short selling of shares by all classes of investors, both institutional and retail. Short selling had been banned by regulator in the wake of the Ketan Parekh scam in 2001. Short selling denotes selling a stock that one does not own at the time of trade. SLB is a mechanism that enables investors who have short sold to borrow those securities from a willing lender at a fixed cost. This can curb runaway movement in share prices, Short selling would impart balance, depth and liquidity to the market. Short selling leads to better price discovery. To begin with, the securities currently traded in the F&O segment shall be eligible for short selling.
I.T. SECTOR BOTTOMING OUT.
I.T. sector seems to be making a comeback and we will see this week that the market may get some support from the IT leaders. Mid cap IT stocks look very strong with Allied Digital 740 looking explosive and all set to conquer the 4 digit mark. CMC 1190 is looking to runaway. HCL Tech and Satyam also looks to have some upside from current levels. It won’t be a bad idea to buy CNX IT future and hedge it with selling Nifty future.
Sensex opened last week at 20032, which was also the high for the week, made a low of 18886 and closed the week at 19162. The weekly loss for the Sensex was 868 points. As a result many support levels have been broken for the Sensex. Finally it took support at the trendline support which has supported the Sensex in the last two falls 18182 and 17172. If the low made of 18886 is broken then we will be on the way to test 18182 levels. The correction will be from 17172 and the correction levels are placed at 18835-18442. The trendline support for the sensex is now at 19091. The trendline resistance is at 19515. Only on close above 19515, we can say that the sensex will gain some strength. The indicators are showing weakness. The short term trend is down and if the low of 18886 is broken then the medium term trend will turn down. The weekly resistance is at 19291-19515-20032. The weekly support is at 18886-18442-18182.
Nifty opened the week at 6037, made a high of 6039, low of 5676 and closed the week at 5766. The weekly loss was 281 points. The Nifty took support at the critical trendline level of 5676, which supported the Nifty in the last two falls. If this support is broken then the Nifty will head toward the 5395. The correction will have to be from 5070 and the correction levels are placed at 5627-5496. The medium trend to stay up it is important that Nifty does not break the support at 5676. The trendline support is coming in at 5727, which is coinciding with the 50DMA. So this levels assumes great significance. The trendline resistance is at 5917-5965. Lot of call writing is visible at the strikes of 5900 and 6000 levels and hence they will prove to be a resistance going forward. The weekly support is at 5676-5595-5394. The weekly resistance is at 5819-5917-5965.
HOW TO TRADE?
This week one can go long on CNX IT future and hedge it with selling Nifty future. The view being IT sector will outperform the index.
One can buy REL ONLY IF IT CLOSES ABOVE 1960, keeping a stoploss of 1830, and hoping for a target of 2360 in the short to medium term.
One can buy CAIRN ENERGY IF IT CLOSES ABOVE 230, keeping a stoploss of 210 for a target of 268.
LAST WEEK’S RECOMMENDATIONS:
Last week’s recommendations were nothing to write home about. Only Renuka Sugars managed to reach the target.
THIS WEEK’S RECOMMENDATIONS:
CMC 1190 SL 1151 TGT 1244-1290.
NIIT 137 SL 132 TGT 146-156.
GUJ ALKALI 246 SL 234 TGT 256-268.
STERLING BIO 165 SL 163 TGT 173-183.
HINDALCO 199 SL 193 TGT 212-217-243.
NUCLEUS SOFT 350 SL 333 TGT 374-389.