Archives : BACK FROM THE DEAD-25/01/2008

BACK FROM THE DEAD – 25/01/2008.
                Once again we were on the mark, when we predicted that the market will correct and 16500 on the Sensex and 4850 on the Nifty will be tested. We advised our readers and followers to lighten their long position and that too on Thursday as the Informed Investor exhibition was scheduled from Friday onwards. Investors, traders and readers of this paper who paid heed to the above advise were saved and are thanking us non-stop. Also since the exhibition was held from Friday onwards, many who attended the event were benefited by this advise. Seeing the bloodbath on the D-Street, we will say that our readers were lucky to have escaped this severe bashing, unscathed. It seems we have made a tradition of accurately predicting market corrections and falls. The readers will remember the July’07 and November’07 falls, where on both the occasions we had predicted the fall. Once again we did it, when others were way off the mark. 
  1. 5000 POINTS IN 2 DAYS!!
  2. FED SLASHES INTEREST RATES.
  3. IS THE BULL MARKET OVER?
  4. WHAT SHOULD THE INVESTORS AND TRADERS DO?
  5. MOMENTUM STOCKS IN PULL BACK MODE.
  6. BANKING STOCKS STRONGEST.
  7. SENSEX.
  8. NIFTY.
  9. HOW TO TRADE?
  10. THIS WEEK’S RECOMMENDATIONS:
  11. SOME MID-CAP RECOMMENDATIONS::

          


 5000 POINTS IN 2 DAYS!!

Markets crashed almost 5000 points in a matter of two days. No investor or trader will ever forget the kind of carnage witnessed on Dalal Street. All traders were almost wiped out financially and the losses were too big. Many left the stock market forever and many even contemplating the worst thing that can be imagined. Brokers and market Regulators were in a worrisome mood, as how the mark to market losses will be recovered. The government directed the banks to be lenient to the brokers, so as to enable pay-in and pay-out.

                 FED SLASHES INTEREST RATES.

                FED jumped in on Tuesday and slashed key interest rates by 75 bps, which was the biggest rate cut since Oct 1984. FED acted in emergency and slashed the rates before the schedule meeting on 29th and 30th Jan later this month. This move was taken mainly to stop the global markets from plunging further like nine pins. This rate cut by the FED has set the ball rolling for the RBI to follow in its foot-steps. The RBI will review the rates in its credit policy review on 29th Jan 2008. The only way for interest rates to go is down, the question being asked is when?

                 IS THE BULL MARKET OVER?

                The correction of more than 30% has shaken a lot of people’s belief in the stock market? The question being asked is whether the bull market is over? The answer is NO. The bull market, which is on from 2003, is certainly far from over and is now in a consolidation mode. The corrections, till date has seen only value wise correction and not time wise correction. So I won’t be surprised if this correction extends over some period of time. In the long term, this will be a value wise and time wise consolidation. This is healthy for the market. Technically speaking the markets took support in a free fall exactly at the trendline joining the two bottoms of the May’07 and Aug’07. This support may be tested once again over the next few days.

                 WHAT SHOULD THE INVESTORS AND TRADERS DO?

                Investors should consider this as a long term entry point in the Indian Stock market as the fundamentals have not changed. This is a golden opportunity to buy into stocks, which were always looking expensive, but now are available at very reasonable valuations. Investors will do well to catch stocks with good fundamentals and good growth story. Investors, who build their portfolio carefully during this carnage, can expect substantial returns over a period of one year. As far as traders are concerned, most of them have lost heavily and don’t have enough financial and mental strength to trade. In fact the wild volatile movements on the index is a trader’s graveyard. So for the trader, the best part is to stay away for some time.

                 MOMENTUM STOCKS IN PULL BACK MODE.

                Momentum stocks like RNRL, Neyvelli Lignite, ISPAT, etc were butchered mercilessly. It is not necessary that these stocks again regain their previous highs. But since pull back is on, I will like to give some pull back levels for some stocks. Neyvelli Lignite 147, fell from 278 to 85 and can pull-back upto 159-181-204. Nagarjuna Fert 42, fell from 89 to 24 and is now in a pull back mode and the resistance levels are 49-57-64. ISPAT 46, has resistance placed at the levels of 51-58-64. RNRL 144, has pull back levels placed at 143-163-183. WWIL 50, has resistances placed at 62-71-79. Please note all the above mentioned stocks are momentum stocks and can go down very fast, so PLEASE maintain stop-loss.

                 BANKING STOCKS STRONGEST.

                In this carnage, banking stocks have emerged the strongest. Stocks like SBI, ICICI, HDFC BANK, BOI, BOB, UBI, AXIS BANK have recovered the most. The build up seen in the derivatives segment suggest that these stocks are likely to rise further and bullish expectations regarding the interest rate cut by the RBI, is already being built in.

                 SENSEX. 

               Sensex opened the week at 18919, which was also the high for the week, low was 15332 and closed the week at 18361. The weekly loss was 652 points. The gap appearing in the daily and weekly charts between 18930-18919 will prove to be strong resistance. The fall on Tuesday was arrested exactly at the trendline support drawn from the May’07 low of 12316 to Aug’07 low of 13779. The trendline resistances are at 19054-19913 and trendine support is at 17277-15350. The indicators were in oversold condition after the carnage on Monday & Tuesday. A retest of the low 15332, made on Tuesday, cannot be ruled out. The ongoing rally can be termed as a pull back rally and the Sensex has closed above the 50% retracement level of 18269. The higher 61.8% retracment level 18962, is coinciding with the gap on weekly charts 18919-18930 and the trendline resistance of 19054. So the ongoing rally will face cluster of resistances between the 18900 and 19050 levels. It will be acid test for the Sensex to close above 19050 levels immediately. The Resistance for the week is at 18672-18930-19054-19624. Support is at 17277-16550-15350.                  NIFTY.

                Nifty opened the week at 5705, which also was the high, made a low of 4448 and closed the week at 5383. The weekly loss was 322 points. The fall in Nifty was arrested at the trendline support drawn from the bottom of May’07 of 3554 to Aug’07 low of 4002. The trendline resistance is at 5605-5857. The trendline support is at 5116-4843-4452. The OI PCR is 0.93, which is also not inspiring much confidence. The ongoing pull back rally has retracement levels at 5403 and 5628. The resistance for the week will be at 5541-5628-5857. The support will be at 5116-4900-4843-4452.

                 HOW TO TRADE? 

               Traders are advised to use strategies involving options. Also please hedge your positions by using Nifty futures. Don’t keep naked open positions.                

THIS WEEK’S RECOMMENDATIONS:

                WELSPUN GUJ 496 SL 483 TGT 519-539-562.

                REL 2027 SL 1965 TGT 2097-2154.

                BOI 395 SL 372 TGT 416-448. 

               AXIS BANK 1097 SL 1075 TGT 1155-1195. 

               ICICI BANK 1261 SL 1225 TGT 1303-1349-1386.

               SBI 2407 SL 2360 TGT 2458-2536-2574.

                RPL 173 SL 165 TGT 182-192.

                RNRL 144 SL 136 TGT 155-176.

                

SOME MID-CAP RECOMMENDATIONS::

                ASIAN ELECT 478 SL 450 TGT 498-517-570.

                JAIN IRRIG 646 SL 630 TGT 710-750.

                SHIVVANI OIL 610 SL 550 TGT 670-735.

                GTL 266 SL 253 TGT 287-305.

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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