Archives : MARKET REVERSAL THIS WEEK - 27/06/2008

 Article-1

MARKET REVERSAL THIS WEEK - 27/06/2008

  • SUPPORT FOR NIFTY-3988 & SENSEX-13501.
 Markets as usual behaved in exactly the same manner and fashion as predicted by us. Both Sensex and Nifty achieved their targets. Sensex reached 13731 and Nifty reached 4093. Markets are in a strong bear grip. But the market is already entering an oversold zone. The region of 3988-4000 for the Nifty and 13501-13222 for the Sensex will offer strong support. Intermediate bottom formation may take place around 3988 and 13501. It is advisable to buy index related heavyweights in this region for a good trading bounce, so please watch out for the above mentioned levels and take advantage while the market tries to go up. This does not mean the correction is over, it is only from short term technical bounce that can be expected. 
  •  SHORT ROLLOVERS ON EXPIRY.
  •  Inflation soars to a fresh 13-year high of 11.42%
  • SENSEX
  • NIFTY:
  • HOW TO TRADE?
  • LAST  WEEK S RECOMMENDATIONS:

Inspite of such a VOLATILE market, all our recommendations achieved their TARGETS. THREE CHEERS.

  • THIS WEEK S RECOMMENDATIONS:


Article-2 

COVER YOUR SHORTS AT NIFTY–4000 – 28/06/2008.

  • SENSEX REASONABLE VALUATION BAND - 11000 TO 12000.
  • ARE THE BANKING STOCKS CHEAP?
  • MARKET TECHNICALS.
If you recollect last time we had predicted that the Sensex and Nifty have support at 13887 and 4135 respectively as per the Gann Theory. Both Sensex and Nifty have taken support at these levels for the week.
  • DERIVATIVE ANALYSIS.

  • LAST WEEKS HAMMER STOCKS.

IVR PRIME RECOMMENDED TO SHORT AT 201, REACHED 177!!!LIC HOUSING RECOMMENDED TO SHORT AT 277 REACHED 262!!!

If both stocks you had shorted 1000 quantity, then the profits would have been …24+15= Rs. 39000. What more you ask for???

  • WATCH OUT FOR:


 Article-1

MARKET REVERSAL THIS WEEK - 27/06/2008

  • SUPPORT FOR NIFTY-3988 & SENSEX-13501.
 Markets as usual behaved in exactly the same manner and fashion as predicted by us. Both Sensex and Nifty achieved their targets. Sensex reached 13731 and Nifty reached 4093. Markets are in a strong bear grip. But the market is already entering an oversold zone. The region of 3988-4000 for the Nifty and 13501-13222 for the Sensex will offer strong support. Intermediate bottom formation may take place around 3988 and 13501. It is advisable to buy index related heavyweights in this region for a good trading bounce, so please watch out for the above mentioned levels and take advantage while the market tries to go up. This does not mean the correction is over, it is only from short term technical bounce that can be expected.

SHORT ROLLOVERS ON EXPIRY.

There was a massive rollover of short positions to July series. The late surge was more of an escape route for trapped bulls and an attempt to camouflage the massive short buildup in July. Even options data suggest that bears have created panic among bulls and now have a vice-like grip over the market. To sum it up, the only thing that came out of the settlement of the June series is that notwithstanding the last two days up moves, bears have marched into July with swagger and confidence. 

Inflation soars to a fresh 13-year high of 11.42%.

Surging food and commodity prices pushed inflation further up to 11.42 per cent for the week ended June 14, 2008, from 11.05 per cent in the previous week. India’s inflation rate jumped to 11.42 per cent in the week to June 14, its highest reading since April 1995. RBI has already announced its war on inflation by hiking both the CRR and REPO rate. Let us see what lies in store as regards inflation next week…10 or 12. …keep guessing. 

SENSEX:

Sensex opened the week at 14423, made a high of 14510, low of 13731 and closed the week at 13802. Thus weekly loss for the Sensex was 769 points. All indicators are suggesting further weakness. On the candle stick pattern Sensex has formed an evening star formation, which indicates further momentum on the downside. On Friday, on the daily charts, Sensex has formed a Black Marubuzo. Even on the weekly charts, Sensex has formed a Black Marubuzo which will have bearish implications. This formation indicates further Bearishness on Monday. Sensex has left a gap between 14127 and 14196, which will act as strong resistance. The Trendline Resistance is at 14360-14991. Strong Trendline Support is at 13501-13222. For the week ahead, Resistance is at 14127-14360-14640. Support is at 13640-13501-13222. 

NIFTY:

Nifty opened the week at 4351, made a high of 4351, low of 4093 and closed the week at 4136. Thus, weekly loss was 211 points. The Trendline Resistance for the Nifty is at 4344. The Trendline Support is at 3988. Lot of Call writing is visible at the strikes of 4200 and 4300. These levels will be difficult to breach. Lot of Put writing is seen at the strike of 4000. This will act as good support. For the week ahead Resistance is at 4324- 4369-4448. Support will be at 4093-3988-3862-3630.

 

 HOW TO TRADE?

This week try and construct a bear spread for the Nifty target 4000. Or simply buy a PUT.  

LAST  WEEK S RECOMMENDATIONS:

Inspite of such a VOLATILE market, all our recommendations achieved their TARGETS. THREE CHEERS.

Sell Reliance 2099 Tgt 2039-1948. Reached 1956.

Sell Rcom 491 tgt 476-458. Reached 450.

Sell ABB 925 tgt 875-799. Reached 850.

Sell L&T 2564 tgt 2362-2296. Reached 2210.

Sell Sterlite ind 767 tgt 741-715. Reached 660.
 

Sell RPL 171 tgt 160-150-143. Reached 159.  

THIS WEEK S RECOMMENDATIONS:

SELL TATA STEEL 726 SL 739 TGT 697-680.

SELL L&T 2265 SL 2313 TGT 2180-2127-2055.

SELL MCDOWELL 1249 SL 1276 TGT 1204-1167.

SELL REL CAP 954 SL 970 TGT 926-912.

SELL ROLTA 261 SL 269 TGT 250- 242.


Article-2 

COVER YOUR SHORTS AT NIFTY–4000 – 28/06/2008. 

Many people ask me why am I so Bearish? Do you have any short positions in the market? My answer to all of them is that I am neither Bear nor Bull… I AM THE LION. I write what I feel is correct and hope the readers benefit from it.

Our Motto: Keep it simple….Give Quality & not Quantity…. and always Stick to our Views….no Double Sided talks…because we are the LION & the LION always has the final word.

Market has taken support at 13800 and 4093 as predicted by us in the last week’s article. The Bear attack was ferocious and relentless and there was no respite for the Bulls in the past week. The formations suggest that the Bears will now create maximum panic on Monday and Tuesday and then pause for a while. This will lead to a short term bounce and possibly formation of short term bottom. This is not to suggest any sort of up trend, but it only suggests that the markets are likely to take a short term break from one sided downside to a stage of sideways consolidation. But only for a while and then again revert back to the old trend.

 SENSEX REASONABLE VALUATION BAND - 11000 TO 12000.

 


In a widely expected move the RBI raised CRR and Repo rates by 50 bps on Tuesday night. PLRs will now rise above 16.75 per cent on average, making borrowings even more expensive for Real Estate and Capital Intensive projects.

Industrial profit margins already under pressure will further reduce and earnings growth will drop down to about 9 per cent for FY09 giving a Sensex earnings projection of Rs 900. Giving the Sensex companies a P/E of 12, the Sensex should sink to about 11000 to 12000 by December 2008. This is because one tends to assign lower valuations to the market when the growth rate subsides. This leads to a contraction of P/Es.


ARE THE BANKING STOCKS CHEAP?
 

No, if you consider the following details. Public Sector Banks are trading at 14 times FY09 earnings while Private Banks are trading at 20 times FY09 earnings. Valuations at 2 times the book value also look expensive because the book value looks itself looks stretched, with downside risks on earnings per share and return on capital employed. Banks outperform only when GDP expands and Business Cycle is positive. Both Positives seen over the past 5 years are now reversing. Worse, all Banks are about to be hit by higher rates, non performing loans, higher provisions and lower growth. Rising Inflation, Declining liquidity and rising interest rates will ensure that Banks show a sustained period of under performance. P/E Valuations likely to contract to single digits, and Price to Book multiple closer to 1 to 1.4 times. Key risks to earnings remain for high P/E private banks like ICICI, HDFC Bank, and Axis Bank. All Banks and Real Estate stocks can lose 50 per cent of their market value from here.


MARKET TECHNICALS.
 

Market continued to suffer the Bear onslaught as predicted by us last week. Both Sensex and Nifty have formed a Black Marubuzo on the daily charts on Friday. Both have formed Opening Black Marubuzo on the weekly charts. The Sensex has completed the evening star pattern on Friday. The Candlestick formations suggest further downside to the market starting from Monday.

If you recollect last time we had predicted that the Sensex and Nifty have support at 13887 and 4135 respectively as per the Gann Theory. Both Sensex and Nifty have taken support at these levels for the week. I feel, the Sensex may find short term support in the range of 13500-13222 and the Nifty may find support at 4004-3988. Possibly these support might hold and we might form an intermediate bottom for the time being.

 

 

 DERIVATIVE ANALYSIS. 

Derivative Analysis suggests that lot of short positions have been rolled over to the July series. The Nifty discount of more than 60 points suggests that majority of the market participants are on the short side and are expecting the market to come down drastically. Lot of Put writing is happening at the Nifty Strike of 4000. The above data suggest that the market will likely find support around 4000 and which is what our technical study too confirms. What we can conclude is, as and when the market touches support at 4000 and if that holds, then there will be a bout of short covering and this will lead the market up in the short term. You may want to call it a short term bounce, but please note that this may be significant from a trader’s point of view. So please cover or close out your short positions at 4000 and if you have the conviction participate in the bounce back. But all this is from the trading point of view as in the long and medium term, we are still in the Bear market.

 LAST WEEKS HAMMER STOCKS. 

IVR PRIME RECOMMENDED TO SHORT AT 201, REACHED 177!!!LIC HOUSING RECOMMENDED TO SHORT AT 277 REACHED 262!!!If both stocks you had shorted 1000 quantity, then the profits would have been …24+15= Rs. 39000. What more you ask for???   

 WATCH OUT FOR: 

SELL TATA CHEMICALS 291 SL 301 TGT 278-265-256. 

  
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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