Archives : QUESTION IS WHEN & NOT IF - 26/02/2016.

QUESTION IS ‘WHEN’ & NOT ‘IF’ - 26/02/2016.

TWO SCENARIOS.

The markets are in a very strong Bear grip, as every minor rally is getting sold into. Lot of Bull-hopes are pinned on the Union Budget to provide some positive impetus to the market. Whether that is provided or not, we will get the answer on Monday. But there can only be two scenarios either it will be market positive or not. Let us understand the implications of each scenario.

MORE LIKELY SCENARIO.

If the Union Budget does not deliver any major negative news for the market and meets the Fiscal Deficit target, then it will be perceived as market friendly. This will lead to a short covering rally across the board which will test key Resistance zone of 7323-7363. In the event, the Pull-Back gets extended then it will face strong hurdle at second Resistance zone of 7539-7600. Short term trend might turn positive but interestingly that will not change the long term trend of the market, which is Bearish. In fact, that will provide another shorting opportunity to the Bears to test recent bottom of 6869.

OTHER SCENARIO.

The second scenario is if the Budget fails to meet market expectation, then one can expect the recent low of Nifty 6869 to be broken and a journey towards Nifty 6338 will commence.

BUDGET – A SHORTING OPPORTUNITY.

Interestingly in both the scenarios, market is likely to retest the previous bottom; the only question which remains is ‘WHEN’ and not ‘IF’. In the event of Budget being pro-market, it will take longer to reach and test the recent bottom. But on the flip side, the Bears will get another opportunity to go short at higher levels.


QUESTION IS ‘WHEN’ & NOT ‘IF’ - 26/02/2016.

TWO SCENARIOS.

The markets are in a very strong Bear grip, as every minor rally is getting sold into. Lot of Bull-hopes are pinned on the Union Budget to provide some positive impetus to the market. Whether that is provided or not, we will get the answer on Monday. But there can only be two scenarios either it will be market positive or not. Let us understand the implications of each scenario.

MORE LIKELY SCENARIO.

If the Union Budget does not deliver any major negative news for the market and meets the Fiscal Deficit target, then it will be perceived as market friendly. This will lead to a short covering rally across the board which will test key Resistance zone of 7323-7363. In the event, the Pull-Back gets extended then it will face strong hurdle at second Resistance zone of 7539-7600. Short term trend might turn positive but interestingly that will not change the long term trend of the market, which is Bearish. In fact, that will provide another shorting opportunity to the Bears to test recent bottom of 6869.

OTHER SCENARIO.

The second scenario is if the Budget fails to meet market expectation, then one can expect the recent low of Nifty 6869 to be broken and a journey towards Nifty 6338 will commence.

BUDGET – A SHORTING OPPORTUNITY.

Interestingly in both the scenarios, market is likely to retest the previous bottom; the only question which remains is ‘WHEN’ and not ‘IF’. In the event of Budget being pro-market, it will take longer to reach and test the recent bottom. But on the flip side, the Bears will get another opportunity to go short at higher levels.

TECHNICALLY SPEAKING.

Sensex opened the week at 23783, made a high of 23855, low of 22948 and closed the week at 23154. Thus it closed the week with a loss of 555 points. At the same time the Nifty opened the week at 7208, made a high of 7252, low of 6961 and closed the week at 7029. Thus the Nifty closed the week with a loss of 181 points.

On the daily charts, both the indices have formed a Spinning Top formation which is a neutral formation. On the weekly charts both the indices have formed a black body candle, thereby forming a Bearish Harami. But it cannot be classified as Bearish Harami as it has been formed in downtrend. Thus weekly as well as daily charts are not showing any clear bias and signalling a wait and watch approach.

The Pull-Back Rally started after taking support at the 200 WMA. The rally continues and the relevant Retracement levels are placed at 23518-23801-24085 for the Sensex and 7148-7235-7321 for the Nifty.

The Bearish Gap between 24111-24196 for the Sensex and 7323-7363 for the Nifty will act as a strong Resistance Zone - I going forward as it also includes the 61.8% Retracement level (Sensex – 24085 and Nifty – 7321). Thus the current Pull-Back rally will find it difficult to cross this Resistance zone - I. In case the Rally gets extended then Indices will be on its way to test the Resistance Zone – II i.e. 24833-24196 for the Sensex and 7539-7605 for the Nifty; which is a confluence of previous decisive Tops & Bottoms.

In the higher timeframe, both the indices are retracing the strong long term upward rally which started from Sensex 17448 and Nifty 5118. The relevant Correction levels are placed at Sensex 25220-23736-22252 and Nifty 7591-7119-6646. The 61.8% Fibonacci level (Sensex – 22252 and Nifty – 6646) will be tested once this Pull-Back Rally gets completed.

Both Sensex and Nifty remain on track to achieve the higher degree Head and Shoulders (weekly chart), the target for which falls at Sensex 22552 and Nifty 6741.

This week, both the indices remained below the short term average of 20dma (Sensex – 23722 and Nifty – 7210), medium term average of 50dma (Sensex – 24571 and Nifty – 7500) and even the long term average of 200dma (Sensex – 26297 and Nifty – 7985). Thus the trend in the short term, medium term and long term timeframe continues to remain bearish. 

Volatility Index India VIX is around 22. As the Budget speech starts, one can expect Volatility Crunch, which will see a sharp drop in Volatility upto 17. Option traders can create short Vega strategies to take advantage of this scenario. Options data for February series indicates highest Put Open Interest build-up at the strike of 7000 and highest Call build-up at the strike of 7500. Thus Option data suggests a trading range with resistance coming in at 7500 and support at 7000.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

6638

6776

6911

7029

7127

7241

7363

Sensex

21778

22277

22792

23154

23448

23839

24196

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

JsWStL

1083

1122

1144

250

Rs.15,250

Buy ABB

1102

1143

1117

250

Rs. 3,750

Buy Pidilite

626

651

648

500

Rs.11,000

CairnInd

131

138

133

2000

Rs. 4,000

AshokLey

91

96

93

4000

Rs. 8,000

Total

Rs.42,000.

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Sell BajajAuto

2238

2295

2152

2065

Sell PCJewellers

324

334

309

293

Sell IBuLHsg

576

590

554

531

Sell TVSMotors

264

271

253

241

Sell Arvind

255

262

244

232

WATCH OUT FOR:

Nifty RZone I & II

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.

Copyright © 2000 - 2018 Jatin Sanghavi. All rights reserved.
No part of the material on this website may be reproduced or distributed in any forms or by any means, electronics or mechanical without the written permission of the author.
Sitemap