Archives : DARK CLOUD COVER - 14/08/2008
DARK CLOUD COVER – 14/08/2008. 

The markets ended the five week winning streak and ended the sixth week with a loss. Even though it was a truncated week of four days, there was enough volatility and drama even to make a seasoned campaigner nervous.

  • P-NOTES ISSUE AGAIN ON THE BACKBURNER.
  • INFLATION UP ; GROWTH DOWN.
  • SENSEX.
  • NIFTY.
  • HOW TO TRADE?
  • LAST WEEK’S RECOMMENDATIONS:
  • THIS WEEK’S RECOMMENDATIONS:

DARK CLOUD COVER – 14/08/2008. 

The markets ended the five week winning streak and ended the sixth week with a loss. Even though it was a truncated week of four days, there was enough volatility and drama even to make a seasoned campaigner nervous.

P-NOTES ISSUE AGAIN ON THE BACKBURNER.

Markets were nervous in anticipation of the SEBI meeting and there were some expectations from the new SEBI chief to state something positive about the P-Notes issue. But there was no clarification given and the matter has been delayed further. This was not taken kindly by the market and the market went down swiftly and breaking important support levels without much efforts. This does not appear to be a good omen for the market.

INFLATION UP ; GROWTH DOWN.

Inflation for the week ended 2nd Aug 2008 came in at 12.44% v/s 12.01% last week. Rise in inflation for past three weeks was so slow that the market started believing that the inflation may have peaked out in the near term and was rallying. But that was not the case as can be seen by this week’s inflation figure. The inflation is slowly inching its way up towards 13% mark in the near future. No doubt the RBI will once again have to tighten financial screws by increasing the interest rates further. Already the growth expectations have been tempered down to 7.7%. The chief culprits for lower growth besides high interest rate regime are high prices of commodity and global slowdown. Thus once again the focus will be to control inflation and growth as usual will take the back seat.

SENSEX.

Sensex opened the week at 15430, made a high of 15579, low of 14686 and closed the week at 14724. The weekly loss was 443 points. The Sensex opened the week with a gap on Monday and then came falling down on Tuesday to form a Bearish Engulfing candle. The fall then continued through the week and as a result Sensex formed a Bearish pattern known as the Dark Cloud Cover on the weekly charts.

The Sensex has risen from the low of 12514 to the high made this week at 15579. The first wave of the up move in a Bearish market is over. The down wave will take the Sensex to support levels. The retracement support is at 14408-14046-13685. The first retracement support at 14408 will offer strong support as it is also coinciding with the 50dma. One positive about the market is that both ROC is still in positive and is trying to move up and the MACD is also in the positive half. We will term this down fall as nothing but profit booking as the market was seen rising consecutively for five weeks.

Strong Trendline Support exists at 14616, and strong Trendline Resistance exists at 15299.

For the week ahead, Sensex Resistance 15033-15299-15579. Support 14648-14503-14408-14046. 

NIFTY.

Nifty opened the week at 4529, made a high of 4649, low of 4421 and closed the week at 4430, thus registering a weekly loss of 99 points. The Nifty formed a Bearish Harami on the daily charts on Tuesday, which was similar to the one made in June when the Nifty was near the same level at 4679 and then it fell all the way to 4093. The Nifty thus fell through the week and registered a Bearish Harami formation on the weekly charts.

Strong Trendline Resistance exists at 4520-4595. Trendline Support is at 4455-4326-4281.

The Nifty has risen from the low of 3790 to 4649 this week. If we consider the retracement targets of this move then those will fall at 4321-4219-4118. The Support at 4321 is coinciding with the Trendline support at 4320 and the 50dma which is at 4300. Thus the band of 4321 to 4281 will provide strong support in this fall. Very High Open Interest has been added at the strikes of 4600 and 4700. These levels will be difficult to surpass in the near future. Put writing has shifted from 4400 levels to 4200 and 4000 levels.

For the week ahead, Nifty Resistance 4518-4595-4649. Support 4392-4369-4319-4281. 

HOW TO TRADE?

SELL LANCO AND BUY AUROBINDO PHARMA AS A HEDGE.SELL BOMBAY DYEING AND BUY MPHASIS BFL AS A HEDGE. 

LAST WEEK’S RECOMMENDATIONS:

As can be seen, last week was nothing much to cheer about, but we were far better and inspite of the very volatile nature of the market, many recommendations reached the targets or near about. One can review last weeks report card below.

BUY SCI TGT WAS 249 REACHED 245.

BUY STERLITE TGT WAS 658 REACHED 652.

BUY DIVIS LAB TGT WAS 1573 REACHED 1614

.BUY APTECH 230 TGT WAS 247 REACHED 247

.BUY L&T TGT WAS 2957 REACHED 2911

.BUY ASIAN ELECT TGT WAS 109 REACHED 107.

BUY TORRENT POWER TGT WAS 122 REACHED 123.

BUY AFTEK TGT WAS 50 REACHED 48.30. 

THIS WEEK’S RECOMMENDATIONS:

SELL IDFC 96 SL 101 TGT 91-88.

SELL BOMBAY DYEING 564 SL 592 TGT 535-522-508.

SELL L&T 2661 SL 2724 TGT 2614-2590-2552.

SELL PRAJ 181 SL 185 TGT 174-168.

SELL LANCO 311 SL 319 TGT 289-278.

 WATCH OUT FOR:

IDFC

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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