Todays Sentence

At the start of a bear market, nobody knows it is a bear market – they just think it is a correction – Marc Faber

Investment Idea

VIP INDUSTRIES

Present Price - Rs.505.50, Buy Above – Rs.513, Projected price – Rs.552

VIP Industries manufactures a range of hard-sided and soft-sided luggage including trolleys, suitcases, duffels and overnight travel solutions, executive cases, backpacks and school bags. Some of its brands include VIP, Alfa, Footloose, and Buddy. The moulded furniture division manufactures chairs, tables, stools and shells of plastic, marketed under the brand VIP Moderna. The company’s manufacturing facilities are located at Nashik, Nagpur, Sinnar, and Jalgoan in Maharashtra, and in Haridwar (Uttarakhand). Rising disposable incomes driven by buoyant GDP growth coupled with a shift towards better lifestyle ensures strong growth for the luggage industry. VIP, the leader, with a 60% market share, is fully geared to capitalise on the same.
On the technical front, the stock has formed a Morning Star Pattern which has strong bullish implications.
Buying is advised above Rs.513 for a target of Rs.552.

DERIVATIVE PICK 14 02 2011

BHUSAN STEEL :- ( CASH – Rs.378.55) : Buying is advised above Rs.383 for a target of Rs.391 and Rs.398. Higher price of Rs.407 and Rs.412 is also possible. Stop Loss of Rs.369 should be kept.

Stock To Trade 14 02 2011

• BALRAM CHIN :- NR7 pattern in Balrampur Chini. Buy above 68.50, Sell below 65.50.
• Core Pro :- Tech 282.05 Oversold TA Insync in Core projects. Buy with stoploss below 270.
• Fortis :- TA Turtle upside Breakout in Fortis 30 mins. Chart. Buy with stop loss below 147.50.

Big move comes. An 149 point rally in an intraday trading.

Nifty Watch:- The Nifty opened at 5241. The Index made a low at 5180 with a 60 point decline, and then moved up to 5329 with a 149 point rally and finally closed at 5312 with a gain of 71 points to its open. As we have mentioned in yesterday newsletter about a big move. This 149 point move may give us some relief that the intermediate downtrend is going to take a break. But we will have to also look for a strong signal of bullish market.

Trend:- Today’s market remains in an intermediate downtrend. Market is trading below its 200 days and 50 days moving average. TA Insync (55-5) is heavily oversold in a strong downtrend. But it’s now turning up. This shows us a relief rally is very near to us. So wait for a strong signal of buying.

Level:- Looking for minor support at 5250 and major support at 5130. Resistance comes at 5400. Nifty is very near to its support level Today’s 149 point rally shows us that we are in a strong support level. So investors should hold their position and wait for a buying opportunity.

Summary:- The Nifty has come almost close to its support level. Therefore, investors should wait for a base building process. Investors should hold on to their cash. Wait for a strong base building process to start. That will give us a buying opportunity in the market.
The Market made two major highs - One in January 2008 and second in November 2010. Selected sectors crossed the 2008 highs in year 2010, while some sectors remained lower than the 2008 highs.

Market Outlook for 14 02 2011

Finally, we did get a positive Friday after 5 consecutive down (4 out of 5 were severely down) Fridays. It was again a combination of short covering and value buying at sub 5200 levels. The sentiments were again low as IIP data was at its lowest in 20 months. We believe that more than just short covering, it was more to do with value buying by HNIs and institutions that helped the indices to claw their way back up. From a high of 6181 in the first week of January we have lost more than 1000 points in about 5 weeks. Nifty has consistently made lower lows and lower highs and momentum has been so strong that even slightest of rebound have been sold into. Most of the sectors have suffered but the bears have been particularly harsh on infra stocks in this leg. Most of the infra stocks have more than halved in value over last 4-5 weeks. But, the question is whether we have hit a sustainable bottom? It would be too early to take a confirmed call on that as it usually is. Nifty has lost almost 18% and around 5400 also we suggested that Nifty had lost almost 15% from recent top and we could be nearing a sustainable bottom. But, that was not to be as Nifty went through the support at 5350 as momentum picked up on the downside. Technically, we are still in the lower low, lower high spiral. Nifty has initial resistance around 5385 and then significant one around 5440-50. Banking stocks bounced back sharply on Friday and led the overall rebound. Positive divergence in leading indicator, RSI is visible in banking heavyweights like HDFC bank, Axis and SBI but many mid cap banking charts still may not be out of woods. Tata Motors came out with very good numbers just at the closing bell and might see a positive open on Monday. However, it might encounter resistance around 1225-1230. TCS has strong support around 1070-80 and could see a technical rebound from current levels. Renuka sugars that also came out with results on Friday is looking weak and a breakdown is possible below Rs 82. One needs to keep a stop below Rs 82 for all long positions. Hindalco is another one that has displayed weakness over last 3-4 sessions and needs to trade consistently above Rs 220-222 to retain the bullish bias. Certain infra stocks like LITL, GMR Infra, Reliance Infra and IVRCL may have seen what we call climactic selling as they witnessed huge volumes last week. But while it may suggest that these stocks may have seen intermediate bottoms it may not necessarily mean an immediate upside. These stocks could enter a consolidation phase before making an attempt to move higher. To summarize, while we may have some evidence of a market that could be bottoming out it would be too early to take a firm view on that. For traders wishing to go long, it would be better to buy call options or to hedge long futures with put options to minimize risk.

Nifty has immediate support around 5225-5240 and significant one around 5150-60 while resistance is likely around 5375-85 and then around 5440-50.