Market Outlook 10 02 2011

The damage in mainline indices doesn’t truly reflect the kind of carnage that was seen in many stocks. Nifty showed a cut of only about 1% at the close but a look at the list of losers and the kind of damage, reflects the true story. The whole ADA pack was massacred on account of heavy unwinding. R-infra, RMedia, RCom and Reliance Cap lost between 14 to 20% each on huge volumes. Most of the selling was seen in the last 60 minutes. The selling was not restricted only to this group as there were many stocks that suffered more than 10% cut and that too on big volumes. The list includes Aban, BEML, LITL, Bombay Dyeing, Orbit, Punj Lloyd, Onmobile, IVRCL Infra, Srei Infra, GMR Infra, JP Associates and TTML. Most of the stocks on this
list have been under severe bear pressure for past few sessions and had already seen significant erosion in mkt Cap even before today’s big cuts. The list of losers was a big one as breadth was hugely negative. As seen yesterday there were no buyers even at lower levels. There is a clear crisis of confidence at bourses and nobody wishes to even look for bargain buys. Mid and small caps continue to be sold into as reflected in more than 3% cut in madcap index. Few stocks that managed to prop up index were Infosys, M&M, HDFC, HUL and Sun Pharma.

The kind of deep cuts with very big volumes suggest almost a capitulation kind of situation in various stocks, if not in the index itself. Almost all stocks that suffered double digit percentage losses did that on above average volumes. In some cases like the ADA pack it was almost 4-5 times the average. This has come after a sustained bear trend in most of these stocks. This could suggest capitulation and while it may not be a one- day affair, it does point towards almost selling climax. But, it would be better to look for certain other signs, technical as well as psychological before deciding to cherry pick. Nifty continues to make new lows on almost daily basis. 5325-35 is the immediate resistance level while stronger one are placed at 5380-90 and 5440-50.

Todays Sentence

There are many ways to lose money in the market but there are only few ways to make money and there are even fewer ways to retain the money made in the market. – Jake Bernstein

Stock to trade 09 02 2011

• IDBI :- TA Turtle downside breakout in IDBI 30 mins charts. Sell with stop loss above 135.50.
• Infosys Tech :- NR7 bar pattern in Infosys. Sell below 3072, Buy above 3120.

Nifty breaks 5380 support, may see further declines

Trend:- Today’s market shows us an intermediate downtrend. Market is trading below its 200 days and 50 days moving average. We are regularly seeing a pattern of lower highs, lower lows.
TA Insync(55-5) has gone below minus 45, continued to oversold. In a strong downtrend, the oversold condition can persist for some days as market continues falling. But, sooner or later, we can expect a relief rally / consolidation.

Level:- Looking for support first 5130. Minor support may come at 5280. The resistance comes at 5500. Summary:- Nifty breaks its support at 5380 in a bearish market. Fresh short positions should be taken on rallies or through the use of put spreads (buy 5300 put and sell 5100 put). It is also possible for the Nifty to go below 5000 in the month of February, if world markets start going down.

Market Outlook for 09 02 2011

Market reacted negatively to the inconclusive end to the meet called to discuss parliament logjam. Nifty traded below 5400 for the whole session and lack of any support even at lower levels resulted in another sharp cut of more than 1.5%. There were sharp cuts in various counters mainly in infrastructure space. that came out with results yesterday was down more than 17% as the stock collapsed to almost 18 months low. GMR Infra, Punj Lloyd, IRB Infra, GVK, Unitech and NCC witnessed cuts of 6 to 10 % each on relentless selling and almost no buying support even at almost 24-30 months lows. Other counters that witnessed significant loss in market cap were BEML, Ispat, JSW Steel, S.Kumars, KS Oils, Praj, MLL, Indian Info, IFCI, TVS Motors, Triveni, M&M and Titan. There was a clear disinterest in value picking any stock/sector as almost all sectors struggled. Bank Nifty made a new recent low after moving sideways for past 2-3 weeks and that doesn’t augur well for the broader markets. ICICI, HDFC bank and PNB lost ground. Number of mid cap banking counters made new recent lows. Few stocks that did manage to see some stock specific upmoves were Fortis, Bajaj Auto, ABG Ship, NMDC and Auro Pharma. But apart from Fortis that gained more than 5% on huge stocks others just about manage to eke out small gains. Overall, it was yet another good day for bears as they pushed for lower levels on almost no resistance by bulls. Bulls seem to have thrown in towel as levels are being taken out without much effort. Till about two days ago we were discussing the possibility of 5450 providing some support and here we are about 150 points lower even from that level. Almost all sectors are succumbing to the negative sentiments with infrastructure being the current favorite with bears. The way some of the infra stocks have seen erosion of market cap over last 2-3 weeks is simply amazing. Many stocks have entered heavily oversold positions. 5350 has also not held and now we are firmly in the 4800 to 5450 range where we traded for almost 11 months before the Nifty broke out. 5440-50 has become an immediate strong resistance while 5550-60 remains a strong intermediate reversal level. One should be careful to be on the short side as stocks and indices have entered oversold zone and any positive factor (one of them could be Govt agreeing for JPC) could trigger a sharp rebound. 5375- 5380 would be the initial level to watch and then 5440-50.