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.

Todays Sentence

One lesson borne of experience is that the best course in investing is often to do nothing. That’s a hard lesson to apply in practice, given the propensity most of us have for tinkering. - Edward Studzinski

Stock to trade 11 02 2011

PNB :- TA Turtle downside breakout in PNB 30 mins chart. Sell with stop loss above 1003.
Ambuja Cement :- NR7 pattern in Ambuja Cement. Sell below 117, Buy above 120.50.

Market decline continues. Narrow range suggests another big move may be coming.

Nifty Watch:- The Nifty opened 25 point lower at 5260. The Index made a low at 5213, and then moved up to 5260 and down to 5210. Again nifty moved up to 5285 and fell, finally closed at 5224. The movements are given to give you a picture of the lack of direction that prevailed today. Overall it’s a choppy market with a narrow range of 75 points. This narrow range suggests another big move is coming.

Level:- Looking for support at 5130 and resistance comes at 5400. The support is relevant only if prices actually stabilise at these levels. So investors should wait and watch for base building.
Investors should hold on to their cash. Wait for the decline to end, and, a strong base building process to start. That will give a buying opportunity in the market.

Market Outlook for 11 02 2011

Nifty continued to drift lower though the momentum slowed down a bit. Some buying was seen at lower levels in some of the stocks that were butchered yesterday. ADA group counters notably Reliance Infra, was amongst the prominent gainers for the day as it moved up by more than 10% amidst huge volumes. LITL was the biggest gainer on account of profit taking by bears as well as some value buying at lower lower levels. Stock was up more than 20%. Some others that gained some ground were Onmobile, GMR Infra, Jain Irrigation, Polaris, Dish TV, JSW Steel, Ashok Leyland, Crompton, TVS motors and JP Associates. Most of these names have seen deep cuts in last 2-3 weeks. But some of the heavyweights saw fresh selling and that kept indices under check. Bharti, RIL, Infosys and SBI were amongst the index losers. Some of the other significant losers were Tata Comm, Ind Hotels, United Spirits, Bombay Dyeing, DCB, Petronet, Alok and Pantaloon.

Nifty dipped below 5200 for a while before some short covering helped to close it above 5200. But, still the pressure was evident at higher levels as Nifty moved past 5250 twice before slipping back again. Selling seem to have caught up with the relative outperformers now as Tata Steel, Bharti , petronet and TCS lost ground today. Tata Steel has support around 590-95 and closing below it could take it to around Rs 560-65. Petronet too has support around 115 and sustained trades below this could take it lower to around 105. Hindalco is also showing some weakness and has broken down below 218. Nifty could see some more short covering once it begins to trade above 5285-5300. On the downside some support is likely around 5140- 50.