research.pacefin
26th February 2009, 11:24 AM
For Private Circulation Only
February 26, 2009
The markets traded in green all through yesterday’s session. It was a good session for the markets, which ended higher despite giving up some gains in last one hour of trade. There was some amount of volatility in the markets throughout the session ahead of F&O expiry. Upside in global markets gave the much needed sentimental fillip.
Shares of oil & gas exploration, technology, auto, metal, banking and power companies were being supportive to the markets. However, sell-off in HDFC, L&T, DLF, Reliance Communication, Ranbaxy, ABB, Ambuja Cements and ACC helped the markets to slip from higher levels The Nifty – 50, gave up roughly 27 points from day's high of 2789.35, before shutting shop at 2762.50, up 1.05% or 28.60 points.
Volumes have once again declined compared to previous session; total traded turnover stood at Rs 48,963.85 crore. This includes Rs 6,621.62 crore from NSE cash segment, Rs 40,129.86 crore from NSE F&O and the balance Rs 2,212.37 crore from BSE cash segment.
Market breadth finished mixed; about 1409 shares advanced while 1451 shares declined. Nearly 174 shares remained unchanged.
Chart 1: Nifty - Long Term Hourly – Breaches Crucial Support / Trendline
http://img16.imageshack.us/img16/niftyweekly.png/1/w1250.png (http://imageshack.us)
There is not much change in the overall buildup in the markets. The recovery from lows of Tuesday, has to be taken with fistfuls of salt (Not just pinch of salt). The derivatives expiry compulsions, for contracts expiring today, seem to be the underlying cause. Avoid avertly bullish or bearish bias. Caution is the key word.
The next logical target stands at 2650-2500. The new time cycle target now stands around 11th of March 2009. We may see an intermediate bottom around that time.
We are strikingly close to support at 2700 - 2650. However if weakness persists, and when 2650 is breached on the downside, expect 2300-2400, as explained in the future projectile. On the upside, the target for next bounce back may be brought down to 2750-2800 range.
Prepare your nerves further for high volatility ….
Weekly Analysis
Our last week’s hit line read – “Positive triggers needed for a breakout…On the flip - Prepare your nerves for….” It seems we now require preparing our nerves further for higher volatility.
Nifty opened the week at 2948.25, almost at the high of week at 2953.2. It then just drifted down to touch the low at 2709 on Friday, before shutting shop at 2736.57 on the back of a marginal recovery towards the end of Friday’s trading.
Nifty had been in a range of 2700-2950 till last week. However Friday’s move to close very near to the lower range of 2700 may spark some melting points. On the back drop of weak global cues the weakness maybe further precipitated.
As was shown in the long term hourly chart, market has been making steady lower lows and lower highs as well since second week of January (Jan 9, 2009). Further it has failed to cross even the intermediate tops of 2950 – 2840, in subsequent attempts. As such in continuation with the bearish implications, market may test 2650, which corresponds to low created in last week of January. As and when we trade & close below this level, expect the testing of 2500 level created by low of November 2008. This is the final frontier for bears which when taken out will get in murderous mood.
Since the follow-up move on the downside has finally been witnessed last week, expect the testing of 2500 level in a hurry. The compressed spring hypothesis may work finally.
Weekly resistance will be at 2750-2840. The weekly support will be at 2650 level and outwardly at 2500.
Chart 2: Nifty - Support Zone : Neutral Zone : Resistance Zone
2500-2650: 2800-2950: 3071-3250
http://img502.imageshack.us/img502/niftyhourlylt.png/1/w1250.png (http://imageshack.us)
Conclusion
The market has finally been engulfed in the bearish undertone. The same may continue till the next time cycle target which falls around 2nd week of March 2009. This in all likelihood will be the final assault by the bears.
Strategy for the week
The overall strategy still remains to exit long positions on any rise coming in next few days. Traders may create shorts from here on for logical targets of 2630 – 2500 -2300 in that order.
Let’s take a quick follow up on the future projectile we posted in the first week of Jan 09:
Future Projectile
1) We may move to a level of 3100-3200 (Time Cycle target around first week of Jan, still holds). – Achieved with Nifty hitting high on Jan 7th 2009.
2) The market may then fall to 2700-2800 levels. Possibly below 2800, this would breach the low of 29/12/2008. This could go on till 2nd week of Jan, where an intermediate bottom could be in place. This may also discount the initial bad results of Dec Q. – Achieved with Nifty hitting a low of 2700 on Jan 15th 2009.
3) Given the current gloom in sentiment, we feel that market may once again seek a top around 2950-3050, in coming weeks. This top would certainly be lower, as compared to 3150 registered on 7th Jan 2009. – Achieved with Nifty hitting 2956 on Feb 10th 2009.
Previous: Thereafter a likelihood of market rising to 3500-3600 till Feb last week - Time Cycle 2.
4) After this the market may fall substantially and may test 2500 - 2200 -2000 in that order.
Update: The time cycle target would now be revised to Last week of March as the top of 3150 on Jan 7th, 2009 will tend to pre pone the bigger move.
Previous: This would coincide with the Time Cycle 3 in Apr-May 2009 (Around 11-13 weeks of downtrend)
__________________________________________________ ____________________ _
Financial Services
Head Office A 1/291 Safdarjung Enclave, New Delhi 110029
Telephone 91-11-42022222 (50 lines), 26106371
Fax 91-11-26165176
Web site www.pacefin.com
__________________________________________________ ____________________ _
RESEARCH
Pushkaraj Kanitkar Chief Technical Analyst pushkan@pacefin.in
Head, Research & Strategy
Yadvendra Mohan Database Management yadvendra@pacefin.in
__________________________________________________ ______________________
Disclaimer
The Research Department of PACE Financial Services has prepared this report. The information and opinions contained herein have been compiled or arrived at based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. PACE, its owners, directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Investors should invest only in consultation with their financial adviser.
PACE and other group companies, its owners, directors, analysts, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies /organizations described in this report.
General Advice Warning
Please note that any advice given by PACE is deemed to be general advise, as the information or advice given, does not take into account your particular objectives, financial situation or news. Therefore, at all times you should consider the appropriateness of the advice and consult your financial advisor before you act further.
February 26, 2009
The markets traded in green all through yesterday’s session. It was a good session for the markets, which ended higher despite giving up some gains in last one hour of trade. There was some amount of volatility in the markets throughout the session ahead of F&O expiry. Upside in global markets gave the much needed sentimental fillip.
Shares of oil & gas exploration, technology, auto, metal, banking and power companies were being supportive to the markets. However, sell-off in HDFC, L&T, DLF, Reliance Communication, Ranbaxy, ABB, Ambuja Cements and ACC helped the markets to slip from higher levels The Nifty – 50, gave up roughly 27 points from day's high of 2789.35, before shutting shop at 2762.50, up 1.05% or 28.60 points.
Volumes have once again declined compared to previous session; total traded turnover stood at Rs 48,963.85 crore. This includes Rs 6,621.62 crore from NSE cash segment, Rs 40,129.86 crore from NSE F&O and the balance Rs 2,212.37 crore from BSE cash segment.
Market breadth finished mixed; about 1409 shares advanced while 1451 shares declined. Nearly 174 shares remained unchanged.
Chart 1: Nifty - Long Term Hourly – Breaches Crucial Support / Trendline
http://img16.imageshack.us/img16/niftyweekly.png/1/w1250.png (http://imageshack.us)
There is not much change in the overall buildup in the markets. The recovery from lows of Tuesday, has to be taken with fistfuls of salt (Not just pinch of salt). The derivatives expiry compulsions, for contracts expiring today, seem to be the underlying cause. Avoid avertly bullish or bearish bias. Caution is the key word.
The next logical target stands at 2650-2500. The new time cycle target now stands around 11th of March 2009. We may see an intermediate bottom around that time.
We are strikingly close to support at 2700 - 2650. However if weakness persists, and when 2650 is breached on the downside, expect 2300-2400, as explained in the future projectile. On the upside, the target for next bounce back may be brought down to 2750-2800 range.
Prepare your nerves further for high volatility ….
Weekly Analysis
Our last week’s hit line read – “Positive triggers needed for a breakout…On the flip - Prepare your nerves for….” It seems we now require preparing our nerves further for higher volatility.
Nifty opened the week at 2948.25, almost at the high of week at 2953.2. It then just drifted down to touch the low at 2709 on Friday, before shutting shop at 2736.57 on the back of a marginal recovery towards the end of Friday’s trading.
Nifty had been in a range of 2700-2950 till last week. However Friday’s move to close very near to the lower range of 2700 may spark some melting points. On the back drop of weak global cues the weakness maybe further precipitated.
As was shown in the long term hourly chart, market has been making steady lower lows and lower highs as well since second week of January (Jan 9, 2009). Further it has failed to cross even the intermediate tops of 2950 – 2840, in subsequent attempts. As such in continuation with the bearish implications, market may test 2650, which corresponds to low created in last week of January. As and when we trade & close below this level, expect the testing of 2500 level created by low of November 2008. This is the final frontier for bears which when taken out will get in murderous mood.
Since the follow-up move on the downside has finally been witnessed last week, expect the testing of 2500 level in a hurry. The compressed spring hypothesis may work finally.
Weekly resistance will be at 2750-2840. The weekly support will be at 2650 level and outwardly at 2500.
Chart 2: Nifty - Support Zone : Neutral Zone : Resistance Zone
2500-2650: 2800-2950: 3071-3250
http://img502.imageshack.us/img502/niftyhourlylt.png/1/w1250.png (http://imageshack.us)
Conclusion
The market has finally been engulfed in the bearish undertone. The same may continue till the next time cycle target which falls around 2nd week of March 2009. This in all likelihood will be the final assault by the bears.
Strategy for the week
The overall strategy still remains to exit long positions on any rise coming in next few days. Traders may create shorts from here on for logical targets of 2630 – 2500 -2300 in that order.
Let’s take a quick follow up on the future projectile we posted in the first week of Jan 09:
Future Projectile
1) We may move to a level of 3100-3200 (Time Cycle target around first week of Jan, still holds). – Achieved with Nifty hitting high on Jan 7th 2009.
2) The market may then fall to 2700-2800 levels. Possibly below 2800, this would breach the low of 29/12/2008. This could go on till 2nd week of Jan, where an intermediate bottom could be in place. This may also discount the initial bad results of Dec Q. – Achieved with Nifty hitting a low of 2700 on Jan 15th 2009.
3) Given the current gloom in sentiment, we feel that market may once again seek a top around 2950-3050, in coming weeks. This top would certainly be lower, as compared to 3150 registered on 7th Jan 2009. – Achieved with Nifty hitting 2956 on Feb 10th 2009.
Previous: Thereafter a likelihood of market rising to 3500-3600 till Feb last week - Time Cycle 2.
4) After this the market may fall substantially and may test 2500 - 2200 -2000 in that order.
Update: The time cycle target would now be revised to Last week of March as the top of 3150 on Jan 7th, 2009 will tend to pre pone the bigger move.
Previous: This would coincide with the Time Cycle 3 in Apr-May 2009 (Around 11-13 weeks of downtrend)
__________________________________________________ ____________________ _
Financial Services
Head Office A 1/291 Safdarjung Enclave, New Delhi 110029
Telephone 91-11-42022222 (50 lines), 26106371
Fax 91-11-26165176
Web site www.pacefin.com
__________________________________________________ ____________________ _
RESEARCH
Pushkaraj Kanitkar Chief Technical Analyst pushkan@pacefin.in
Head, Research & Strategy
Yadvendra Mohan Database Management yadvendra@pacefin.in
__________________________________________________ ______________________
Disclaimer
The Research Department of PACE Financial Services has prepared this report. The information and opinions contained herein have been compiled or arrived at based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. PACE, its owners, directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Investors should invest only in consultation with their financial adviser.
PACE and other group companies, its owners, directors, analysts, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies /organizations described in this report.
General Advice Warning
Please note that any advice given by PACE is deemed to be general advise, as the information or advice given, does not take into account your particular objectives, financial situation or news. Therefore, at all times you should consider the appropriateness of the advice and consult your financial advisor before you act further.