Morning Cut Recommendation

Hello,

 

Markets went sideways into a consolidation range with the total range of the market itself (Nifty)  being limited to a mere 32 points. This can be seen as either a step up zone for the next major move upwards or this was a period of distribution (which seems unlikely given the small range and buying by FII's).

 

Yesterday US markets once again moved up once again and hence reduced a chance that markets here will open in negative territory and hence provide a potential for a Evening Star Pattern. The validation of such a pattern will increase if markets break below yesterdays low while it would get invalidated if we break above yesterdays high.

 

Yesterdays high zone of 5110 will act as short term resistance point above which the next resistance is at 5500. On the lower side, support for nifty exists at 5465 and 5515. Implied Volatility of ATM Nifty options dropped further to 14.8 while PCR ratio for Nifty came in at 1.42.

 

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Morning Cut Reco

Hello,

 

Our anticipation of a bullish move based on the Hammer Candlestick chart formation worked beautifully. Markets opened positive and shot up in the afternoon on back of strong US Futures / European markets. With the US Markets having closed very strongly, we are sure to rise above our next resistance level of 5500 but the bigger question that remains to be answered is if we can break above 5550 in this move.

 

While Oscillators on the daily charts are still in the mid range, on the hourly charts a strong rise can pull them into Overbought territory from where a reaction - either time wise or price wise - can happen. Put Call Ratio on Nifty came in at 1.41 while Implied Volatility dropped to 15.8. Resistances for Nifty are at 5500 and 5550 while supports come in at 5400 and 5350.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Reco

Hello,

 

Markets stopped at the crucial 5350 level and bounced back from there to create a hammer candlestick pattern. The Hammer is a bullish reversal pattern that forms after a decline. In addition to a potential trend reversal, hammers can mark bottoms or support levels. Since it has come after a decline, hammers signal a bullish revival. The low of the long lower shadow implies that sellers drove prices lower during the session. However, the strong finish indicates that buyers regained their footing to end the session on a strong note. A confirmation of hammers require further bullish confirmation. The low of the hammer shows that plenty of sellers remain. Further buying pressure, and preferably on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal. Yesterday's volume while not very huge was more than the volume of Monday and hence significant.

 

Put-Call Ratio on Nifty came in at 1.47 and Implied Volatility at 17. Maximum Put open Interest is at 5400 further confirming that 5350 may sustain for the short term. Among Nifty Call Options, 5500 - 5600 carries max OI thus signifying the resistance at the level.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Reco

Hello,

 

Despite the strong close on Friday in the US markets, our markets after opening strong went down throughout the day to finally close the day essentially flat. Our markets seem pretty weak now with both the short term and medium term trend having turned weak.

 

A confirmation of weakness shall be available once Nifty breaks down below the 5350 level which is the lower pivot level of the current range. As indicated, we have on the short term broken down below a rising channel providing us with a immediate target of 5190.

 

PCR ratio for yesterday was 1.43 with maximum activity on Nifty 5400 PE and Nifty 5500CE. Maximum open interest comes in at 5400 PE and 5600 PE and hence a breakdown below 5400 should also see a shift of the 5400 position as it can be a support otherwise.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Re: [Technical-Investor] Thoughts on systems & benchmarking

Leverage in itself is a good thing in Super Bull markets and will get a really bad name once this comes to a grinding halt like 2008.  That same leverage will take accounts down to levels to wipe off a couple 2-3 years of gains.  So, leverage should be use carefully and after full consideration of risk like Prashant is talking about. 

In addition, everything in investing has to be benchmarked against two major factors:

1. Returns of FD before taxes
    - This needs no management of assets except for 1 hour per year in a 1 year FD
2. Returns of Equity MF without leverage
    - To me Reliance Equity (growth) is the best and longest term benchmark
    - A subset of the above could just be the measure of the Nifty ETF (which has low fees) Performances
    - This needs approx 1 hour a month or 1 hour a year depending on how active one wants to be using this investment vehicle

If one can beat these returns over the last 1, 3, 5, and 10 years, regardless when you started, before a Portfolio Manager of Your Own Personal Funds.  If not, then resort to one of the above.   Now, if a leverage portfolio is used, then you have to cut back the leverage in the benchmarking, or come up with a similar leverage on the above measurements (putting a FD return with borrowed money on margin, which is available in the US, but not in India, as far as I know). 

I will even add one more factor to it.  If you are doing an active portfolio management and it is taking you 10 hours a week on it, then what one has to subtract from the returns is the money you would make in a job or business by putting those hours into the job/business.  That has to be factored into the benchmark since the above 2 factors are demanding 1 hour a month or 1 hour a year of time. 

Now, when it comes to trading systems, life is exciting when you develop one, which may be back tested up the wazoo, but will not meet the requirements and performances of future market environments. 

Hence, I love the discussions that a few of the Seniors have been doing about making things simple and keeping it to MAs or a simple combo of technicals. 

Prashant has eluded to most of the above, but if one reads it carefully......I just added some more color and clarity to it. 

KKP



On 8/26/2010 8:30 AM, Prashanth wrote:

 

Hello,

A friend of mine was recently suggesting to the group where I was part of that the easiest way to pick stocks was to get MetaStock, run its indicators and select a list of stocks based on Discretion. I generally argue against such BS, but did not have the mood to do so and left it off. But the information he sought to convey is that all you needed is MS and a data provider and well, you could well be on the way to riches and glory.

 

Just yesterday I was discussing with a friend cum client of mine the importance of "Benchmarking". I believe that if a system is not able to generate at the minimum twice the return (after deducting all expenses incurred in regard to trading that system) of the said Benchmark, it may be wiser to be a Buy and Hold (or shall I say Hope) investor since one can spend the same time doing some other profitable work.

 

Generally when computing returns, people forget the risk they take (leverage) and instead calculate directly the net profit / loss A friend of mine recently showed me a list showing the returns generated by him for his clients. He has over 9 months averaged around 5% per month, net of brokerage & taxes. While on the face of it, its a commendable performance, what one misses is the fact that he uses nearly 5X leverage to achieve such returns. The question that one should then ask is whether the risk is worth the reward. 5x is no small leverage and one bad move can wipe out returns generated over months together.

 

Cheers

 

Prashanth

__._,_.___

Reply to sender | Reply to group | Reply via web post | Start a New Topic

Messages in this topic (1)

Recent Activity:

• New Members 14

Visit Your Group

For Forum Rules of Conduct & Disclaimer, please go through

http://finance.groups.yahoo.com/group/Technical-Investor/files/!Forum Rules of Conduct.txt

MARKETPLACE

Stay on top of your group activity without leaving the page you're on - Get the Yahoo! Toolbar now.

---

Hobbies & Activities Zone: Find others who share your passions! Explore new interests.

---

Get great advice about dogs and cats. Visit the Dog & Cat Answers Center.

Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use

.

__,_._,___

--  Plan Your Work and Work Your Plan to Get Ahead in 2009-2012.....  KKP Investor ------------ ------------ Bull Markets are Born on Pessimism,  Bull Markets Grow on Skepticism,  They Mature on Optimism, and  Die on Euphoria - Sir John Templeton ------------------------------------ Bear Markets are Born on Recessionism,  Snowball on Momentum & Technical-Breakdowns,  Mature on Eco-Political-Nightmare Talks, and  Die on World-Is-Coming-To-An-End Euphoria - KKP  -----------------------------------------------  >BUFFET: My rule is to be fearful when others are greedy,and be greedy when  others are fearful.   ABOVE ALL: Whatever God Does, Accept that as Good; Leave Behind ALL Other Judgements/Justifications. ----------------------------------------------------------------------------------------------------   Disclaimer> Do you homework for your ownself and then invest.  My ideas are not advice.       

Morning cut Recommendation

Hello,

 

Nifty ended the settlement day nearly flat. The august settlement has seen a rise in Nifty to the tune of 69 points. This thus is the 3rd consecutive positive close. Market-wide rollover was at 80% and Nifty rollovers saw 76% rollover into the September series which is pretty near to historical averages.

 

Yesterday for the second consecutive day FII's were on the selling side. US markets closed below the psychological level of 10,000 for the first time in August. Markets may be range bound today on account of both it being the first day of the new settlement and also today being the last day of the week

 

Short term traders may continue to hold their short positions with a stop loss above 5500 whereas medium term investors trading with a weekly perceptive in mind can hold their long positions with the stop being below 5450 as explained in our Monday outlook.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

  

Thoughts on systems & benchmarking

Hello,

A friend of mine was recently suggesting to the group where I was part of that the easiest way to pick stocks was to get MetaStock, run its indicators and select a list of stocks based on Discretion. I generally argue against such BS, but did not have the mood to do so and left it off. But the information he sought to convey is that all you needed is MS and a data provider and well, you could well be on the way to riches and glory.

 

Just yesterday I was discussing with a friend cum client of mine the importance of "Benchmarking". I believe that if a system is not able to generate at the minimum twice the return (after deducting all expenses incurred in regard to trading that system) of the said Benchmark, it may be wiser to be a Buy and Hold (or shall I say Hope) investor since one can spend the same time doing some other profitable work.

 

Generally when computing returns, people forget the risk they take (leverage) and instead calculate directly the net profit / loss A friend of mine recently showed me a list showing the returns generated by him for his clients. He has over 9 months averaged around 5% per month, net of brokerage & taxes. While on the face of it, its a commendable performance, what one misses is the fact that he uses nearly 5X leverage to achieve such returns. The question that one should then ask is whether the risk is worth the reward. 5x is no small leverage and one bad move can wipe out returns generated over months together.

 

Cheers

 

Prashanth

Morning Cut Recommendation

Hello,

 

As anticipated in yesterday's report, Nifty drifted down throughout the day to finally close just above 5460. Our weekly stop-loss level will get executed if market closes below 5450. With today being Derivative Expiry day, market could be volatile. India Vix had one of the strongest days yesterday soaring up by 11.4%.

 

Nifty is currently trading in a Ascending channel of smaller time frame which itself lies within the Ascending channel of the larger time frame. The lower trend line of the smaller channel currently sits at 5420. A break below that should provide us with a short term target of 5320.

 

Nifty shorts can be held with a stop above 5500. A break and close below 5420 too can be utilized to initiate fresh short positions in Nifty.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

   

Morning Cut Recommendation

Hello,

 

With Nifty once again failing to cross the 5400 barrier and instead having broken the lower end of the short term range, we will have to prepare for a retracement of the current move rather than the breakout we were hoping.

 

While the breakout is not fully ruled out, for the time being, it makes sense to be out of long positions and initiate short positions with a stop and reverse level being around 5550.

 

Yesterday, we saw huge covering of 5500 and 5600 PE which is indicative of possible weakness in the short term. PCR ratio was at 1.79.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

Nifty once again has stalled at the crucial level of 5540. With the oncoming derivative expiry, markets may remain range-bound for the next couple of days. August Open Interest in Nifty seems to show a solid support at 5500 level and a very strong resistance at 5600. Its unlikely that either of the two levels will be breached in the coming days.

 

Advances - Declines came in at 831-536 yesterday showing that despite not much movement in Nifty, stocks are starting to move up. This is a pretty good sign of Bullishness since till now much of the moves happened despite breath being negative. PCR ratio of August Nifty Open Interest came in at 2.5 indicating strong bullishness going forward.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

This week the markets finally made its move by breaking above the 5350 - 5500 range and closed near the next resistance of 5540. While 5500 was a straight line resistance, 5540 is important in the sense that it represents the upper end of the Ascending Channel we are in for the last 8 months.

 

The Ascending Channel if broken provides us a target of 6255 with a possible time frame being at the least 2 - 3 months. On the other hand, if market starts to slide down, the same Ascending Channel shall provide a support around the 5000 level. With current week being the last week for the August F&O, based on current open interest in Nifty, Nifty may ideally trade around 5450 - 5600 levels.

 

Over the last few days, there has been tremendous talk of a Indicator named "Hindenburg Omen". This is said to be a very bearish signal that can cause a fall worldwide. But as they say, market never behave according to majority view and with the continued flow from FII's, I believe that chances are very high that any such omen can fall flat on its face and prove to be a damp squib.

 

Of course , that should not stop us from having a stop loss for our long positions. Last Monday I had said that all long positions could be held with a stop below 5350. With the market having moved tremendously this week, I believe that the stop loss level can be raised higher and hence long positions can be held until a close below 5450.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

Yesterday finally after a long time in hibernation, Nifty made the breakout that was anticipated from a pretty long time. Breadth was ok with NSE recording 845 advancers vs. 514 declines. Generally first stocks to breakout are Index stocks and only later on during the rally do mid-cap stock join the rally.

 

Market yesterday stalled at a very important level that I had mentioned yesterday - 5540. This level is a very crucial level in many ways. One is the fact that this level coincides with the top of the channel. With the channel running for more than 8 months, a reversal here can lead us back to either the mid way point or even the lower end of the channel. Secondly 5540 also is the top of the first retracement that happened way back in 2008 (February).

 

Last time we encountered such resistance was in April when we tested a similar resistance from the high of May 08 and a level which co-incidentally also was the top of the channel that was getting formed. As one can remember, markets fell steadily until we touched the lower end of the channel.

 

Maintain Long positions in Nifty with a stop below 5450.

 

Regards

 

Prashanth

Mythri Stocks &  Shares Pvt Ltd.,

 

 

Morning Cut Recommendation

Hello,

 

Nifty has come to the edge of the range. If breakout were to happen, today offers the best chance for the same. Above 5500 Nifty encounters a stronger resistance in the form of the rising channel (in which Nifty is moving for the past 8 month) at 5540. Since this is a trendline resistance, a break out here shall provide us with a target of 6269 - a level that comes close to the all time high of Nifty.

 

Yesterday we saw a strong reversal in option open interest with short positions in Calls of 5400 and 5500 being cut and fresh shorts in 5400 and 5500 Puts. If this continues today, it should indicate strong support for the markets at 5450 level. PCR for Nifty yesterday rose to 1.57 which is a indication of the same. With Relative Strength Index being at around the 60 level, there is room for markets to rise higher before we encounter a overbought scenario.

 

Continue to hold Nifty longs while moving the stop loss to 5445.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Overnight the US markets made a strong move upwards which generally should get reflected in our markets as well. Unfortunately with the kind of range we are stuck in, it seems that we require a even greater propelling force to force us out of the range we are getting accustomed to.

 

Outside of Nifty, action seems to be limited to few stocks and yesterday it was the Banking stocks that caught the lime light. Bank Index (BankNifty) is now on the verge of a breakout into the all time high territory and being a heavy weight in Nifty can provide support for a breakout by Nifty too.

 

For today, it advisable to hold existing longs with a stop below 5395. Fresh Longs are better initiated on breakout of 5500 since its very difficult to trade in ranges as small as this without getting whipsawed.

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Yesterday's market action was interesting in the sense that we had a huge fall (synchronized across the world with US Futures and European Markets too falling in unison). Two things seem to stand out,

 

1. The big bar (Drop) came out of the blue. If this was Selling (which it should be since it was during market hours and one that would have taken out a lot of long stops. Theoretically such bars means that the trend has turned and the next bar continues form where the first bar left off.

 

Here that just did not happen. For the next 90 minutes of trade, we traded above the low of the day. While market seemed to be still weak, there had to be buying since there was no fall later on. This action seems consistent with this being a shakeout of weak bulls.

 

2. The low for the day also coincides with the 200 day Hourly average. This is generally a pretty good support level and market bounces from this level previously have taken the Index to a level higher than the previous pivot high.

 

For today, Longs in Nifty can be initiated with Stop Loss below 5395. As we are also on the verge of a wedge breakdown, a strict stop is very necessary.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

 

Trading Volume dominated by few persons

Today's Business Line carries a article titled - Just 451 clients account for 50% of NSE daily turnover (Link) .What's worse is that the article also says that just 106 clients contribute more than 50% of Derivative Volume.

Personally I believe this is a Serious issue that can have large term consequences for the majority of market players. Think about how much liquidity is concentrated in so few hands. No wonder we get moves such as the one today where market tanked in matter of minutes.

Its a well known fact that Volumes are dominated by a select few and liquidity is abysmally low. But if 106 clients contribute to nearly 50,000 Crore of Volume (that is equal to approx 470 Crores per person), that is trouble brewing.

US Markets too are dominated by few and the impact was felt on 06/05/2010 when the select few just withdrew (remember, the liquidity providers did not sell, they just stopped Buying) and market tanked all the way to near selling freeze in a matter of minutes. If this can happen to US markets which are deep in terms of liquidity think about the consequences of similar happenings in our market.

I believe that the Freeze in the markets that happened on Election Results were a product of not actual Buying but clear cut manipulation to squeeze out the bears. If a Buying freeze can happen (which incidentally as far as I can remember has not happened in any other market in the world - major markets), so can a selling freeze (which in recent memory we have suffered twice.

I believe that the low number actually shows that our market has a very high systematic risk possibility since risk being concentrated in so few hands can actually work either way and even the best of margin systems prove inadequate to bring a smooth closure of positions.

Cheers

Prashanth

Morning Cut Recommendation

Hello,

 

Another barely positive week but still trading well within the narrow band of 5350 - 5500. Among the major indices of the world, its just we and Sri Lanka who managed to close in postive with worst performer being Nasdaq Composite Index - the tech heavy index of US which fell a massive 5.02%.

 

Maximum Open Interest in Nifty remains between 5300 and 5600 confirming to the range in which markets have been stuck for some time now. Existing positional longs can be held with a stop below 5350 and fresh longs are better initiated only on break of 5500.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

PS: Arvind, I have attached a Short Term Outlook of the market by a friend of mine. If its ok, please do post the document with the Weekly outlook you send.

 

 

Morning Cut Recommendation

Hello,

 

Yesterday's Nifty Pattern on the candlestick chart is a Long Legged Doji. A Long Legged Doji is a reversal pattern and reflects the great indecision that exists between the bulls and the bears. Yesterday's IIP numbers disappointed the markets but also further highlighted the growing capacity constraints in the industry. While IIP numbers headed south, Inflation headed north as the WPI came in at 11.40.

 

With markets neither breaking below 5350 nor breaking above the 5500 mark, markets seemed to have reached a sort of a quagmire out of which the markets are unable to come out. While day before yesterday belonged to Tata Motors, yesterday it was State Bank of India. Results were the reason behind the strong breakouts in both these stocks. Even in midcap territory, there have been a lot of stocks that are making new highs / breaking out of long term ranges which seem to provide better trading opportunities than Nifty.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

With post analysis of the FOMC statement turning out more questions about the US Economy than it answered, US futures tumbled after close and the same got reflected in the Indian Markets which after opening positive gradually drifted to negative and finally fell sharply in the final hour before close.

 

While on the short term, yesterdays breakdown below the 5435 level is crucial, on the Medium term, as we said in the Weekly outlook, the main level to watch out for would be 5350. This is the lower end of the range in which market has been trading for a pretty long time and a breakdown below that should propel the market to fall another 100 - 150 points from there.

 

Any move below 5350 could be used to initiate short position on Nifty with a initial target of 5225. India VIX finally seems to have bottomed out and started what could possibly be a uptrend from here. Being a contrarian indicator, this spells negativity for the Index. PCR Ratio based on OI for yesterday came in at 1.40 and PCR ratio based on Volume at 1.12

 

Regards

 

Prashanth

   

Morning Cut Recommendation

Hello,

 

Nifty yesterday again failed to cross the 5500 mark as US futures awaiting the FOMC meet results remained weak and with other Asian markets too remaining weak, Nifty slided down and closed the day with a loss of around 25 points. One of the saving grace for the markets was Tata Motors which came out with strong numbers.

 

At the end of a one-day meeting of the Federal Open Market Committee, the Fed's top policymakers released a statement saying that new information "indicates that the pace of recovery in output and employment has slowed in recent months." This has smoothened the nerves of the market for the time being though its still very early to say if the market is satisfied with the conclusions drawn.

 

While Volatility is still way down, market is becoming slightly choppy at these levels. Longs are better initiated once Nifty crosses the 5500 level.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

 

Morning Cut Recommendation

Hello,

 

Nifty nearly tested its 5500 level yesterday on the back of strong moves in Auto, Metal & Reality stocks. Only stock that remained weak is Reliance which yesterday tested its medium term trend line support. US markets closed a bit higher yesterday as it waits for the FOMC statement. The Federal Open Market Committee will debate whether to take new measures meant to boost growth--and if so, what those measures should include.

 

Since this is not expected during the Indian Market hours, with Asia remaining weak as of now and US / Europe Futures too not showing any signs, not much can be expected from the markets unless we strongly breakout from the 5500 levels.

 

Levels to watch out for Nifty are 5500 and 5550 on the higher side and 5425 and 5405 on the lower side.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

While we closed positive for the week, the range of trade was very small, infact on the candlestick, we have made a formation called a "Inside Bar". Theoretically this is a reversal pattern, but since the candle has formed at a area where the moves have become very slow and small, value of this pattern may not hold to its potential.

 

On the weekly scale, this is the third week in succession wherein markets have neither broken down nor broken up. Options Open Interest for the current month have peaked at 5300 PE and 5600 CE giving us a wide range of 300 points within which the market seems destined to remain for the time being.

 

A  lot of Analysts are calling for a top formation at 5500 and have indicated that by reaching 5487 during the week, we may have infact made a topping out formation. While there is no denying the fact that 5500 is indeed a very important level on several parameters, markets rarely move as predicted by the majority. Secondly no major bull markets have peaked out without a peaking out formation that happens with a sharp rise and then a sharp fall.

 

On a weekly level, one can remain bullish until we see a close below 5350 happening.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Yesterday's move in the markets proved to be a anti-climax as the much awaited breakout did not come. While Nifty did move over our level of 5475, it could not sustain and selling in the last hour meant that we closed negative after trading around in a small range for most parts of the day. Its important that the last hour of selling is analyzed thoroughly since it can be read in two ways. One, its a case of Breakout failure. If this is a breakout failure, market can turn around and go down pretty fast to its strong support zone of 5335 or Two, it is just a shakeout. A shakeout is one where  a sharp downward move occurs in an  upward trend market  with no prior indication or extensive previous preparation. This catches weak bulls offguard but the trend itself does not get over and it continues as before.

 

Its still early to judge as to whether our markets are preparing for a strong breakout from this zone or is this the end point. One of the problem we seem to be facing is Reliance. A market heavy weight and one of the leading performer in most rallies, this time around, its underperforming the market and sits on the verge of a breakdown. While one can remain Bullish for now, its better to know a level to exit if the supposed breakout does not happen so that one is not stuck in a long position in a falling market.  

  

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

The big question for today is - are we finally going to see the breakout of the range - a breakout which seems is long awaited since we now are at the threshold of breaking the 5475 and hopefully there after the 5500 level. Markets have been playing Cat and Mouse for too long a period and while its still early to say good bye to the current range, chances are higher that this time we may see the breakout happening.

 

Yesterday we had a unlikely sector that propped the market up - Information Technology. BSE IT Index has now joined the club of Indices that have broken their All time high's. The others in the club being BSE Auto,BSE Health & BSE FMCG Indices. The only two heavyweight indices that are yet to join are the Metal Index & the Banking Index. A move by these should realistically propel the Index towards it all time high.

 

For today, keep a eye on 5475. Once we start trading above it, that should act as a good support range for the time being. Resistances above it are at 5545 and 5610.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Adani Power - A technical perceptive

Adani Power has been one of the strongest mover in the Power Sector. While it was a underperforming stock right after the IPO got listed, the stock started taking off in December 2009 and has been going up relentlessly ever since. Infact addition of the stock in the Derivative Segment seems to have boosted the stock even more in the last couple of days.



Adani Power stock is in a Long Term channel and trending upwards. As long as the trend is not broken, longs can be initiated either at pullback or at breakouts. Either way, stop Loss for Short Term Position would be a close below 120 which would indicate the end of the rally and probably the beginning of a counter rally.

Major Support levels for the stock are 120, 118 and 114. A fall below 110 would mean a entry into a bearish phase.



The above chart is a Relative Strength comparison of all Private Sector Power stocks listed that are on NSE. As one can see, Adani has been one of the strongest movers since Nov09 with the only other stock to beat Adani Power with respect to gains returned being Torrent Power and the weakest stock being Rel Power.

Relative Strength charts are used to determine strength of stock in relation to other stocks in same domain and buy the strongest while selling the weakest. This is a continuing process since stocks can move up and down the hierarchy based on market trends.

Based on current conditions I would rate Adani Power a Buy.

Regards

Prashanth

Morning Cut Recommendation

Hello,

 

Yesterday was a day of lacklusture movement with the Index unable to pierce through the 5475 resistance. The breadth of the market while closing positive lacked substance since even in mid caps, there has been no continuity of trend making it hard to trade stocks. The only sector which seems to show a huge divergence is the Banking Sector which is on its way to test the all time high (for Bank Nifty) and the one sector that is holding up the Nifty despite weakness in other sectors.

 

Nifty Put Call ratio fell to 1.25 and India VIX at 17.55 is very close to the April lows which is also the all time low for the Indicator. Both these indicators are contra indicators in effect meaning that while everyone is looking for a higher breakout of Nifty, the Put Call Ratio & the Vix seems to be indicating a probability for a downswing.

 

As has been emphasised here, any fresh long or short positions are better initiated once we move outside of this zone since the risk reward ratio does not seem to justify otherwise.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

On the bank of a strong US Futures / Europe, Nifty supported hugely by the Banks rallied and is once again testing the higher ranges of the 5350 - 5475 range that we seem to have got stuck into. While yesterday's rally was pretty good, we still have to move another 40 points before we get a breakout that has been evading us for some time now.

 

FII's have continued to buy significant amounts of equity in the Indian market though its impact has been much lower than in previous times due to counter selling by local institutions but the current log jam cannot continue indefinitely. At some point either the DII's will join the party and FII's will turnaround to start selling off. Either way that should give us a breakout / breakdown of the range we are currently trading in. Despite yesterdays move seemingly strong, Advancer to Decliners were at 852 : 482 indicating that participation was not across the board and there is still a large segment of the market that is yet to participate fully.

 

There are two ways to trade the market. One is to trade using Mean Reversion wherein we Buy near the lows of the range and Sell /Short at the top of the range or wait for the market to decisively move either way before initiating any positions. Either way, its important to have a stop loss in place to account for the unknowns.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Nifty while closed weak on Friday did not break below our lower range of 5350. This coupled with the fact that US Markets bounced back from the lows of the day and Futures being currently strong means that we shall yet again test and maybe move above the 5400 level. As mentioned for a breakout to happen, 5475 is now the new level to watch out for since the heavy choppiness at 5400 has meant a erosion of it either being a support or a resistance.

 

FII's during the month of July invested a total sum of Rs.8320.51 Crores in the Equity Markets but with Domestic Institutions being heavy sellers to the tune of Rs. 6323.15 Crores in July, markets were kept in a range out of which it could not come out. Whether such counter trades shall continue even this month is a difficult task to guess but it seems unlikely.

 

Option Open Interest indicates a resistance at 5600 level with support at 5300 level thus setting the initial range for the market. With Volatility being pretty low, chances of a breakout seem lower than a breakdown and even the range seems to indicate a bit of downward bias rather than upward. Nifty Put Call ratio for Friday was at 1.41

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

View on Cisco - Long Term & Short Term

 

My take on Cisco.

 

Here is a Long Term Log chart,

 

 

The Chart is a Long Term Log Chart. As you can see after the rise after a stupendous rise from 1994 - 2000, it retraced nearly 40% and is in what is called as a Widening Wedge from 2002 onwards.With Volatility having come down drastically we can remain in that channel for a long period of time.

 

 

The above weekly chart shows the formation of a Inverse Head & Shoulders. Technically what this says is that once price breaks the neckline of 28, it should over a period of time achieve a price target of 41. Ofcourse there is no guarantee that such a target will be achieved since other factors may come to influence, but on a long term scale, chances of it achieving are higher.

 

A complex Inverse H&S as the above seems to be has a low chance of failure though failure of the pattern can happen and is visible if after breaking the neckline, stock reacts and starts to go down. Breakout volume can be crucial. If stock breaks the neckline with strong volume, chances of it being successful are tremendously higher.

 

 

Now the Daily Chart. On the daily chart too we seem to be seeing a Inverse H&S formation with a target price of 27 which is also a strong resistance point.

 

On a short term basis, the stock is weak and unless it crosses 25 decisively, its difficult to project any strong bullish move in near term. The stock has been consolidating for more than 8 years now and the longer it remains in that channel, stronger will be a move in either direction.

 

As on date, long term appears more strong as compared to short term where weakness may persist.

 

Regards

 

Prashanth

 

 

Morning Cut Recommendation

Hello,

 

Nifty Futures for July closed just above the 5400 level. Nifty August futures is trading at a premium to spot and this theoretically signifies that Bulls were agressive in shifting their Longs to the next month. The premium should erode substantially today since US markets closed in the Red and the futures too are weak.

 

With Nifty trading around the 5400  level, the 5400 level in itself has lost meaning which means that we should start looking at Nifty breaking either 5475 on upside or 5350 on lower side which currently defines the trading range we are caught in. Once we move out of these zones, Nifty should be able to move strongly on either side.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

Nifty as anticipated weakened a bit and closed below the 5400 mark. While its still too early to call as to whether we are in the edge of a correction or not, one thing seems to be sure. This settlement shall close around this level and any action will come only in the next series beginning tomorrow.

 

FII's continued to be bullish and this alone can act as a barrier to any sharp fall from here unless they turnaround and start selling instead of being buyers. With US markets not providing any direction markets can remain rangebound for further period of time until and unless there is some new action that takes the market out of the current trading range.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

With expiry around the corner, RBI Credit Policy had not much of a impact on the markets save for a intraday swing high which got taken out before we closed for the day. While Nifty still remains above the crucial 5400 level, its becoming increasingly tough to believe that the market has the momentum to continue its upward march unless we shake off the lethargy & move sharply above the 5475 level.

 

There are 2 other things that has happened which has to be taken note of. After 13 consecutive days of buying, FII's sold a bit yesterday. While the amount is very small, it does make a difference. Add to it the fall of Gold. Gold's fall overnight is one of the strongest in recent times. A fall in Gold can point out to two reasons  - Case One -  Fear is subsiding - Case Two - liquidity contraction maybe starting to happen. If its the first scenario, Gold should fall where as equities should rise and in case its the  Second scenario, all asset classes should and fall. As of now, it seems that the second scenario is unfolding.

 

A break of 5400 on Nifty should be taken as a first move of a reaction. How large the reaction will be will of course depend upon multiple other factors that are not taken into account currently.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

Morning Cut Recommendation

Hello,

 

The first day of the week after the breakout turned out to be lackluster and market weakened quite a bit. Breadth of the market was exceptionally negative with the NSE recording 386 Advancers vs 959 Decliners. Markets seemed concerned over the result of Maruti and with Reliance reporting its results today along with the announcement of Credit Policy by RBI which too is scheduled today, markets seem to be on a wait and watch mode.

 

While the breakout is still valid, one has to be open to a proposition of the breakout being a failure. This would essentially not tie us down to a bullish scenario but keep us in the rut for a bear trade as well. With just 3 days left for expiry of the July settlement, it seems very unlikely that we shall move beyond 5500 nor move below 5300. Nifty closing below 5400 would confirm a failure of the current breakout setup and provide us with a bearish trading opportunity.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

After a period of 28 months, Nifty for the first time since Jan 2008 closed above the 5400 mark. The fact that Nifty is now at a 2 year high does not mean that the market is expensive. Measured by way of Sensex Price Earnings Ratio (PE), we are still below the high of 2010 which reads at 22.68 vs current reading of 21.46 let alone the 2008 peak of 28.57. This means that there is still room for Nifty to seek higher levels even when viewed through the prism of Fundamentals.

 

Breakouts are given importance based on both where its breaking out - how strong the resistance is - and based on how much time has elapsed. On both counts 5400 is a level which held tremendous importance. The final barrier towards confirmation of this breakout would be a close over 5475 which is the 78.6% retracement of the entire rally from Jan 2008. A breakout above this will lead us to 5700 - 5800 level. Even a test of 6K in the coming months looks very likely going by the strong trend in the market.  

 

For the week, this also being the expiry week, we may see a small increase in volatility as the Indices adjust themselves to closing prices. As on date, Nifty PCR Ratio is at 1.47 with maximum open interest remaining at 5500 CE and 5300 PE. Hence this will be the range that may not get broken for the week (till Thursday, Friday is new settlement) though there lies more probability of a rise above 5500 as against a fall below 5300.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Morning Cut Recommendation

Hello,

 

The ping-pong match seems to have finally ended in favour of the Bulls with the Bulls seeming to gain total control by breaking and closing above the 5410 mark. We have one another barrier to break before Nifty can start off with a strong upmove. The resistance comes at 5455 which looking at SGX seems will be broken in the opening gap.

 

While the US markets have provided us the momentum for the current spike, they themselves are in a spot of bother and hence can see higher volatility which may get reflected even in our markets. Unlike previous time (Sept 07) around when we had a strong move inline with the US, this time it seems that any move will come with higher volatility than what we have been accustomed to till date.

 

Once we have crossed 5455, Nifty has resistance coming up at 5500. On the lower side, supports exist at 5365 and 5335.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

   

Morning Cut Recommendation

Hello,

 

Market swings are becoming more like a Pendulum. We move to one extreme and then fall back to go to the other extreme. Of course unlike a real pendulum this cannot continue for every since some strong force will move it out of the predefined comfort area. But until that happens, for a trader it makes more sense to either use a mean reversion strategy to trade this market or be out of the market until a direction is provided one way or the other.

 

Overnight US markets fell as Federal Reserve Chairman Ben S. Bernanke testifying before the Senate banking committee said that they (Fed) recognize that the economic outlook remains unusually uncertain and that they remain prepared to take further policy actions as needed.

 

Nifty yesterday once again tested the 5410 Supply Zone and fell back to close the day just below the 5400 mark. With weak US markets and Asian markets, we can fall back once again to our support zone at 5365 failing which 5335 which is the more crucial support.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

With US futures / European markets leading the way Nifty came out of the range it had been contained to for the last few days but since US markets which were strongly negative (Futures) when we closed, closed strongly positive a rebound is sure to happen. The key question is as to whether this fall should be taken as a shakeout wherein weak bulls are taken out or are we truly in the beginning of a downturn. A confirmation of this can happen if we see a secondary test of the shakeout on lower volumes.

 

On the positive side, Nifty did not break the support at 5335. Infact we came very close to breaking the previous week's low but stopped just short of it. Hence technically we are still not yet in Bearish territory even though the bears are sniffing a opportunity to attack. On the negative side, Nifty once again tested the 5410 level and could not hold on. Multiple tests without the ability to break confirms that there is huge supply zone at the higher levels and hence the inability of the markets to break higher ground.

 

Support & Resistances for Nifty remain the same as yesterday.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

 

Morning Cut Recommendation

Hello,

 

Another day of measured trading with Nifty trading in a very small band. While we opened weak in line with US & Asian Markets, the weakness did not last long and market bounced back from the lower levels to a small positive where it traded nearly all day long. As long as either 5410 or 5335 is broken, we can be witness to lackluster moves in Nifty with a build up happening for a strong move on either side.

 

Nifty has maximum Open Interest in 5300 PE and 5500 CE which can be the range till the end of the series unless unforeseen events force a move out of that zone. Put Call Ratio is at 1.41. For the day Nifty has supports at 5365 - 5335 and resistances at 5410 - 5440.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Last week we mentioned that we may see a break of 5400 coming in during the week and Nifty briefly did break the 5400 level but was unable to sustain at the higher levels and climbed down a bit. We closed the week in positive territory though the trend seems to be weakening as new highs generally generate more momentum and we failed to do the same this week despite breaking many strong resistance levels.

 

What we seem to be seeing is a classic case of "Test of Supply". Nifty tested the 5400 level and met with a Supply zone which has meant a retraction for now. This week can turn out to be crucial in understanding as to where we go from here. On the positive side, FII's are still buying strongly which means that at every reaction, market will get support unless the FII's start reversing. On the Negative side, we still have the US / European markets to deal with. Unlike our markets, US Markets are structurally pretty weak and is facing pretty strong resistance & can weaken the sentiments going forward from here.

 

In terms of Candlesticks, this weeks bar comes very close to being a Dragonfly Doji. The last time we saw such a pattern was in first week of Jan10 after which market preceded to have a reaction that lasted for the whole of January. With US markets closing pretty weak on Friday, we can expect to open negative and if we were to break & close below the 5335 level, weakness can persist for some time to come.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Markets had a lackluster day with Nifty trading in a small band. While at one point we did threaten to break down and test 5335 support, a late recovery meant that we had sailed through without any damage. While the Indian Markets have been leading indices, even the Indian Markets now seem back to be looking towards the US market for direction. The US markets on the other hand has been suffering at the 200 day DMA resistance and hence seeing higher volatility.

 

A strong move above 5400 and or below 5335 will set the stage for the next phase of Nifty. Until that happens, it would be better to wait and watch. For today, Nifty has resistances at 5400 and 5450 and supports come in at 5350 and 5335.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Morning Cut Recommendation

Hello,

 

The Breakout in Nifty which was long awaited turned out to be a anti-climax as Nifty after opening strongly with a gap gradually drifted downwards throughout the day and finally closed the day well below the 5400 level. There are 2 ways in which we can interpret the market action of the day. One -  This was a simple case of profit booking especially since markets after having moved up for the last 4 days was looking for a breather. Second way would be to take this reversal at the key level as a sign of reversal.

 

As of now, trend in all timeframes remains bullish and hence one shall have to treat the current fall as more of a reaction rather than a reversal unless we continue the downturn by breaking and closing below 5335. Such a close will mean a reversal has indeed happened and its time to close the longs and await opportunities to short the market. One other reason for being bullish would be the fact that markets greatly fell after 3:00 which indicates more towards closure of fresh long build up rather than systematic selling.

 

For today, Nifty once again faces strong resistance at 5385 - 5400 level which has to be broken for the trend to remain intact. Above 5400, 5475 is the next significant resistance. On the lower end, Nifty gets support at 5335-5350 and below that at 5290-5300 levels.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,