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.,

  

Morning Cut Recommendation

Hello,

 

A weak Infosys result pulled back Nifty from breaking out of the 5400 resistance though at the end of the day we did manage to close just a bit over the 5400 mark making it clear that the breakout has indeed happened. With US markets giving a strong showing yesterday, Nifty can be expected to open well and truly above the 5400 level thus making 5400 a strong support zone instead of the Resistance it had been until now.

 

This is the first time Nifty is trading above the 5400 mark since Feb 2008. Resistances above the 5400 mark are few and far off and hence markets can get volatile as we move forward from here. On the higher side, Nifty faces resistance at 5475 and above that at 5565. As on date, 5500 has max Open Interest in Calls and 5300 in Puts. Hence resistances can come in at those levels too.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Nifty yesterday tested the 5400 level and fell back a little. The reaction itself was not entirely unexpected since 5400 represents a major resistance point and market had gone into a bit of Overbought territory for any strong gains to be made. But the test itself has meant that as pointed out in our weekly column, 5400 will get broken this week and since resistances above that are pretty high since we have not breached the 5400 mark in a pretty long time.

 

For the first time in a very long history have we broken out of the influence of the US markets and other International markets and actually one of the leading markets for the year - at least for the time being . With strong FII flows continuing, one can expect our market to continue to outperform for the time being.

 

On the higher side, Nifty shall face resistance at 5400 and 5465. Supports for Nifty comes at 5335-5350 and below that at 5300-5320 levels.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

Morning Cut Recommendation

Hello,

 

Weekly View:

 

While the action in the week was very limited, there is subtle hint that the markets are not going to come down anytime soon. Of course a reading of the charts provides no Guarantee to such a thing not happening, but a break of 5400 in my opinion should for once and for all provide a clear direction to the market which has been trading directionless for a long time now.

 

5400 on Nifty is the recent high achieved by Nifty and a break of that should alter the medium term view of Nifty and wherein we can look forward to bigger targets. One such indication comes from a chart formation known as Pennant (which itself also can be part of a Pole and Flag). One such pattern can be identified in Nifty and since we did have a breakout of it (on Hourly charts) on Friday, the target calculated using the prescribed methodology points us to a target of around 5600 (Short Term) and above that 5800. 

 

Of course all of it will get invalidated if Nifty is unable to surpass the 5400 level and instead breaks the 5200 level which has been a level of strong support in recent times. Such a move will mean a definite end to the current rally and can pull Nifty back to 5000 or even 4800 levels. But probability based on current Trend Strength and Option Open Interest points out to a bullish scenario coming true rather than the bearish one.

 

Daily View:

 

With Nifty breaking out of its 5335 - 5350 resistance on Friday, the next logical resistance comes to 5385 - 5400. Whether we break the same today or not shall depend more upon how the European Markets fare in the later half of the day. On the lower side, Nifty gets support at 5320 - 5300 and 5265.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd     

Morning Cut Reco

Hello,

 

Nifty weakened in line with rest of Asia and Dow Futures but did not fall so much so as to breakdown crucial levels of support. We did not even break below the Monday's low which is a crucial level to be broken for the market to slide downwards from here. With Dow getting back above 10K yesterday, Nifty will again tend to test its resistance at 5300 and 5335.

 

Only a break and close above 5350 (5335 - 5340 range) would herald a fresh bull run in the markets that have for the last few days gone nowhere. I believe its a matter of time before we break either the higher resistance point or go down below the crucial support ranges and probability seems to indicate a more likely chance for a move on the upside rather than on the downside.

 

Nifty has supports at 5225, 5205 and 5150. Any test of these supports today would indicate that the market has lost momentum and probability would hence shift to the other side (i.e., bearish).

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

Morning Cut Recommendation

Hello,

 

Nifty on the back of the strength in US futures / Europe finally moved out of the small range it had been contained to for the last few sessions. While Nifty did try to break the 5300 resistance it was unable to do so and closed a bit below the said level confirming for us once again the strength of the resistance. Overnight US Markets too failed to hold onto the gains and while it did close positive, as of now, US futures are negative and with Asia too opening negative a weak opening seems to be on the cards for our markets. Market Breadth was slightly positive with 798 winners and 519 losers.

 

Nifty for today has resistances at 5300 and thereafter at 5335 - 5340 which is the level to break if we are to see a sharp upmove from this level. On the lower side, supports come in at 5250 , 5205 and 5150.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

A combination of Bharat Bundh & close of US Markets on Monday led to a lackluster trading session for our markets. While the Index chart itself look pretty weak unless and until we close below the 5200 level the chances of a sharp fall seem limited in nature. While the overall scenario does look bearish, the chances of a upmove cannot be still ruled out since the weakness has been pretty smooth and with low volatility. Historically Volatility is lowest in Bull Markets and highest in Bear Markets. This is because falls are generally sharp and fast as against to rises which are slow and small. This time around while markets are slowing creeping downwards, there has been no rise in Volatility as shown by the VIX. This seems to suggest that the under-current is still bullish and if not a bull run, we can at the very least see one last hurrah before a bear trip begins.

 

Nifty has support at 5200 and below that at 5150 and resistances at 5265 and 5300. Hourly Trend is Bearish. Max Open Interest in Nifty options is at 5200 which should provide a strong support zone for the time being.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,

 

 

 

Morning Cut Recommendation

Hello,

 

Another day another fall and we move back to our support zone of 5250. Markets while seeming to probe both support and resistance zones is unable to strongly breakout in either direction. But how long can this cat and mouse game be played when elsewhere, other markets which on longer term we are highly co-related with are falling left, right & centre. Even other BRIC markets are pretty weak. Chinese markets had their worst quarter in many years falling as much as 23% this time around. 

 

For the last Quarter, we were one of the strongest markets if one discounts markets like Colombo and Jakarta which performed slightly better than us. Dow is already below every major and minor averages and hence seeking lower levels as support just does not exist at current prices. Nifty on the other hand still has plenty of supports before we even think of testing the major averages.

 

As of now the only way to trade this market seems to be to trade a mean reversion strategy by selling at OB situations and buying at OS situations while waiting for the market to show a direction by coming out of the current range bound zone. Supports & Resistances that have been mentioned recently hold good for today too.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,