Monthly Archives: June 2016

BREXIT Recap

Introduction

WHAT IS BREXIT?

A referendum wil be held on Thursday 23 June, 2016 to decide whether Britain should exit (Britain’s Exit – hence the term Brexit) or remain in the European Union.

WHO WOULD VOTE?

The votes in which everyone ( or nearly everyone) of voting age can take part, normally giving a ‘Yes’ or ‘No’ answer to a question. The side which gets more than half of all votes cast is declared as a winner.

All British, Irish and Common wealth citizens over 18 who are the resident of U K, along with U K nationals living abroad who have been on the electoral register in the UK in the past 15 years.

DECISION:-

A decision to leave, this would be a first by a member nation.

The European Unification

The European Economic Community was launched in 1958. It became the European Union in 1993. The Euro Currency was created in 1999.

Brexit 1

If there are majority votes – in favor of LEAVE Britain

THE LEAVE VOTE :-

ØThis would deepen the crisis facing a continent already struggling with economic weakness, debt problems, large-scale migration and growing geopolitical instability to its south and east.

ØWithout the U.K., which alongside France dwarfs the military capacities of other member states, the EU’s defense, security and diplomatic capabilities would be hit. Only Britain and France have sizable expeditionary forces, nuclear weapons and United Nations Security Council vetoes.

ØBritain’s Exit from EU will have major repercussions for Britain, EU as well as economies across the world.

ØIncreased Paperwork: EU citizens in Britain and Brits living in other EU nations would have to update their immigration statuses. Companies working in both the UK and the EU would have to verify that they’re compliant with two sets of laws.

ØBlow to UK Economy: The UK government estimates say that Brexit could cause the country’s economy to be between 3.8 and 7.5 % smaller by 2030.

ØThreat to UK’s ‘United’ Status: Brexit could encourage England, Wales, Scotland or Northern Ireland to appeal for quitting United Kingdom.

ØRipple effect for global economy: The United States will bear the major brunt of a Brexit being UK’s biggest trading partner. President Obama has warned that it could take 10 years for Britain to negotiate a new trade deal with the US Goldman Sachs, JP Morgan, Morgan Stanley and Citi group together have contributed to the anti Brexit campaign.

If there are majority votes – in favor of STAY Britain

THE STAY VOTE :-

ØIf Vote works in favour of Britain then Britain would get a special status  within the 28 nation club.

ØMigrant Welfare Payments: Cutting the amount of benefits for low paid migrant workers from EU nations will dissuade them from flocking to UK in large numbers. Migrant workers, however, will still be able to send child benefit payments back to their home country.

ØKeeping the pound: Britain will never join euro and has secured assurances that the Eurozone countries will not discriminate against Britain for having its own currency.

ØProtection for London’s biz: Safeguards for Britain’s large financial services industry to prevent Eurozone regulations being imposed on it.

ØRunning its own affairs: For the first time, there will be a clear commitment that Britain is not part of a move towards even closer union with other EU member states – one of the core principles of EU.

The mixed reviews of EU countries

NOT IN FAVOUR:-

  • A Pew Research Centre survey published this month showed levels of disapproval of the EU in many countries as high as or higher than in the U.K.
  • In the Netherlands, 46% had an unfavourable view of the EU; in Germany and the U.K., 48%; in Spain, 49%; and in France, 61%.

MIXED REVIEW OF EU COUNTRIES:-

Brexit 2

Source:- Pew Research Centre of Global Attitudes Survey, The Wall Street Journal.

 

If Britain Exits – its impact on India

IMPACT ON INDIA:-

ØWith Euro losing one of its stars, India too can feel sighed.

ØRupee may depreciate due to double effect of foreign fund outflow and dollar rise.

ØThis will increase petrol and diesel prices to an extent.

ØThe government may want to reduce additional excise duty imposed on fuel when it was on a downward trajectory. This will increase fiscal deficit, unless revenue increased.

ØPrices of gold, electronic goods, among others will increase.

ØCheaper rupee will make Indian exports including IT and ITes, competitive.

 

Disclaimer: This is my personal view so reply on them at your risk

 

 

Nifty back to its medium term trend

We have seen some surprising pull back from the lows on Nifty which was surely not expected in such a quick manner. Though overall trend for the mid term seems to be positive but Nifty was trading in a downside channel on the daily chart which has been breached today with heavy volumes moving back towards a medium term positive trend outlook. Though still 8265 has not been breached on the upside but looking at the momentum it feels we should do the same soon. Until now i was just recommending longs on stocks but now it seems we can go long on indices after we move beyond 8300. Though i wouldnt take any risk on naked futures as Brexit is still lingering. Overall Nifty has closed back above all short term averages and now the resistances seems to be around 8577 if we sustain 8200 for this expiry

Nifty channeling

In my last post i mentioned about probable evening star pattern on 9th June and its still holding its importance on Nifty chart. But to support its significance we have got two more components now. Firstly, We got shooting star candle as squared in the chart and secondly, now Nifty has confirmed its path in the channel with is trading downwards. Though my overall mood is positive for a view of 6 months but minor correction was expected as i mentioned in last post and my first tgt 8081 has been achieved while now my second target is active which is 7935. But the stop loss remains the same at 8265 on closing basis. May be a intermediate support might be at 8040 which is channel support line. Being BREXIT nearby, its always advise to hedge your position where as in our case we can buy 8300 CE to hedge our short on Nifty.

 

Erase loss with Eros

Media and Entertainment industry has been hot favorite since late 2014 and we have seen all stocks from the segment emerging out as multi-bagger. One of the stock which had initiated rally in sector was Eros international which moved from almost 140-640 in just a years time who was joined by other stocks like PVR and Inox Leisure. At current date PVR is doing the best followed by Inox Leisure and Eros is last because of a strict Sell-off late last year on accounting scandal allegations. But now i am getting a strong feeling of entering Eros again for 3x movement minimum from here. There are few factors which are giving me strong bias on my view. To start with most crucial point, its about accounting fiasco allegation which its US holding company was facing has been put down after respective appointed committee cleared them after investigation. So fundamentally is surely convincing to investors and analysts who has lost hope in management. Few reports even say that corrected practices would be more profitable to indian counterpart in terms of Revenue per user from ErosNow app.  Secondly this Calendar year they are entering almost 4 new India regional movie segments which could add some large portion to Gross sales. Concluding fundamentally, they have almost 65 releases this year in 5 different languages which just 2x their sales from last financial year if everything goes as planned

Coming to technicals, I just spotted most dependable reversal pattern on weekly charts i.e., Inverted H&S. Though we have just kissed Neckline this week, but there are all chances of getting a breakout over the same next week. Weekly indicators are oversold and have just turned bullish by having internal crossovers to their respective averages. Thirdly, as marked on bottom of the charts, volumes have been rising in last three weeks supporting upside price movement. Fourthly, as circled we had got a Morning star pattern before 2 weeks and its confirmed with two weeks close above the same. 278 is resistance as marked with red line as it was the levels where most volume in a week while falling had taken place which could mean it could act as a supply zone. So now all factors is suggesting a sure Buy for long term but medium term trade could be taken on Technical breakout next week.

Strategy for medium traders: Buy above 219  with targets 278/349 sl: 172

Imperfect says ‘I-M-Perfect’ ??

Sometimes patterns wont be perfect but still its says that “I-M-Perfect”. Though today many technical analyst wont notice circled pattern as perfect evening star pattern but i would say that this COULD be imperfect evening star pattern and could give some points reversal if not as much as a perfect pattern would give from such a peak. If we talk about some factors to support this imperfect pattern, 1) Recent Rally: We have almost got 600 points rally from low in prior 12 sessions so now its time for some correction to this Rally. 2). Overbought on daily: Indicators on daily charts are overbought suggesting some sell-off though weekly indicators are yet not signing any sell-off which means that any correction in next few sessions would be a strong opportunity for medium term traders to go long but traders can trade short. 3) Sector weakness: Few front line sectors having weight-age on index are also showing weakness on charts such as Nifty IT and Nifty FMCG. 4) Economy situation: As rajan said in recent policy that we have fear of short term chances of inflation which may have some sentimental sell-off. So to end, we can expect some profit booking for short term trade but overall trend still remains intake. Support on downside: 8081,7935 while resistance on upside 8265 on closing basis.

Nifty target achieved!

Nifty has given a wonderful run over 7772 which was my trigger for buy as i mentioned in my post on 25th May (Bears Sucked out completely) and target of 8265 was given on 26th May (IPL Fever on D-street). Though my target was left by just 3 points on Friday but we should have margin of safety of +/-5 points . After such a movement we must a get a interim profit booking to almost 8100 levels. But those who only trades long and safe trades must hold existing position for my second target of 8450 but it might take some time. But FnO traders and risky traders must pull up your sleeves tomorrow for a fresh shorts. As we all could notice in the attached graph that we have a got a “Red candle” at the top with recent high volumes and a trade below 8209 would trigger a fresh shorts for traders in coming weeks. On the downside targets are 7989/7925 and stop loss on upside is 8270. But remember that we should only go short below 8209. And safe traders should just hold longs for medium term but book partial profits below 8209. So all should trading according to your view. Stay cautious for volatility mood.