Monthly Archives: April 2017

100 days report card not satisfactory!

In the year of 2016, Equity markets around the globe were having a Roller coaster ride with a rally in start of the year in anticipation of good economy growth around where bars were raised of Global economy growth. But then BREXIT referendum in June mashed up with the rally and second half of the year was a bit nervous until 9th Nov. On the 9th day of November, Mr. Trump surprisingly won presidential elections in US which changed winds for equity markets.

Above chart is a weekly chart of DOW Index and we could notice that post 23 June, BREXIT Referendum week, we saw some profit booking while then from 9th Nov, trump win, we have got 17% rally in equity markets. The rally was in anticipation of reforms which was promised by him during campaign but his report card on 100th Day on Friday was not cheering for many economist.

Some of the achievements which he mentioned for 100th day were efforts to roll back Obama Care, steps taken to control criminal activities, answer to chemical attack, some steps to stop trade with Mexico and Promoting Made in the USA.  But why were economist not happy? Because nothing has changed the world for financial market as another promises such as spending in investment, Tax cut and financial reforms have not been implemented. Rally of 17% in equity markets have been in just anticipation of good reforms but statistics is not showing in improvement. Consumer confidence index has started losing which means now US citizen’s hopes in Trump is fading away. As you all can notice in the graph below, that consumer confidence was at just 88 before trump win but it than zoomed to 99 in Jan but than took a dip to 96.

University of Michigan Consumer Confidence Index

To gain back confidence, Trump must implement tax cut asap which could be cheerful amongst citizens and industrialists. But he is now stuck between his words (where he promised tax cut in campaign) and fear of widening of fiscal deficit due to tax cut. So that this the reason why he is still spending some more time before he takes any steps in form of tax cut.

Personal Expenditure

Another factor which has not supported economy in Q1 has been personal expenditure which has been in decreasing state which means consumers have been saving more than spending.

GDP

Economic barometer index of US,GDP, has been in falling trend since Mr. Trump has joined the party. So now Mr. Trump has get some quick reforms to show world some results on financial stats. Until now rally was just based on liquidity and consumer expectations but now if we need any rally, it should be on improving fundamentals and not just liquidity.

Technically, DOW has given a breakout on weekly charts from a pattern for a rally but if we get any fear of war than things might change. But world shouldnt wait for any result of War because that’s uncertainty and no one can predict. Its better to buy on each dips in equity markets because next few years its going to be for finance if the trump gets everything right. And I believe we must give some more time than just 100 days to judge him.

Still some more time to have trust in PSU Banks

Markets had been pretty range bound since the UP election results were out in mid-march, but finally we gave a breakout today and closed at new life highs. Who has led the breakout? Banking Sector! So lets talk about Nifty bank in my today’s post.

As we all could notice in the Daily chart of Nifty Bank, we are about to give a breakout from a Channel.  This was a long channel with a time wise stretch of almost 3 months starting from Early February which is on the edge of rally breakout tomorrow over 22140 on spot level.  Banking stock has been in good momentum since last 3 weeks but who could lead breakout in Nifty Bank? PSU Banks……………..!

On MoM rally which we got on nifty bank from almost 16000-22000 was lead by private sector banks like Indus Ind, Yes Bank, HDFCBANK, Kotak bank and just one PSU Bank SBI. Other Mid-cap and PSU Banks were lagging rally due to NPA concerns. But as we have already seen banks following Swacch Bharat on their NPA’s, we are getting attractive deal on Risk: Reward for long term on such banks. I Had been pretty much avoiding trades in such banks but now i would surely keep them in my watch list for trading purpose.

Lets check out PSU Bank Index

So when we are witnessing Niftybank closing above its own high of 2015 , PSU bank index is still far away from 2015 high and then we could think of it catching up with its own private peers. As we all could notice in weekly chart of PSU Bank index, we have almost witnessed a inverted h&S bullish reversal pattern. This clear suggest that we are going to get some good medium term trends from PSU Bank stocks. The index is expected to kiss 4800 from current levels of 3540 from pattern breakout. So any dip in quality PSU bank stocks is a buying opportunity for 6 months.

Strategy: Buy stocks like Bank baroda, SBI, Andrabank and mid-cap bank like federal bank for a 6 months time with stop loss on PSU Index at 3270 

Was it a Wave 4th truncation today at 9120?

Nifty has been in consolidation since UP election results on 14th March which is almost a month now. We have been consolidating strictly between 9000-9250 but with strong stock specific movement. On the other side Nifty Bank has been out performing by holding 21500 level since quite a long time.

Looking at Nifty daily chart , as attached, today we have closed with almost a Doji which signals pause to current trend which was a down trend. Now if at all we open a point positive and trade above todays high than we may get somewhat like a morning star pattern which is a positive reversal pattern. Though on negative side we have more factors such as todays close below 20 day average first time after 6th jan and overbought indicators. But what makes me strong for a short rally in near future is strong breakout of market leader Reliance and strong option support at 9000 by PUT writers.  Also if we consider Wave count theory, then probably we have given a close to wave 4th today by completing Wave C of A-B-C zigzag formation in 4th Wave. So as of now there are equal forces of Bulls and Bears on Daily chart and only tomorrow move could decide market sentiments ahead. But would still recommend to remain long ton stock specific .

Strategy for traders: ” Avoid Nifty trade specifically, but  buy Reliance 1400 CE and buy 9000 PE Nifty.” …tgt 1480 on reliance…! 

Can INFY loose its decade old rally?

Earning season for last quarter kicked off today with Infosys announcing results lower than market expectations. Its top line grew mere at 9.7% approx last year against more thn 17% growth for a decade before. Looking at such disappointing numbers i feel its all over for front line IT stocks for short term. As we all know 62% of Infosys revenue is from North America and when i expect Rupee to get stronger and stronger for coming years and Trump imposing some threat on H1-B Visa than its surely going to impact more negatively on Infosys top line.

This all negativity is almost near to be proving on charts of Infosys….

So above chart is a monthly chart of Infosys which is showing some similar pattern as head and shoulder which if is proven with a close below 900 then we can expect 525 level over few quarters. Secondly if we mark recent most heavy volume months then they all have been negative movements which can hint that investors are unwinding position from portfolio. Thirdly, a support line which has been intact during a decade growht of 17.6% on top line is also coinciding with neckline breakout line so 900 is level to watch out to empty infosys for time being from your long term portfolio.

Strategy for Investors: Sell below 900 from portfolio and buy 1000 CE to hedger your sell until we confirm monthly close

Strategy for traders: Sell on rise with Stop loss of 1050 ..Tgts 920/840/790 over quarters.

Read disclaimer before investing.

Friday was just a speculator profit booking

Nifty has been on a dream run since start of 2017 but Friday’s last 30 mins shook long term traders and many of them squared-off longs in fear .After studying fall on chart , it seems it  was just a speculator’s profit booking as still we havent got any clear pattern of strong reversal on charts.

So as we all could notice on the chart, Nifty is taking strong support on a trend line which is intact since Jan and also travelling to 20 day average (Orange line) since mid-feb. Currently, both 20 SMA and Support line, are at 9120 making it a crucial support for next week. Looking at the option data we are building strong supports from PUTS writing at 9100 and 9000 so any dip in the market is a buy for a positional traders. Now if we apply EW Theory then we will now have a 5th Wave up with minimum tgt of 9350. So the strategy remains buy on dips with SL of 9000 for positional traders.

No “BHEL” for now

BHEL has been a outperform in last 3 months with almost 50% return to investor but now its time for some profit booking. Stock has manage to close below 20 day Average after 3 months and even the indicators have given bearish crossover to confirm some profit booking ahead. Crucial support of 165 has also been breached with heavy volumes on Thursday. So now one can short BHEL from current levels for almost 8% gain in quick time

Strategy for Traders : Sell BHEL tgt 150 sl 168 and to Hedge buy Nifty tgt 9280 sl 9050