Natural Gas have seen a complete sell-off in recent times but now it seems that we are witnessing it bottoming out with a positive divergence on weekly charts as marked. If today’s close is above 120.80 (as i expect) than “Bullish Engulfing” pattern would be formed and reversal could be marked. A commodity trader must go long on the same with strict Stop loss as suggested.
Equity valuation is the next step after equity research. After completing research as explained in previous post in this section we need to now conduct a valuation exercise which is the most crucial part of analysis. It is the process of arriving at value for a company or business. There are many models and formulas to arrive at a forecast value but i will explain you some common model’s in near future.
Equity value is the job to find out how much a company is worth currently and what it is likely to be in near future. It the current market price is lower than the future valuation then we shall buy that stock or business and vice-versa. A valuation model is generally expressed in Formula. Valuation model specifies what we have to forecast and than method to convert this forecast to valuation.
Valuation has became integral part of the financial sector where we are witnessing higher numbers of Mergers and Acquisition taking place on global platform. Valuation model remains common across globe so it becomes easy to value a company in any currency. We will further get into the approach of fundamental valuation in upcoming posts.
Nifty continued with its wired trend of making Higher high and lower low for the second consecutive day but today its not the Doji but a strong positive candle. Technically, it may be called “Bullish Engulfing” but its not clearly near a new low so we can consider this just a continuation pattern that too a bit dicey one. From the derivative markets, we have seen addition in Open interest both on 7600 CE and 7400 PE equally today making situation more confusing. On daily charts indicators are pretty- flat while of-course on weekly charts as i have suggested medium-term outlook is positive. But on minor wave correction is expected soon on the index. So i remain intact with my Sell on Rise strategy for short term traders as i suggested on Nifty to reverse!
Nifty has given a close with a perfect Doji on Daily charts, signing a Pause to the previous trend or a break before going ahead. In simpler terms, Doji represents confused state of mind of traders. To add more confusion, today’s Doji pinched a New high as well as new low compared to previous closing giving No clue to technical analyst to decide further route on candle stick patterns. Taking some clues from Derivatives which suggest resistance building strong at 7600 and me too suggested you guys to short Nifty with the same stop loss in my post “Nifty in Reserve” on 3rd March. Indicators have turned flat on daily charts and Nifty bank has given a weak close today so i would suggest to hold on my short call on Index with the same stop loss of 7600. Tomorrow opening shall be crucial…!!!
Nifty’s move to 9119 in March 2015 from the previous high of 2008 around 6330 was applauded by our traders alot but not investors. This rally i would term as “Traders rally” because fundamentally we were not globally competitive as suggested by our rupee vs dollar (Green line) which has been weakening regularly. Because of our weak rupee, Nifty in terms of Dollar (White) has not even achieved 2008 high as you could notice in the charts. This huge divergence between the Nifty (Yellow line) and Nifty in Dollar terms need to narrow down soon and we could see fast rally in equity markets. But this rally would be accompanied by strengthening rupee.
Why would rupee strengthen? because finance budget and RBI has won back trust of Investors. By achieving 3.9% of Fiscal deficit target and setting off new target of 3.5% in budget, has surely given a confidence to global investors. Secondly, PSU bank’s cleaning up of NPA’s and Basel norms restructuring has given financial sector a boost. Thirdly, investor friendly initiative by many states in form of global business summit has boosted FII flows in various sectors. Fourthly, bounce back in Commodity prices will boost companies revenues which were hard hit in last few years.
So to conclude, Nifty has yet not at par with 2008 and as India is considered brightest spot in world map as only emerging market growing we can expect Equity market investment to be a multi-beggar even from current levels in next 5 years. Start investing if you havent yet.
Nifty has given a strong weekly move of almost 650 points from the day of the budget to todays opening price which marked high at 7505. Again PSU banks rallied and out-performed but at last it seemed rally was a bit exhausted. After a non-stop rally of 600 points in one week, am bit looking for Shorting opportunities. If you look at Derivative date, 7500-7600-7700 calls saw a huge writing through the day. While a Hanging man on Daily charts displays that traders are indecisive of the move from such a crucial resistance. So sentiments are strong for the rally but options are suggesting a pause. Now lets see who wins the match. If we see a negative opening on Tuesday and couldnt sustain above today’s high then surely we are receiving my target on downside of 7260 mentioned in Nifty Reserve yesterday. Overall i would sell on rise for rest of the expiry because there aint any good reason for non-stop rally to 7700.
Century textile has been a strong contender for traders choice in volatility. Stock is today showing strength to give a double bottom breakout signs. Currently stock is trading exactly at Neckline around 465 and risky positional traders should take some risk at CMP. Indicators on daily chart are also showing signs of short covering from the oversold zone. So all the factors are supporting that this breakout should be confirmed and we shouldnt miss the bus. We will face a short term resistance around 100 Day Average around 530. So keeping that in mind we should trade.
Buy Century Text with tgt of 525-530. SL: 450
Today Nifty closed above my expected resistance level of 7447 which was my 50 day average level and recommended target yesterday at “Double Dhamaka”. Looking at todays move on Index, it seems Nifty is going to be unstoppable for a day or two. Technically, Nifty seems to be approaching reserve level for this rally. We must rest for a pit stop to move further smoothly without any steep correction. Now all technical levels for resistance are near to 7700 but i feel bulls would be exhausted before we reach there. Now Looking at options data i feel 7500 is strong resistance and one must surely book profits on long tomorrow morning. I feel as a trader one must take a bearish view for at-least 2-3 sessions . So as technical and options are coinciding for the resistance range 7450-7500, i would stay bearish but purely for trading perspective.
Sell 7500 CE and Buy 7300 PE
Net Payin: -78+104= +24/lot
Target: 7260 Stop loss: 7600
As we discussed Dow ideas or Tenets yesterday which are pillars, but one more crucial rule of Dow was to consider or give most importance to closing price, irrespective of time frame of chart. He believed averages most close above or below previous low or high to confirm the trend. So always consider closing price to trigger your analysis
Some criticisms of Dow theory
- Believed to give reversals late, almost 20-25% after the high or low
- Generally, buy or sell confirmation occurs in second phase of trend and so its believed to be a laggard
Still to confine this criticisms, Dow theory has captured 68% of the moves in S&P between 1920-1975. And dow actually wanted to give overall idea of the long term trend through his theory so he never intended initiate trading calls.
Finally we saw some strong move on Nifty after many sessions but yet its not that convincing for a reversal for a long term horizon. As Dow Theory suggest that unless we get a clear reversal signal, we should believe that the existing trend is intact. So i am still not fully convinced for a upside reversal. As we could notice that Nifty is approaching a chaos area of many resistances, it makes me to take some profits on the trading position for the longs. Lets take resistances one by one….Firstly 7265, which is a channel line resistance. Second resistance is at 7350 which is a fibonacci resistance and thirdly, 7363 which is the unfilled gap. So guys we need to be a lil cautious but it doesnt mean we should skip trading. My view on the Nifty is intact as i mentioned yesterday with Upside target of 7350. Stay hedged!!!!