Banking sector has been the most out-performing sector in after budget rally. But now it has approached dangerous resistance level and trader should at least book some profits on longs. Technically on daily charts, Nifty bank is resisting near to the 100 day average which is at 15950 while even the option data is suggesting strong wall at 16000 for this week. But most dangerous Fear Factor is on the weekly charts as attached! First danger is of 50 Week SMA crossing down 100 Week SMA which if confirmed can open gets for long slide on the index. Secondly, index is resisting since two weeks at the downside channel which is intact since the high last year. So now all eyes are on the some fundamental trigger. Two upcoming triggers are yellens Speech tonight and RBI policy next week. So strategy on trading as of now is Sell Nifty Bank April with tgts 15455/15120 SL:15950
Nifty has witnessed almost 900 points rally from the low this expiry to the high of today. Rally was uninterrupted by bears at any day but it seems game was all over for bulls today. 7720 was my strong resistance on closing basis which has been intact even today but we also have witnessed a strong red candle almost engulfing last entire week. Though we need confirmation which can be obtained only on Fridays close but looking at other factors we can be rest assured that volatility would be at the peak this week. Technically speaking, we had a gap at 7721 which is now filled and acting as strong resistance. Secondly Fibonacci level was at 7700 and Finally 7700-7600-7500 Puts have witnessed unwinding while 7700-7600 Calls have witnessed write-off. Combining all the factors, it surely seems that we are going to see some extreme volatile profit booking in upcoming days. So now may be traders could take a short view for the April expiry with targets of 7480/ 7350 with a stop loss of 7750.
In recent years, Steel sector and especially Tata Steel has been cursed by investor as it has under performed against Nifty index in the rally to 9119. All the long term investors and new investors have started liquidating TataSteel in the current rally but i feel somewhere you guys are making mistake. Surely, stock has been disappointing your portfolio but it has some global reasons rather than just comparing it with domestic Index or giving it domestic reasons.
Let me explain you with the comparative charts between crucial indices and Tata Steel.
Definition of Lines
Tata Steel: Its the closing price of Tata Steel traded on NSE
Steel Index: Its the Weighted Market capitalization index of publicly traded steel companies on NYSE
HRC1: Hot Rod still prices
Nifty: Its closing prices of Nifty 50 Index
To get complete overview of the stock, we have considered last 7 years of comparative study
2009-2012: During this 3 years we could notice that all indices were performing according to one another and Tata Steel was outperforming Nifty throughout the rally. During this time frame steel demand was increasing around the globe and China had just started investing in capacity expansion in early 2009-10. Post 2008 financial crisis it was believed that world economy is stable and back rising with confidence and so all the commodities were back in demand, especially in developing countries in Asia like India and Korea. But PIGS country financial trouble in Euro Zone got some goose bumps in post 2008 financial crisis recovery.
2012-2015: This were the most volatile years in recent times for Equity markets around the globe, starting with PIGS country crisis to China’s slowing economy for the first time in a decade. China by 2013 had expanded its Steel producing capacity which it had triggered in 2009-2012. But it was the bad time to achieve that. Euro zone crisis had completed dried up steel demand in Euro and Chinese slowing market had squeezed steel demand in the domestic market too. So it was completely a mess for commodities around the world and we saw prices falling for commodities to almost 10 years low because of a rare combination of Higher Capacity and Decreasing Demand which had triggered the fall around the globe. But for global Equity Markets this period was Capital Infusion years. As Euro and chinese markets were facing crisis and to some extent US too, their central banks infused alot money in markets which inflated all equity indices without any strong fundamental Back up. This led to divergence, as noticed in the graph, between tata steel and Nifty index as rally was purely backed by financial segment and not by commodity markets. All investors, including me were convinced of the rally but experienced analysts around the globe had already spotted this bubble in 2014. This Bubble busted in March last year and Equity markets so a strong profit booking of almost 25% from the pick in just less than 11 months.
Late 2015-2016: Last two months in 2015 had acted as bottoming out in commodity sector. Excess capacity in steel in China and Europe has started filling the pinch and countries have targeted to cut steel production of almost 200 mln tonne by 2017 which has started reaping fruits in steel prices in early 2016. Steel prices and many other base metals have seen strong recovery from a decades low prices. Even many countries have started imposing Anti-dumping duties for chinese steel which has been also a factor for steel prices rising around the world. Even chinese companies have cut down utilization of capacity to 69% from the pick of 89%.
So we could clearly notice that tata steel is more concerned and trades compared to global steel prices and steel companies world wide as it had Corus in its portfolio. Now all the factors are suggesting strong pull back in commodity markets and that has surely started showing some confidence back in Tata Steel stock in recent weeks. Now the divergence between Nifty and Tata Steel as marked with arrow has to narrow as it was back in 2009-12 but over a period of time. So if each card plays well for tata steel, then it is surely a multi-beggar for long term investors from current price of 315 but holding period should be minimum 3 years. I strongly recommend to start buying tata steel on dips from next possible trading session and have patience for ripening fruits!!!
This view is purely my view and you all should react to it after analyzing it thoroughly and consulting your own financial advisor. Hope this post was useful to you guys!!
Nifty has been in pretty positive mood these days compared to global peers where we are witnessing profit booking. Nifty opened up almost flat and remained in the tight range with a derivative resistance of 7700 through the first half of the day but than we did witness some fierce intraday sell-off which did not last for long. We finally recovered all the lost ground and filled up the gap exactly at 7721. Nifty has given a spinning top creating more confusion ahead. Though derivatives are shifting resistances from 7700 to 7800 but technical are suggesting that Nifty is in Resistance web. So yet no clear trend for the medium term so am just waiting for some one perfect call. Stock specific trading should continue.
Century Textile has given a strong move on the Technical pattern breakout of ‘Double Bottom’ which was recommended to you guys for trading on 4th march as “Century Textile Positional Trade” .Stock has triggered 529.50 level today which is within the target range given in the previous post against than market price of 465. Stock has given sweet return of almost 13% in 20 days which is outperforming Nifty index. Currently stock is resisting near to 100 day average which is around 530 so i would like short term traders to book profit on my trading recommendations. For long term investors now we could see consolidation between 485-530 and its the best time for accumulation. Though you must checkout fundamentals for sure! Anyways, we will trade again once we get some technical pattern again! Enjoy profits this long weekend!
Nifty has given outstanding performance for this series which was not really expected from the bulls. Though its very difficult to pick up the lowest and highest price but still we did get enough part of the rally in our pockets. As i had mentioned in earlier post that Nifty has entered resistance cluster so not getting any confidence trade on either side. So its better to talk about resistance levels and support levels on the daily charts. Today for the first time we closed above 100 day SMA at 7615 after 28th October 2015. Now on the upside we face a small intraday resistance of a gap around 7721 while above that we have resistance of downward sloping resistance line from life high which is around 7850 and 200 day SMA which is at 7905. On the wave theory we have 7700 and 7900 as resistance levels so we should keep that levels in mind while taking positions. Though i would suggest to go stock specific trade next week rather than index.
After a weeks Non-decisiveness on Nifty charts, today we have finally got a bearish reversal pattern. Though for a confirmation we need to get one more close below the same candle. Nifty was unable to trade above 7560 since a week and today Options data win which were continuously suggesting sell on rise. Though Reliance and SBIN which remained strong in the positive zone holding Index to some extent. Indicators finally on Daily charts have biased towards bears on the ground. But the consolidation support is at 7440 and we need to break that and close convincingly below the same. On the Downside now we have support of 50 DMA which is at 7370 and if we break that 7265. All eyes on FED meet tonight. My view on sell on rise still intact.
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!