Author Archives: Kush Ghodasara

Traders Pocket may get more Fatty!

Traders got their pockets Fattier this expiry after a long time but this MAY NOT be end. Budget to decided whether “Traders pocket would get more Fatty”! .  I did expect Nifty to touch this high two weeks back at my post: “Bottom’s up for Short term trader” where tgts were 8445/8563/8712 and we are just left with the last one. Such a fast rally now could even activate more high levels if the budget comes in favor of common men.

26_1_17

Now Lets talk Technically! As had been mentioning since last few post on Nifty, 8720 could be crucial level on weekly basis. That should be stop loss for short term traders who might have carried forward shorts. But for long traders party would continue above 8720. Indicators have totally turned positive but as per Elliot wave 8720 could still be a small resistance so that level should be played with caution! As we i have indicated with Green Lines, Nifty has given a probable Inverted H&S pattern and its still intact as stop loss which is usually at right shoulder low is still intact which is at 7800. Surprisingly target is at 9800 which is too juicy to trade with a small stop loss from current level but remember 8720 is cautious level. Though am not confident at fundamental side but technically we have few chances for a rally. We will get more confident if we close above 8720 but remember 100 day SMA at 8445 should act as a stop loss for all long trades.

Strategy for Traders: Stay with longs with final target at  8720 with trailing SL of 8445

Strategy for Investors: Hold 8500 PE as recommended before until next post!

 

 

Nifty Bank approaching “Line of Control”

Nifty Bank has seen sharp short covering after under performing in the month of December. Prior to December it had out-performed ..So during this Rock-n-Roll one level which acted a pivot was 19068 as marked horizontal in the graph over which Bull’s will get control over the markets. 

13th_jan

So as we could all mark that since last July, 19068 level has played role of resistance-Support and now we are again approaching the same. But this time its more crucial resistance because we also have 100 day SMA at the same level. From the Derivative markets also we have got highest open interest at 19000 mark which may be a small resistance.  Even a dragon fly Doji on daily chart suggest that bulls got back control at the end of the day. Even indicators are showing strong positive momentum which is giving me more confidence of probable breakout over 19068.

Now getting to Wave Theory, we have started a Wave B corrective move against a larger corrective Wave. Looking at a primary level, i conclude that we may get a Flat formation to larger wave which means this rally has all chances to kiss 20000 mark soon. Even post 19000 we have all resistances around 20000 which means 70 points move away from close today would trigger fresh buys for traders. Investors should still remain stock specific in Bank Sector as still many PSU’s are announcing willful defaulter which may have strong impact on profits in coming quarters. So Strategy would be simple to go long on Nifty bank with Stop loss of 18600  targets 19450/19960.

 

Still avoiding Metal Stocks? Not Tata Steel Now!!

Metal Stocks have been under performers since last 8 years, from 2008-2016 but not now!!! In a broader sense we may say that 8 year bear cycle of commodity prices have ended last year at fundamental level. We have seen global metal prices bouncing almost 20% from the lows in 2016 which has resulted in turned in many global companies like Rio Tinto and BHP. And now metal price hike effect would start appearing on indian metal company’s Balance sheet. But before fundamental guys say’s “BUY”, technical charts have already given a breakout…

tataSteel_Monthly_Jan17

Above chart is of TATA STEEL monthly time frame, where we could notice that stock has just notched out of symmetric triangle almost after being intact for 17 years!!  This clearly signs of a turnaround for long term.  On the upside as a yearly investor, u could see 600 mark but above that it would again be a double bottom breakout which activate target of 950..So ball is in your court to decide what you wanna do with the stock

Strategy for Investors:

Buy CMP: tgts 600/950 SL: 350

Now coming for short term traders, they too have a great trade ahead……………..

tataSteel_Daily_Jan17

So now lets have a look at Daily chart above which says a double bottom breakout with a breakout gap. Even the volumes at the breakout is strong…Yesterday which was a breakout on daily chart is the same price for breakout on Monthly chart as i stated above..So 437 mark is strong technical support now. Though it doesnt mean we can have a profit booking but we may be sure that each dip now is a buy.

Strategy for Traders: Buy with tgts of 500 sl: 412

Happy Profit mining to all!! 

 

“Bottom’s up” for Short term trader

Before you get my title wrongly, what i meant was that Nifty has given a Double Bottom confirmation for Short term trader which has taken traders on a high in quick time. In my previous post my target for traders was 8,250 which was achieved 2 days back but i was waiting for Double Bottom breakout confirmation whose neckline was at 200 day SMA, around 8287, making breakout more valid.

11_jan

Looking at the chart am sure many technical analyst would find current set-up juicy to trade for longs as firstly, we have closed above 200 day SMA. Secondly, we have got Double Bottom breakout, Thirdly, indicators are Juicy for positive movement and recent volumes too have been above 5 day average. BUT…….we as a medium term outlook we are still into corrective wave and this is just a Pull back rally and we have small resistance of 100 day SMA at 8445. Infact extent of pull back would decide the strength of correct wave. If this rally ends some where in the box marked which is around 8,563-8712 then corrective Wave could be a Zig zag and we may see new low below 7900 but if we witness this corrective rally to stop anywhere around 8,900 then it could be a Flat which means we wont trade below 7900 atleast for this year. So to sum up in simple words, traders still have some chance to trade longs.

Strategy for market participants:

Traders: Buy Nifty with tgts of 8445/8563/8712 sl: 8220

Portfolio Investors/Medium term traders: Start Buying FEB 8500 PE above 8440 spot level with sl of 8712

Spread Traders: Buy metal stocks such as Tata Steel/VEDL/JSWSteel and Short Nifty! 

 

Bulls take it over on last day

Nifty was in a confused box just two days ahead of expiry but bulls took it over at the last moment to prove Positive divergence as i mentioned before.

29th_dec

Though after yesterdays Dragon Fly Doji on Daily chart of Nifty many would have initiated a short trade…. Am i right??…But i didnt….Why and how did i get right?…because this was the perfect example of a Right candle but at a wrong time! Which means that a Dragon fly doji has most significant Only if its at the top of a previous rally and we were nowhere near top yesterday. So frankly speaking it would have been like burning fingers against the trend for short term traders. Though it doesnt mean long term trend has been a turnaround…This rally is just a short covering as i mentioned before. On The upside now we have strong resistance near to 200 Day sma at 8252. So short term traders should start booking on my long calls in the range of 8200-8250 in intraday…..

P.S. Strategy remains the same as last post…here is the snap…!! 

29dec

Confused Box!

Nifty has been pretty volatile in the range of 7900-8300 but the strategy is working well for the spread traders as i recommend in the previous post: ” Go long on stocks and short on index for next two expiry”…..And even long term investors are safe as they were recommended to buy PUTs on each rise…but short term traders Burnt fingers as stop loss was triggered at 8088! 

Today, after a strong short covering move on Nifty, still we are in a Confused Box of Technical signs!

27th-dec

As you all could notice with the Green Trend line with today’s low, we have got positive divergence on Nifty which is a good sign of short covering.  Even the options  suggest that next two days can be for the bulls after a long time. But i am not convinced thoroughly with Candle stick pattern for a strong reversal. Even all short term moving averages have given a bearish cross overs to a larger degree of Moving averages signalling that yet the move is not completely in hands of Bulls. On the upside of the box we have 200 day SMA at 8252 which could act as a strong resistance for short covering.

Even on the fundamental side, we may get some boost from news and FII before budget as the stocks are much undervalued but the quarterly results would surely drag Nifty to last lag of correction before we completely take a U-turn towards new high. So Long term investors shouldnt chip  in a hurry for Jan rally as this is just a relief rally for Bulls while investors will surely get a better chance after Budget and before March ending.

So strategy still remains the same:

Short term traders: Go long with Stop loss of 7920 and Target 8250

Safe traders:  Buy PUTS for February on each rise with Stop loss of 8720

Spread Traders: Go Long on selective Stocks and Short on Index

What would be the “Peak”?

Markets have been playing between Demonetization and Global Rally, making it difficult for Analyst like me. Though until now it has been perfectly moving as i predicted in last few posts but still traders want me to give them exact point of Trades on #Nifty and am sure other analyst friend out there would agree with me that is difficult to always pick right levels. So we can always give you “Probability ” and not “Surety”. This time too i have got 4 Probabilities from this level on Nifty which is 8261.  Current rally on Nifty could be either Short Covering or 5th Wave rally which could give us new high but confirmation could be done after we resist at some “Peak” ahead.

10th_dec

Step 1

So this current rally could stop on 4 points on the upside: 8320, 8440, 8566, 8720.  But i would give most likely PEAK to 8440-8566 as its they are levels also suggested by Open interest side too. Technically both levels are 50 DSMA and 100 DSMA too making crucial resistance levels. Where as second most likely peak could be  8320 which is small channel resistance on daily charts while the rarest possibility is 8720 which is a Fibonacci retrenchment level.

Conclusion 1: Rally is most likely to resist near to 8440-8560

Step 2

What next after likely resistance at 8440-8560? Now the downside we can get two possibilities: 7640 and 7400. For me most likely target is 7640 because if market resist on any of my likely level, 8440 or 8560, it is the predictable target from both. But in the extreme fundamental effect of Demonetization 7400 could also be achieved which is a Fibonacci level and also Support at a trend line intact since the low in 2009. Trend line has been tested successfully 4 times before making to cemented low for this rally.

Conclusion 2: Possible Downside target 7640

Strategy:

Now taking into consideration that Nifty would resist to 8440-8560 and would resume downside for 7640, the best strategy would remain as my previous post “Can 3:30pm tomorrow be a morning for traders ?”

Snapshot of strategy

10th-dec

So for short term traders playing this rally on long side , stop loss is 8088 as mentioned above which is 50 weeks average

For Safe traders hedging portfolio with PUTS as mentioned above would have stop loss at 8720 which is fibonaaci turning level

For spread traders remain with buying stocks and selling index as short covering on Stocks could be fast and furious. …….

See you guys then at 8088 or 8440-8550! 

 

Can 3:30pm tomorrow be a morning for traders ?

Ah….you might be thinking that i have gone nuts…”how can a afternoon be a morning”???…But for Nifty Traders that can come true….Tomorrow being a weekly close, i just spotted a possible reversal pattern on Nifty Weekly charts which is known as Morning star pattern but the close tomorrow would be the game decider. Lets first look at the following weekly chart

1_dec_w

I noticed few interesting things  on Nifty weekly charts which supports short term view for covering recently lost ground. Lets first talk about Morning star pattern which has made my headline today. Though the formation is not the text book one but we may still get it too close. In the pattern first candle we need deep red (8288-8048), Second candle should be lower than the first candle and preferably it should be a Doji (8122-7916 and a Dragonfly Doji) and the third candle should trade above second one completely and close atleast 50% into the first red candle..(8080-8168 ?) . So for the pattern to be true we need a close above 8168 tomorrow which is quite possible. Secondly, Nifty has been taking closing support above 50 Weekly average (Pink line which is at 8088) since recent two close and close its intact as support since May 2016 which fuels are biased view for short covering. Thirdly, Looking at indicators such as Weekly RSI,  we are oversold and healthy short covering would be better before moving towards last lag of profit booking on Index.  

So the targets for short covering moves are 8450-8550!!! why i still call it a short covering move???”  Because my medium term is still of a bearish as i have been posting in my previous posts “500/1000 points to be sucked out of Nifty?”  

Now let me take you to a tour of Nifty Daily charts which would give us more strong reason why its just a Short covering and not a rally?

1_dec_dJust one big reason which is supporting my view of a medium term bearish trend is ” Negative 50 day cross over 100 day average  as circled”  Moving average crossover is the most effective tool i have came across for medium term trend crossovers.

So the strategy is simple:

For traders: Go long on Nifty with stop loss at 8088 with short term targets of 8400/8500

For Investors/Medium term traders:  Sell on rise as mentioned in all my previous posts with SL of 8700 with tgts 7800/7670/7450  for next two expiry

For Spread traders: Go long on stocks and short index for next two expiry

Anyways see you guys soon after we near the end of short covering move!! Trade with strict stop loss on both sides…..!!

Divergence to widen: US vs Emerging Markets

Equity markets around the world follow US market index to get overall trend of financial markets but this scenario could change now with Trump plans. It was expected that Trump victory would lead to downfall across markets but only Emerging Markets are leading the fall while US markets are touching almost life highs. Reason to this is almost found behind trump’s road map for their economy.

Key Points of “Trump”onomics:

  • To slash the highest marginal income-tax rates, cut rates of tax on corporate income and on capital gains
  • Completely abolish federal inheritance and gift taxes entirely
  • To spur Infrastructure spending and Defense spending 

Good or Bad for US ? 

Trump victory was a surprising win in US markets but it did bring some cheer in Equity market which makes us think that it was what investors think would be good for corporate while common men may have some hiccups. Why it bought such a huge buying in US ? Answer was straight from Trump campaign highlight:  To slash the highest marginal income-tax rates, cut rates of tax on corporate income and on capital gains”  Corporate balance sheets and High networth individual spending power would getting stronger with tax cut and in this anticipation money started to flow from Corporate bonds to Equity markets. But on the other side it would widen inequality i.e., Richer would get more richer. So inflation could pick up in real estate segment which would be good for sometime but not for longer term

Completely abolish federal inheritance and gift taxes entirely was thought for common men. This would bring some relief on tax pain to individual who has received gifts and some properties in Inheritance. In all this is a good factor but some might use this is a tax evasion but the ratio would be negligible which is ok! Most crucial campaign point was Boosting infrastructure spending which bought much needed rally in steel prices after hitting multi year low last December. This would also cut down unemployment to large extent which could in all again help to boost inflation in country which they are starving since years. But the plan of $550bn approx spending could increase some burden on Government.

Summarizing overall picture of his plan i feel good days are ahead for US markets.  Already stocks are zooming up which has increased bond yields meaning people are now having trust on corporate reversal. This would result in strong dollar which would bring back investment for Emerging markets to US markets. Even second thought could be that we may see early pause to on going bond buying programmed if we see uptick in inflation and rate hike! The biggest challenge to trump would be felt after few years which is Trade deficit. As dollar gets strong, domestic manufacturing would go up but that would also means that import is going to be more cheaper. This was a problem back in 2013 when we had felt same pinch of currency war. So Trump should keep a tight watch on trade deficit.

Technical View on Dollar index

Dollar index which measures dollars strength vs Other currencies is also in a rising trend and supporting my view stated above.

dollar_index

Above chart is a dollar index weekly chart and as we could notice at bottom that momentum is just catching up while on the charts it has given a 2 years consolidation breakout above 100 level last week. Secondly it also moved out up short term upside trending channel fueling in more support to strong dollar. Now we talk about support on the downside it would be 96 which is the blue 50 weekly average which is acting as strong support since late 2014. 

Technical View on Dow Jones Index

Now lets look at the chart of Dow Jones to get Trump victory more clearer

dow_theoryAs we all could see in attached weekly chart of Dow Jones, we have given a Double Bottom breakout with a confirmation neckline at 17950!  Last week also confirmed breakout of a downside temporary correction by moving out of that channel which exactly took support at neckline making Double bottom target 20450 more rock solid.

So we could confirm from above that good time for US is ahead atleast for time being

Emerging markets in Trouble?

Fortune of Emerging markets seems to have changed overnight. Emerging markets were expecting Clinton to come in power and we could make at obvious reasons why from Trump road map. Two biggest negative factor for Emerging markets: Firstly; Strong dollar and rising rates in US would trigger a good sell-off in emerging markets. This seems to have already started as since the trump victory, emerging markets have seen outflows world $7bn from their equity. So for sure its going to be some trouble ahead in emerging stock market indexes. Secondly: Strong dollar would raise cost of exiting finance with emerging economy corporate have raised from outside their country. This would burden balance sheet which could add more trouble to companies. So in-short currently we should avoid emerging markets.

Technical view on MSCI Emerging market index

MSCI Emerging market index measures a pool of selected stocks from emerging markets and it has also followed the path stated above i.e., Sell-off. 

msci

So as we could notice in the weekly chart of MSCI  Emerging market index above that it had given a inverse H&S breakout few weeks back as Clinton was expected but now it has proved to be false breakout and sell-off could be witnessed easily. Though one more close below neckline at 868 is required bit indicators have started weakening.

Global Forecast

After analyzing US vs Emerging markets on Trump win, i could sum up that Emerging markets are going to have some tough times in near future while US markets could out perform. Surely, exports from Emerging markets are going to take a hit for few quarters but that wont be completely avoided by US corporates as still emerging markets enjoy Low Labour Cost. And emerging market governments such as India and Indonesia are taking strong steps to attract Foreign capital which could be fruitful for some sectors as they have Demographic opportunity. 

But as of now we could expect Divergence between US and Emerging markets to widen as we could already mark in the graph below

divergence

To end up, divergence might widen for few weeks more but ultimately now its would be good time to pump in some money in emerging stock markets such as India, Turkey, Indonesia and Thailand where Domestic demographic  demand would start inflating corporate profits soon.

Two close Confirmation

Nifty has been “Demonetizing” itself since 9th Nov and it has now triggered my much expected Short call Below 200 day SMA with two consecutive close below it. Though many safe traders wait for a third confirmation but i preferred to go short today itself as a intimated in my previous post.

Previously recommended Strategy:

strategy

So i believe positional traders have sold if not yesterday then today when we opened way positive. Now the picture has turned completely negative for the short term and we can say any rise towards 8700 is opportunity to sell. Technically indicators on daily time frame are surely in oversold zone but remember even if indicators are in negative zone, we could still go more deeper. So where indicator limits itself, Elliot Wave comes into the front seat. So as of now counting close that we are into complex Corrective Wave pattern and the upside should be capped at 8700 while the downside target could be 7650! though there is always alternate count, but currently situation calls for 7650 on positional basis. Those who has gone short on my recommendation below 8120 , keep my previous post targets in mind to book on shorts. Follow strict Stop loss as per strategy above…

See you guys soon now at 7800 or 8550 whichever earlier!!