Long term investors who have been investing since 2 Decades would be having atleast one IT stocks in their portfolio but the charm of IT stocks seems to be fading out. Since last year we have been witnessing under performance from this sector and now finally it seems to losing complete long term strength.
Above chart is of a NSE IT index and the time frame in picture is weekly. There are two things to be noted technically in this chart, First: Index has been trading in lower channel since the start of 2015 and we are about to break this channel on downside next week which could trigger sell on all Blue chip IT stocks from Long term portfolio. So a trade below 9400 on the index is going to be a first confirmation. Second: Index has traded and closed below 200 Week Average for the first time since 2011 last week…..But looking at indicators may be a pull back could be witnessed. Though not sure of such a pull back so would recommend to start off loading IT stocks on each rise from next week. On the upside resistance could be 11400 while downside the valley is deep!
Some IT stocks charts supporting the fall
Infosys: Stock has closed below 200 Week average with volumes
TCS: Stock has just started dipping out after a consolidation of 2 weeks so its better deal to short TCS then Infy at Current levels
WIPRO: Stock has already been hit due to many fundamental reasons so looking at chart, its a completely avoid trade at this level for any side
HCLTECH: Stock has been outperforming other blue chip IT companies and its only IT Stock still trading above 200 day average ..
So now next week we need to first wait for NSEIT Index to give confirmation of trading below 9400.
Looking at the volatile markets and uncertainty ahead we could go with a spread among IT companies….
Sell HCL Tech and Buy WIPRO…....
Will post again if we get some confirmation!!
So Finally after 3 months of patience all my downside targets upto 8150-8250 has been achieved. In my previous post i mentioned about a crucial pattern “Multiple H&S” which had a neckline at 8560 and we did respect it on closing basis with targets on downside touched in just one day due to unexpected event. Demonetizing 500 and 1000 currency notes have turned charts of Nifty more cruel. Technically there is always a alternative count and for my previous count of bottom at 8150 , alternate target count was 7300-7600 which is now seems to be coming. …..is true and am not scaring you guys!!! Though for a confirmation we need to wait for Nifty to close below 8150 which is 200 day average and also previous bottom count. Market may not see Free Fall from here but gradually we may get there!! On the upside we may now have a ceiling at 8580, which is strong neckline resistance as market with red horizontal line while crucial 50 day average is 8690 is to be breached for bulls to be back in drive!
Now looking at some long term charts, Monthly on Nifty, we could see how crucial is 7400 support line which is intact since the low of 2008. Support line level of 7400 is also coinciding with at Retrenchment level of recent rally of 6825-8960..So stay alert if we close below 8120!!
Fundamentally what could justify my view??? ….Answer : Consumption story! The recent step of government is surely a game changing for a long term story and growth of India but a short term to medium term, its gonna hit balance sheet of companies. Q3, and to some extent even Q4, would see a great fall in demand of goods and services. Purchasing power of most individuals would take a hit as cash is completely sucked out and so is black money. A common man would cut down on extra purchases for a time being which could hit sector such as Auto, Capital Goods, Real estate, Cement and Textile industry.. But on defensive side sectors which are daily needs such as FMCG, Pharma and to some extent Education can do well. So its best time to accumulate stocks of Defensive sector while wait for few months to buy other sectors.
Risk Takers sell on rise if we breach 8120 for December/Jan expiry with upside Stop loss at 8700 and targets on downside 7800/7670/7450
Safe traders avoid any trading for next few weeks and sit on liquidity to purchase for long term below 7700!
Will update next if we breach 8700 or 8120!! Until then Trade safe!!
Humpty Dumpty Finally had a great fall from the 8550 wall! But for me this fall was interesting as it was anticipated on charts since long time. In my last few posts, strategy had remained to be Sell on rise while for safe traders i had been recommending 8600 PE Novemeber…Here’s a snap short of previous few posts…
Strategy from 16th October: Recommended 8600 Puts for Safe traders
Strategy from 29th September: Recommended 8600 Puts for Safe traders
Strategy from 14th September : Recommended Sell with lower Targets
Strategy from 26th August: Head and Shoulder anticipated
So am sure those who have followed my previous 4 posts on Nifty in last 2 months, they are into Huge profits as have been continuously recommending 8600 PE longs with tgts of 8550/8300/8150…
Technically, Nifty has entered Corrective Wave 4 of a larger trend and the fall is always with heavy volumes as common traders would think that we have started bearish trend again BUT THATS NOT THE CASE! This fall is purely a short term profit booking before we start WAVE 5 move back in the direction of larger wave. During this course of correction for a medium term time frame, Nifty charts have emerged with a rare corrective pattern of “Multiple Head and Shoulder” on Daily charts. I had already anticipated this pattern on 26th August post but didnt expect it be with a Multiple structure. This pattern is surely a bullish reversal but before that we may see some pull back and nifty would give chance to those who missed my call earlier…“Something is better than Nothing”….
As outlined with Red lines, multiple H&S has got breakout confirmation at neckline 8550 which was also a 100 day SMA making breakout more convincing. But yesterday we have taken a strong support at downside channel support which is intact since last 2 months.. So may be a pull back could be expected until neckline at 8550 as marked with red horizontal! That could be entry point for those who missed out earlier for shorts.
On the downside, target from H&S is at 8100 which is coinciding with other multiple levels of 200 day average and Wave 4 Support. So it makes our target more probable..But to be on safer side we would book profits on shorts near 8250
Book 50% Profits on 8600 PE NOVEMBER ,which would bring down cost of holdings to almost Zero as price has doubled since recommended. Keep a trailing sl of profits at 8650.. On downside cover all shorts near to 8250-8300 Spot levels..
Will get back to you again if 8300 or 8650 is triggered now!!
Markets had lots of buzz in last 10 days, starting from a Surgical strike, World War and Deutsche bank bankruptcy but that was in line of “Technical charts expectations”. Recent high on Nifty at 8806 was exactly where i expected in my last post on 29th September at
Strategy suggested was :
Now if you are safe traders then am sure you have accumulated good number of 8600 PE November and if you are risky traders am sure you had covered longs around 8806 and gone double short with the SL of 8980!
So one thing has been confirmed in last 10 days that Nifty has turned bearish and any rise would be an opportunity for medium term traders to go short again for good downside for my previous targets at 8150-8250!
“Are you trapped on longs at 8800? Dont worry you may get a chance to exit in next week….”Technical Nifty is into a Corrective Wave which at present seems to be in zig-zag form which is most destructive of all forms in of Corrections. But corrective wave seems to be forming a complex pattern which “Can” give a strong pull back from here near to the start of wave A which is 8980. Looking at the charts of Nifty , we can see it has already started a downside channel which is the first characteristic of Wave A. Now Question is the degree of Pull back?? …Its very difficult to say at this juncture where can a next pull back end but looking at other factors currently 8800 +/- 20 points seems to be the strong resistance but it may go upto 9000 +/- 20 points too… Next two weeks up-to Diwali could be again volatile markets with earning season picking up but would strictly stick to Nifty levels for a trade….
For Risk Traders
Cover all shorts which you have initiated around 8800 as i recommended in my last post and go longs for short term at CMP with stop loss at 8490 and tgts 8740/8820/8920. After Target one is achieved Keep trailing SL of last target and start buying 8600 PE of November with stop loss of 9000 +/-20 points
For Safe Traders
Strategy remains the same of buying 8600 PE November on each rise with 9000 +/- 20 as Stop loss!!
Ultimate Target in coming months still remains “8150-8250″….SL 9000+/- 20 points
Banks Tanked like hell last week and i hope you guys earned full of it as i intimated the same on 23rd Sept in my post: Banks are About to Tank! Though my downside target 19200 was achieved easily but thats not the end of downside rather its just the beginning. Nifty Bank breached a upside channel on weekly charts which was intact since february low and we have closed below the same today giving a strong confirmation to previous two Gravestone Doji. Surely looking at above charts we will get biased towards getting our shorts on cards but before than i feel we would get a short covering on daily charts. Looking at indicators on daily chart, banks are too oversold and it should get some upside before going down more. Banking policy next tuesday is expected to give rate cut and much need short covering markets but that could only sustain temporarily as i feel this cut is already discounted since long.
So may be we could see some positive moment if we get rate cut better than expected but then strategy would be Sell on News rather than buying fresh. On upside 19750 is strong resistance for short term while 19900 would be my next level to short.
Buy 19350 CE Nifty bank with tgts of 19650/19850 SL: 19100
Today was one of the most interesting expiry end of my career! It feels good when you have initiated call against 90% of the public on D-street and you get in right in just last 3 hours of trade. Had been betting on bears since mid expiry but wasnt get it right until today when i got reason to my view posted on 20th Sept in the post : “Reason would be just a confirmation!” . Just a small sign of war and we got the much awaited profit booking on cards which almost got my target 8550 mentioned in the post above and return ticket of bulls is confirmed now! But would the fall be immediate ???……. Surely, NOT!! ….. Though medium term outlook turns bearish, but a pull back cannot be ruled out in immediate sessions!! What has given me the most fear for a more downfall is Nifty has closed below 50 Day average at 8688 for the first time since early march which indicates that sentiments are turning bearish for next term and also weekly charts are expected to give a bearish close tomorrow after many months. But then why a small pull back???…….. Global sentiments could be the reason!! …OPEC decision to cut production has raised indices of Global markets and that could support our pull back for sure….. So calculating from all possible ways, we can get a pull back to 8715/8820/8870 levels in coming days. Its difficult to say one point of reversal today but 8820 seems to be more likely because its coinciding with a channel resistance too! ……So what after a pull back??……. Looking at Fibonacci i feel 8150-8250 could be level where markets could take support. Between the range we have many gaps unfilled and also we have a neckline support of “inverted H&S of Nifty” which i mentioned in my post “Time for investors to be Active!” on 14 July 2016 !
So to sum up, surely my view is bit biased on downside, but anything is possible!!
My recommended Strategy:
For risk traders:
- Go long with Double stop loss at 8550 first for targets of 8820 where you go double short with stop loss of 8980
For safe traders and Long term investors:
- Buy 8600 PE November expiry on each rise from tomorrow with stop loss at 8980 on Nifty spot….
Target on Nifty: 8150-8250
Banking Sector was on a dream run since February and out-performer amongst them were PSU Banks. State Bank of India (SBIN) which has weight age of 9.48% on Nifty Bank had always be a lender of last resorts for longs in this dream run since February but now it may not be the last resort for Bulls as its about to give a bearish reversal signal confirmation on daily charts and the pattern is one of the most successful patterns on Indian charts i.e., Head and Shoulder pattern! As marked in attached graph, we could see a that we have closed today exactly near to Neckline around 251.50 and sell-off could be triggered tomorrow below the line. Now let me explain you pattern a little bit:
Volume plays crucial role on Head shoulder patterns during falling sessions.
- First, Left shoulder downfall (marked light blue) has diminishing volumes then the rise on left shoulder. Traders thought process is such that this is just a profit booking of previous rally so we dont see major volumes during downfall.
- Secondly, Head has rising volumes on the rise but the top followed by a profit booking has highest volumes and we could notice that in the box markets Yellow in the graph.
- Third and most import part of the patter is Right shoulder and it has volume more than the recent averages specially on the breakout days. So we consider previous two sessions excluding today, we have got volumes more than last 5 days Average as marked by green line.
What should we look out tomorrow for confirmation of reversal?
- A Close below the neckline which is approximately at 251.50
- If Volume is greater than 13.1 Mln shares which is 5 day average
- a Gap down with above two points would give a better confirmation
So the pattern seems to be intact until now but nothing can be said until tomorrow’s close but smart traders should pick up the call before the close tomorrow as i mentioned above.
Now if we take some other factors in consideration then 250 PE is also strong support indicated by Options for this expiry which is coinciding with Neckline level. This would surely trigger strong long unwinding below 250 mark tomorrow,. Secondly, even if u look at Nifty bank stocks, SBI is the only stock of top 5 weight-age which hasnt triggered sell-off yet in last 3 sessions. So after, Yes Bank, Indusind Bank, Axis bank, ICICIBANk, can it be SBI? …We would get the answer tomorrow..
Sell SBI tomorrow below 251.50 with stop loss of 261 and target of 227 on positional basis…Safe traders can wait a day close confirmation….Cheers!!
Markets had been quite volatile this week on various statement awaiting from BoJ and FED but still Index charts are looking weak as i explained in my last post on Nifty. Though we have seen strong stock specific buying in Mid-cap sector and some front-line stocks too but the main pillar of Indian markets, Nifty bank (Bank Stocks), have started showing signs of under-performance in coming weeks. We saw trigger first from Yes Bank, followed by Indus ind bank to some extent and the main culprit born this week was Axis Bank. Looking onto PSU Banks , if you look at SBI counter, it has been resisting strong at 260 CE were we are witnessing strong writing. So overall Stock specific banking stocks are looking weak. Even if you look at Nifty bank options, we have been witnessing strong writing at 20000CE but on the downside writing for this expiry is still at 19500 PE which gives me strong feeling we could get that next week with furious fall. Coming to chart below, its weekly chart of nifty bank.
If we look at the channel which was intact since the low on Budget day, we are closing near to downside support line of channel for almost 6th time but this time is fearful! Why? …We have got 3 bearish candles for last 3 week…Inverted hammer …Gravestone Doji…..Gravestone Doji….!! So if we trade below 19760 spot level next week, it could be Trend Reversal for medium term…indicators are already turning bearish….So i would be recommending sell on rise on Nifty bank…with stop loss at 20300 …Target …19200!!!
Volatility has been peaking since last few sessions, not just in India, but around the world. This brings some fear among traders. If we talk about some crucial factors signing a massive move ahead are: 1) Cash Portion avg in US Mutual fund is at 5.5% which is near to the same level it was in 2008 just before crisis. 2) VIX position in US is at record high levels. 3) Foreigners Open Interest in Indian Derivatives is at record high levels of life time. These are the few points which gives me strong intuition of a massive move on either side ahead!……..Which side? …….I would say preferably Sell Side! In my last post i did mention to go Sell on rise on Nifty and we got ample opportunity to go short at higher levels than the day i posted. Let me point out to you a downside channel which is just confirmed today making support for near term around 8550 while for resistance side 8800 is upside channel resistance as well option resistance built up today. So may be for this 8800 could act as resistance and 8550 as downside target. All saw Nifty PCR at 1.10 ! But why arent we getting that downside move quick?….Because we need a reason to confirm downside… This reason could come in from FED, BoJ or War…It wouldnt matter what the reason will be but its going to get a tag for next fall….So strategy remains sell on rise with first target at 8550 and SL at 8980.
Finally it seems, Nifty has given a sell sign on Weekly charts after many months. In my last post “Behind Enemy Lines” , i mentioned to go short below 8720 level and we have seen for two sessions that we traded below the same level giving her intentions of further move. Though it doesnt mean we are going to witness strict sell-off from this point of time but we may see some short covering before sliding ahead. Some factors which are supporting my bearish view are block trade selling in banking stocks which are high beta to Nifty Movement, Weakening Global charts and Shifting Option Data Range. Today many of the banking stocks including PSU banks so more volumes than the last 5 days average volume so may be some fund action or profit booking by HNI portfolio holders. Secondly, Global markets are weakening on charts suggesting bearish sentiments over the inflow. Thirdly, option data which was suggesting 8750 as the base until Monday sell-off, has shifted to 8600 by today and on the upper side 9000 resistance has shifted lower to 8800
Now coming to Technicals, though Daily charts may signal a short covering but weekly charts are reflecting a Upcoming Evening star pattern on D-street which could be confirmed with Fridays close. But until now it has satisfied 3 out of 4 rules of the Evening star pattern: 1. First candle should be a long green candle, 2. Second candle should be a Doji , which in our case is Grave stone Doji, with a gap over first candle. 3. Third candle should open with a Gap down . But only condition remaining to confirm is ” third candle should close atleast at distance equal to half the body of first candle” So looking at other factors above, i feel last condition may be fulfilled by Friday’s close. Which means if we close around 8668 we would confirm the pattern. So the strategy remains intact ” Sell on rise with stop loss of 8980, while targets are 8550/8300″