Friday, August 22, 2008

Okay then bears....... you have proved yourself....... now what?

The moment 4375 was violated I knew we were heading for a disaster in spite of opening above the yesterday's closing levels. The problem is that there is no indicator before 4191 that can present any kind of support to a fall. So with this kind of trading that we saw yesterday chances a bright that we test that level before we have any kind of recovery now. If for any reason we break the level of 4191 too then once again we are in a freefall region till 3820. I will not go predicting beyond that levels as that is too far out as of now. The narrowing Premium on Futures may indicate that the bottom this time over is not far out now.

The drop yesterday was on twofold reasons:- firstly, the oil spiking up to $121 and the reports by one of the so-called global research firms saying that oil is headed to $140. The second was the expected inflation figures -- fortunately the wholesale price index spiked to 12.63 per cent for the week ending August 9, 2008 as against 12.44 per cent in the previous week - somewhat in lines of expectations and the experts saying that at the present rate the max upside may be capped at 13 odd percent before the inflation starts cooling off again. The Asia was trading in red when we opened and it gave a chance to the bears strike. They then went on to consolidate their hold on the markets driving it further and further down finally ending at 4284. So we have another hundred odd points to go before the bear's will power is tested again.

The indications from Europe yesterday were not encouraging with FTSE opening red and closing flat. The Dax opening red closing red at 1.28 per cent and CAC closing down 1.40 per cent. The US however in spite of starting red ended with the green bias. Dow Green points on .11%, NASDAQ red .36% and S&P 500 green .25 per cent. Asia today again is showing signs of trading red. Nikkei down .29% and straight Times down .09% at the moment.

The indications on the candles -- mind you are bearish giving no scope for a recovery for the time. Five EMA has gone below 20 EMA - never a good signal. On MACD the red line still trails below the blue and continues looking down. RSI is looking bad, StochRSI once again is in oversold territory hovering near zero (it has bee so for some time now). On the slow stochastic however the red line has crossed the blue but both red and blue at the moment below the 20 marker. the TRIX too is looking down -- never a good sign by a leading indicator. if we have a black candle today too when we are definitely going to trail the lower end of the Bollinger bands. The bands narrowed down to the narrowest point on the 20th of August and as of yesterday seems to have started widening up again. This widening can carry the downtrend for some time to come. This might mean not so good closing of the this present FNO session coming Thursday.

Last two days fall of Bongaigaon refinery. have probably catered to the rupees five dividend dished out day before. I am not recommending buying till we reach 50-52 price band. At the levels of 50 to 52 a dividend payout of 50 per cent would mean 10 per cent return on investments -- beating most of the fixed deposits in the banks. The max downside to this stock that I would see in the worst of conditions should be around 45-46 level. RSI for the stock is down at the moment, MACD shows a downtrend and TRIX is looking down. The StochRSI however is in the oversold territory for a last couple of days. So I suggest that you hold on to the balanced 50 per cent of the amount kept aside for investment in this stock till it shows some more downside. There is a gap at 66-68 levels that is likely to be filled up in due course of time.

Best of luck to everyone for the trading today.



Uma said...

cheema: after friday's uptrend I'd say we're likely to see a lot of volatility

S S Cheema said...

Yeah - seems so - but the crazy part is that market is directionless. atleast the main trend should be there.