Thursday, April 16, 2009

Buy on dips anyone? Update for 17 Apr 09

The life has turned topsy Turvy – the same people who were bearish to the hilt and were doing the bear dance had become bulls somewhere along the line. The markets too danced to their tunes and was running up like an untamed bull on a rampage. The markets went along from crossing 5 EMA all the way up to crossing the 200 EMA. What a run up it has been – but why ? the only thing that comes to my mind is not people thinking that we are out of the woods – but the fact that there was just too much negativity around. It happens this way. When there seems to be no way we can see the markets go up – we do go up and vice versa. Please do understand that even if people are seeing the light at the end of the tunnel – I remain bearish still. It will take the elections and the aftermath along with some results showing a turnaround that I will change my mind. The fact of the matter at the end of the day is – that if we all agree that the division of the bull market and the bear market is the 200 EMA then we have actually failed to sustain above it. Once again we may now get into a sideward movement after falling a wee bit and then continue our journey downwards. We do not have to touch our erstwhile lows and it would be not possible at this point to say anything for sure but one thing is certain – if we do have a little bit of good news pouring in from anywhere then we are going to touch a high of around 3800 and that should for the time being be the max upswing to what started during the beginning of the month. The money is there are it will flow – like life itself if stagnant - the money catches rust so at the end of the day it has to continue moving. Well that is enough of babbling for a day. Let us talk technicals.Daily 16 Apr 09

Well on the global cues the topping out of the markets seems to be around – fresh highs are not being made and good so – like I say in every other post – we need a breather. The markets have perhaps become cautious. The bears are cautious as every time they have tried to hammer the markets they have been slaughtered. The bulls are cautious as higher volumes are now not giving the kind of rewards the bulls expected perhaps and they can face turned tables looking in their face. The only things perhaps that will work in the favour of the bulls is that though the nifty has broken the 200 EMA to the down side – most of the index stocks are still well above 200 EMA and reaching those levels will give them support. Second is the Puts build up is excessive and at each level when we breach to go lower there will be squaring off of puts and that will lend support to the markets again. Asia was what we all saw. Nikkei up 0.14% and Hang Seng down 0.55% and Strait Times down 0.75%. The Europe has still not closed . Europe opened flat with positive bias – went to the flat line and then climbed up – it was only with the US opening flat that the Europe came off the lows somewhat – now FTSE being 1.71% in green, Dax 1.62% in green and CAC 1.52% in green. It would be interesting to see the Europe end. US is mixed in the beginning of the session – DOW down just 0.05%, Nasdaq up 0.52% and S&P 0.06% in red. It is a long way to go for the closing but is JPMorgan results are any yardstick to go with – they having declared better than expected results of 2.14 $ billion  then we may see green yet. Mind you the results have not been really reflecting showing in the market trends as the anticipations and the future guidance has been playing major role in the same.

Coming to Pure technicals I have observed something that should ideally dictate the markets over the next few sessions. The fall of 114 odd points on nifty has not really moved the indicators out from the overbought zone. That means a lot – earlier on march 30th when we had a single black candle of somewhat the same dimensions – all the indicators had moved out of the overbought zone and we saw the recovery the next day onwards. It would be interesting to see how it all shapes up. We ended just toucing the 5 EMA and those who deal with the markets daily will see this as short – short position opportunity – so that is another thing to keep in mind. The middle of bollinger bands is 3050 and one can expect this as a target. This is target on three accounts , Bollinger Band mid point, 50% retracement by Fibonacci if we do fall then we will meet 20 EMA around at those levels. The volumes were same as day before – 207% of last 50 day average. Another way to perhaps look at this is that two times the volumes could crack the markets just 110 odd points. Take your pick. ADX had been bullish but showing a divergence to trend (explained by jaggu) MACD is bullish but like I said earlier – the divergence is reducing every passing day. RSI is just a dip below the 70 point at 68.91 and just out of the  overbought zone. Slow Stochastic has the %K that is the red line below the %D line (blue line) that gives signs of bearish behaviour but both the lines are still overbought so expect some correction to come. Well the TRIX is still looking up. Well that is all to the candles.

The pivot data is as under: -

R3 3668
R2 3568
R1 3468
Pivot 3411
S1 3311
S2 3254
S3 3154
Projected High Range 3440 to 3518
Projected Low Range 3503 to 3425
Fib Projected High 3553
Fib Projected Low 3311

Notice resistance higher are just about 55 points and support down 100 points at every level.

Okay another red herring – the call writers were the one in the dock when the markets started climbing – now the opposite may be about to happen – see the option pain and the call put ratios…option pain 16 Apr 09 Put call ratio 16 Apr 09



Uma said...

A good post! As always!

S S Cheema said...

Thanks Uma