Friday, April 10, 2009

A copy book Doji…. Update for 13 Apr 09

April the 13th… sorry seems to have mixed up with Friday the 13th. Well they sound the same to me atleast. I will ofcourse bore you somewhat with why I was not available for the last few days to give updates. Well in army we have this team called Gradation and Examination Board that comes every six months and roger's’ us/the flying base checking it for standardisation and the gradation of pilots. Well it goes like this whether you understand or not – the visit is a whirlwind of activity. Tests, both flying and of ground subjects, poking in every little corner to see the op efficiency of the base and all. Well now fortunately I was not appearing for any upgradation – but unfortunately was coordinating the visit so the stuff like who flies with whom and when, lectures and tests and that is what kept me busy for last four days or so. It was bad enough that I used to reach home around midnight and on my feet early morning. Infact it is after they left that I had a good eight hour straight sleep, one movie with my kids “tasveer”, Mc Donald's, two-three hours at XBox and only then here I am – ready to face the world. Okay now – the 200 EMA – that people say is really important to name the trend – bearish or bullish for nifty is around the corner at 3395. The markets did make a half hearted attempt to break that but was not successful as everyone of you would have seen. The result has been a perfect doji. Well now Doji is a reversal signal but I would like to wait for the reversal signal to be substantiated by some fall in the markets I am saying again at the cost of repetition that confirmation of this reversal signal is important before we see the market going down.. Well the markets have been going on and on and even the best of the bulls that I know now agree that there has to be a breather as the markets have not really consolidated in a worthwhile manner for a long time now.Daily 09 Apr 09

On the global cues front – our long weekend perhaps played out more than the pure global cues for our markets to make a Doji. Nikkei was up 0.32%, Hang Seng was up 2.95% and Strait Times too closed green. Europe opened green but was definitely close to the flat line till US gave it thumbs up and it went of to touch new highs. FTSE closed 1.48% higher and DAX was up 3.06%. CAC too ended 1.82% higher. In US A better-than-expected earnings preannouncement from Wells Fargo sent the financial sector surging 15.5%, which induced buying in the broader market and helped the Dow move back above 8,000. Dow ended 3.14% up, Nasdaq 3.89% up and S&P 500 3.81%. It is these global cues that can help our indices retain some shine even after a Doji.

Next coming to the candlesticks. I have already told you about the Doji formation and that too just after touching the 200 EMA. All the same if we break 3400 then we are off to 3600/3800 I suppose. The volumes are fairly high with the volumes being 150% of 50 day average.This jump in the volumes has been there since the middle of the run up we are seeing now. The participation has increased and the retail too seems to be jumping on now. Always the last to enter and last to leave. ADX remains bullish and does not waver a wee bit from climbing up. MACD diversion has increased and remains bullish. The RSI however is in the bullish but overbought zone so that is one cause of concern and the second is that once again though the Slow Stochastic is bullish – the oscillator is in overbought zone. The TRIX is merrily looking up so there seems to be still some force of upswing left. Incidentally, if we cross the 200 EMA then it would be a first on Nifty after this bear run began. Instead of the 3 month chart that I used to post earlier I am posting a 6 month chart so that a broader outlook of the trend can be obtained. With this I am convinced that we are moving from sell on rise to buy on dips even though the fundamentals are not supporting it.

I would not put across the options data. See the put build up. the Put build up is too strong and that implies that everytime the market tries to go down – there will be puts that will be sold and that will support the markets to go down. Also now that more and more people have started giving higher targets – there will be option pain 09 Apr 09more call build up than put build up with the markets going higher. put call ratioThis ratio has to drastically undergo a change and only then we will see the markets either stabilising or falling. This can take upto about two weeks more in my mind. Mind you the markets are closed on Tuesday also so keep your back safe. Also now that we had a Doji – please refer to my last blog and you will find the Fibonacci retracement levels. I expect atleast a 50% retracement before the markets continue further up.

Let us see the pivot data for Monday

R3 3495
R2 3444
R1 3393
Pivot 3350
S1 3299
S2 3256
S3 3205
Projected High Range 3371to 33033418
Projected Low Range 3383 to 3336
Fib Projected High 3426
Fib Projected Low 3281

Best of luck for monday and I will surely be writing an article on options strategy for the coming week.