Thursday, July 9, 2009

Light at the end of the tunnel? Update for 09 Jul 09

imageThat there is a light at the end of the tunnel is a foregone conclusion really – but the question that one should ask is – how far is that light.  Yes we may confidently talk about 5K on Nifty or probably 10 K in the coming time – but when is the big question. And if that part is not right then the entire exercise to profit from the stocks goes for a six. Why did we go up to the levels to where we were a few days back and why we are going down now is just not my prerogative. I have mentioned so many times that the markets are just not bothered about asking me as to where they are headed to so I will not question that – I will purely take some input from the technicals and as of now the technicals are fairly and squarely pointing downwards. icicibank put call 08 jul 09infosys put call 08 jul 09The event that we had so many hopes on is now gone and we have to look elsewhere for the cues – and the Global cues are the nearest that we can now relate to. We have stood defiant in the past and decoupled but I feel the pulse is beating the other tune at the moment. The next event that I look forward too is the results that will start pouring out shortly but till the time that happens – we are here where the markets are taking us.

  I will now present to you the Options data. Look at the optimism pouring out – there is a definite puts being written but nowhere the figures that are there for the calls. Look at IOC – you expect that with such calls being written and no puts at all – we will see IOC rise?NTPC put call 08 Jul 09 put call ioc 08 Jul 09Reliance put call 08 Jul 09please for heaven’s sake give me a break. The call writers have to be real dumbos to have done this and will butcher them (the call writers) so the markets as far as this data is concerned are just not going anywhere up as I am sure that the call writers are not Dumbos.

Moving on to the global cues. As far as Asia was concerned – we have seen the slaughtering carried forward. Europe was in red but just around the flat line but they could not sustain there – after the US opened and dropped – closing at the lowest levels for the day. FTSE was down 1.12%, DAX  down 0.56% and CAC down 1.27%. US opened flat went green briefly before falling – trying to recover once again – fell then and closed flat. Dow up in green 0.18%, Nasdaq 0.06% and S&P down 0.17%. This should at least temporarily give some relief to us but my sense still is that the worst for this leg is not over. Daily 08 Jul 09All the same Asia opening has brought some relief and is presently in green – Hang Seng up 0.41%, Strait Times up 1.49% and Nikkei down but probably on its way to recovery down 0.47%.

Coming to that Candle sticks. Daily Put call ratio 08 Jul 09Option pain 08 Jul 09Two indicative things have happened – we are along the lower edge of the Bollinger bands and we have closed below the 50 EMA. I take this as a bearish signal that give a continuation to the other indication. It goes without saying that 3 EMA continues below the 15 EMA. ADX is bearish and the ADX line proper has started looking up and if it continues then it will definitely give strength to this down trend. THe ADX is at 15 and I am looking forward to this crossing 20 and then eventually 40 on our way down. MACD is bearish with the continued bearish divergence. RSI is bearish and still nowhere near being oversold. Slow Stochastics %K line is oversold but I believe and feel that the %D line would also join it there before recovery. TRIX still looks down and is bearish.

So here is the summary – Options data – bearish, Candles bearish and global cues neutral to bullish. My positional policy is to remain short and sell on rise. See the exercise that I had suggested day before. Hey and before you pounce on me at some later date – This is the suggested paper exercise…

Ser No Stock/Index Sold / bought at last closing Notional profit/loss Stoploss Remarks
1. Nifty - 50 (4185) 4079 + 5,300/- 4286/4281 stoploss is at the 15 EMA line as of now, will keep changing on required basis.
2. Reliance         waited too long to get good price



dr.c.m.singh said...

cheema saab you are absolutely right in suggesting that day to day variation difficult to follow and positional trade better...but i had shorted large amount ( 20 lots ) nifty at 4195 and could not resist myself from booking profit at holding 4 lots so comfortable with positional trade...i like the way you summarise the technicals in purely unbiased manner...thanks and well done.(not only your call on nifty has gone right but you were sitting on sidelines for quite some time not committing yourself to any position)

S S Cheema said...

Thanks for the comment. It raises the morale a lot to get encouraging comments from you. Striving hard to learn...