We still have a chance…. Update for 25 Feb 09

There are reasons that I would like to list before I try to protect the stand I have taken today. Firstly I have been of the opinion for some time now that this fall is unwarranted – we cannot fall unhindered even if we were doing as bad as we are doing now a days. But I also agree that the markets have a mind of their own and it did not stop climbing when everyone was hoarse calling out that the climb is not keeping pace with the pace of growth. All the same at the moment we are oversold, the volumes have been low, we are overly concerned with the happenings in the US and the rest of the world, we have an elections at our door steps and the present regime gives less weightage to the economic concerns than the populist concerns. All the same we do not have a negative growth. Our internal demand, development continues. we still remain to be agrarian society where too much exports do not effect us like China and the list goes on and on… All this is right but the fact is that we are seeing lower tops and lower bottoms. The earlier range in which we used to play was 3200 – 2900, now if we can play the range 3000 – 2600 – it will be a great miracle.

Today the candle we have made is Dragonfly doji. It is a fairly strong reversal signal. It indicates that the control has shifted from the Bears to the bears. Now that would be great. But all the same take this with a pinch of salt. We are into the last few days of settlement and that could have let some pressure off. The second reason that I feel (and do not see as a major concern to others) is that the lot sizes have increased considerably. In these times of low volumes and low liquidity I feel that the rollovers may suffer. If that be so then a percentage of the shorts will have to be covered and not carried forward. That would lead to some sort of bounce. That coupled with somewhat stable to good international cues can ensure that we go up a bit higher and trigger a wave of buying that can sustain us above 3200. Hypothesis and nothing else but all the same a scenario in front of all of you.

The global cues … Asia remained weak and we saw red all the way home. Nikkei was down 1.46%, Hang Seng down 2.86% and Strait Times down 1%. There was a chance perhaps of better day but the Europe basically dashed the hopes. FTSE closed 0.89%, DAX 1.03% and CAC down 0.73%. Does is not seem to somebody that the markets around the world are hanging around at levels – wherein at the first signs of recovery can give a good push up?There was a statement by Bernanke wherein he has lighted a glimmer of hope by saying that if all goes well then the recovery to the US economy can take place in 2010. The markets that had opened flat – gone green – fell to flat line again rallied up. Since then the higher ground has been lost but US is still green all the same. hope like hell that it remains this way.

As I have mentioned earlier the candlestick is a Dragonfly Doji and it represents reversal after a fall so that is one good condition. We are now officially trailing the lower edge of the Bollinger bands. The bottom touched it. 5 EMA is below the 20 EMA and 20 EMA is below the 50 EMA so a long way to go before the trend changes. Volumes were low – but a bit higher than day before. ADX is purely bearish. MACD continues with its negative divergence – but I am happy that the divergence is not too much. RSI is negative and Slow Stochastic has the red line crossing over the blue line – but still in oversold territory. TRIX is still looking down.

Wanna see how the day went past? Well the trade was fairly simple. We opened just below the S1 level and threatened once to break to the S 2 levels but crossed the S1 levels towards the Pivot point and thereafter never looked back. We never really test the Pivot but neither we saw the lows seen earlier during the day.

The pivot levels for tomorrow should hold a lot of meaning because the good times will be indicated by the charts before they happen.

R3 2815 as against 2869 on Friday
R2 2787
R1 2760
Pivot 2718 as against 2744 on Friday
S1 2691
S2 2649
S3 2622 as against 2620 on Friday
Projected High Range 2739 to 2774
Projected Low Range 2718 to 2683
Fib Projected High 2764
Fib Projected Low 2658

That is all for the day – the US is hovering around +1 % still so a positive closing may happen and help us further. Best of luck to everyone – cheers.