Technical Analysis on Nifty

[renu daga]

totally agree with u raj
the red circel area wa sactaully where good corrections had to be made .. but afte correction it pulled up like ..mad,,,and now oing dopwn like mad
and wil ulimate thow it where it is good for!!! the circeled area..but will take long time of consolidation,,,,,say i odnt agree with 1/2/3 patter but for channel,,,conmsoliadtion should be there...

renu

 

[rajpersonal]

9700 has come finally ... But thats a fibonacci retracement and not a strict support . Fibonacci calculation suggests markets could correct to the extent of 61.8 % or nearabouts. The most strong technical support is placed around 8800/2600 for Sensex /Nifty.

On the short term we are seeing contraction of prices and maybe indices can start making a falling wedge pattern( will put up the chart in the weekend ) .

We need to see some reversal patterns being made on daily charts which can develop in next couple of weeks when the index tries to stabilize between 8800-9700.
So continue to wait for some reversal signals and watch patiently ...

Price discovery by markets are always better then economy boosts and are not short-lived !!! and it doesnt seem far !!! ...

This is what i believe is needed for a good bottom formation in bear markets. There are lot many external interventions like crr , p-note selling considered to be good news which i felt could boost sentiments but have not boosted market levels and every news is being sold into. Purely with a technical view a bottom is well made by a price discovery mechanism of the markets itself. Also a good bottom indicator RSI is almost nearing a level which it was in 2001-2003 on monthly basis which suggests markets are getting into highly oversold zones. So its better to watch the markets for the signals then look towards any external interventions and reasons.

So ideally once there is a lull on external side followed by a price rise which is entirely due to markets could give more confidence then some economy boosters. Lets see how it pans out but just a brief and a quick thought.

Refer to the graph earlier posted
http://www.traderji.com/attachments...17858-technical-analysis-nifty-trendlines.png
and see the green region

 

[rajpersonal]

FEAR OF UNKNOWN
There were lot many supports got broken in the past few weeks without a decent bounce and indicators are at lowest ever zones. So in the short term lot of technical expectations have not been met.

Suddenly the basic fundamentals or value investing have gone for a toss with stocks quoting at 1/4th of book value in P/E the earnings is a ?.

Economists/experts predicting a doom 2-5 years back are suddenly jumping after being wrong till now , experts who predicted a big run 2-4 years back are in the background and the cycle continues.

Recession / Slowdown / collapse /depression /crisis / bear hug /cycle etc and there are lot of questions and no answers ...............FEAR of THE UNKNOWN ....

I am a young technical chap and technical analysis is the only tool i have to make some interpretations/projections which may or may not go well but the endeavour to do so continues.... So lets look into the long term chart.

Sensex Long term Chart :
1) As we see on the long term chart a major breakout confirmation took place at 8k. The 13 year range of 3k-6k broke but the major channel breakout took place after a couple of tries at the higher end. This was the point at 8k we came out with the 13 year bull cycle and big tgts which not many could think of .We have already seen the best 3 + years .

2) An ideal correction of such a major bull wave should have been 50/61.8 % at 11900/9700. These levels have been broken for now and the next level comes to 76.4 % which is not that significant as it goes below into the channel.

3) The previous falls in 1992 and 2000 were in the extent of 57-58 % . So taking similar calculations 57-58 % dip would be 8900-9100. So if its following the same cycle then a 3-5 % deviation on closing basis can be taken.

4) If we see the long term charts the 13 year flag/channel breakout is a major one and ideally the prices should not test the channel again ( so i was expecting 11k to hold ) . The pattern would get negated if we see a monthly close inside the channel and we could see a very prolonged sideways movement and dent the prospects of a bigger bull run or the 13 yr cycle.

This has been the reason for my view that we may not see a sustaining monthly close below 8k-8.8k. Some sessions below could be seen in such highly volatile scenario. Say 5-25 sessions below this level would negate the strong breakout and its a very long term call so need to wait for confirmation.

5) Although support levels of 12500, 11200 broke of quickly and on brink of sustaining below 8800 what could be next. This is where it gets tricky as the next logical support would be 7600 ( not major or strong ) and 6200-5900 ( most strong after 8800 ) . The lower level of 6200 is scary as it confirms the negation of the long term breakout and a very very long sideways move.

6) Concluding the technical observations i continue to mention a sustained weekly/monthly closing below 8800 is not what i am looking at as it scares me technically and below that we may have to worry about lot more assets , work etc as the Sensex could go to 6k or lower technically. Its a personal view point that there could be lot of trouble if such a thing has to occur and i would remain positive in the long run for big tgts till 8000-8800 remains on monthly basis.

The current market movements have negated lot of possible technical expectations and comparisons to historical patterns havent been fruitful. The basic assumption of technical analysis is History is repeated and if we have a major recession or new history made then technical projections may not be the best guide.

Some of the sentences which i read from experts,economists,gurus seem to confuse me more.

The bear phase may last for 12-18 months...... ( same line for last 6 mths when did the bear phase start so at least i know the end ).
Suddenly there are lots of depression theories over the media , doomsdayers in every corner of the world and being repeated day-after day. At the same time there would be a contra view of the best opportunity of a decade etc etc. Media is not supposed to be right but to be at it !!! ...

This is a very new wave of fall, panic or an unknown thing which according to the oldies of the market has never been seen before. Sentiments and panics can really do weird things in the market so best thing to do now would be to silently watch the next 1-4 weeks or take smaller exposures only with a 2-3 year view if you have not been stuck at sub 12k levels.

For the 20k levels many stocks may have gone down by 60-90 % and in such a scenario pulling out residual money would not make much of a difference unless there is a desperate need or over-leverage. So wait and watch for the next few weeks any further falls would not make a major difference as not much has been left in the value.

 

[rajpersonal]

Sensex Technical View
Yet another big drop but good recovery by end of the day. Technically the candlestick pattern suggests a possible short term reversal pattern but next couple of sessions ccould give a confirmation. The lows of index Sensex 7700 Nifty 2252 are close to the lows made on 28 Oct 2005 which is exactly 3 years back from where we started the fastest move to 21k. In a matter of less then 9 months the index is back to the starting point.

In the short term we can term this to be a bottom as a recovery of 10 % from lows is not usual and is generally a sign of panic bottom. In the last few weeks we have seen that bounces have not lasted for more then 3-5 sessions so we could expect stability to set in once this pattern of panic is broken. In the long term chart 8400-8800 is important on monthly closing ( implies 20-25 sessions rather then calendar dates as per me ).

So trading bias should be on long side on dips to 8k with a stop of 7600 and a possible bounce to 9500/10500 , also shorting is better avoidable at 8-9k as risk-reward is highly unfavourable. Will see stock specific updates later tom if possible.

Resistances on upside are at 9500-9700 followed by that the most important level is 10750. On fibonacci retracements 9500/10500 are 23.6 /38.2 % zones.

Although as discussed 7600 is a support but not a strong one but the next one below 8800, but if markets have to turnaround this is the best possible place technically. According to a rough guess in my sms today is 7200-7800 and 2100-2250 which is a personal view. Also the market consensus is now going towards 6k and 2k then can markets possibly surprise ??? is the question.

Many of the investors /experts / analysts suddenly looking at 6k and 2k as good possibilities in the same manner as 10k which can be lot of greed or fear either ways but technically going to 6k would dent the charts and maybe the economy in such a manner that it would be very difficult to recover in coming months . As per my view if one is bullish in the long run buying at sub 10k is more better as 6k is much more scarier for the long term picture so personally i would be buyer at 8k then at 6k

 

[rajpersonal]

Certain technical points which are important:
1) In the last few corrections since January the falls have lasted for almost 48-52 sessions or say roughly 11-13 weeks. 21k -14.7k , 17.7k to 12.5k . Although the current fall has been much larger in magnitude around 50 % this time around to previous 30 % ones.

2) In the previous corrections we have seen a bounce of around 23-25 %. So in that sense we can see a bounce to minimum of 9500-9700. As the fall has been steeper can we see a much sharper pullback beyond 9700 .

3) Fibonacci Retracements for the fall are placed at 9550/10700 /11650 /12500 which correspond to 23.6/38.2/50/61.8 retracements. Ideally a bear rally bounce can target around 38/50 % .

4) There are some gaps left on the upside. 9570-9681 , 11257-11410 , 12284 -12472. So these gaps can get filled in the future but when is a big question as all are placed much higher from current.

So currently as the index is oversold the bounce back could be sharp also which could target 9500-9700 and to an extent 10500-10700 in a more sharper case in the next few weeks. On the lower side 8500-8700 zone could be the support.

 

[rajpersonal]

Re: Technical Analysis on Nifty and Sensex

Sensex finally took a good breather or got exhausted technically after so many gap-ups. In the last few sessions it was clearly stated it go till 10750 zones around which one should book profits, keep strict stops and be hedged.

Also it seems clear after todays trade that 9900 is coming. Sensex has a gap around 9870-10110 which should get filled first. Another important gap level is placed at 9297-9361 which is the most important to watch as it coincides to around 50 % of run from 7700 to 10945 ( terming it to be an extreme short term peak). The dip could test the levels at 9900/9300 and to an extent of 8900 which is 61 % and important recent low and needs to be watched carefully.

Next action to be taken after we see base formation or reversal around the above support zones to take next trades. Technically till we sustain above the 9300 or to a larger extent 8900 a retry to 11650 + which is 50 % retracement is possible as the current counter rally could stay in place for another 3-5 weeks or say 20-40 sessions till 8900/9300 holds.

Globally all the indices have reacted sharply from oversold zones and have reached resistance levels with some exhaustion.

 

[rajpersonal]

Sensex Technical View :
Sensex takes a quick dip after hitting 10900 and is quickly down to 9700 losing more then 1000 points . The nearest support zone remains around the 9300-9350 zone . Also 61 % of the current bounce comes to 8900.
At the same time the lowest gap is placed at 8740 -8900. This should be a major support which needs to be watched for a trend change.
On the upside 10200-10500 should be a stiff resistance. Sensex is currently in between the range and that is precisely the reason why it was mentioned yesterday to just wait and watch only.
In the day high volatility was seen with traders getting many opportunities whereas it may also be termed that traders were hit on either side. Such kind of volatility will remain in days to come as indices are in an indecisive mode.
Market Observations and Thoughts :
Few months back there was whole lot of discussion going around CRUDE , inflation , forex derivatives, money market liquidity in india and subprime , housing bubble , inflation , CDOs, bank failures etc around the world .
Suddenly many of the above things have been accepted in cases whereas others have ceased to exist. The consensus is many economies around the world may get into a recession or slowdown.

what recesssion means as per wikipedia, a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."A sustained recession may become a depression. A rule of thumb that recessions are often indicated by two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP).

A pure read of that tells me for India with a GDP of worst case 6.5-7.5 % it would still be faraway from a technical recession.

There are many things which can be discussed on this topic but will start of with inflation nos which i do have a brief statistical logic on. Although the nos may not be a direct reflection of the actual inflation but continues to be a decider for economic policies.
Some points which may turn it around :
1) The major rise in inflation to double digits came in after crude price rise. Indian fuel pricing is around 67 $ and a rate hike may come only again if it comes to above 100 or rate cut if it goes to 50 maybe a rough estimate. My rough guess is crude may not touch 100 + so no cut.
Now what could happen as inflation is rate of change by next year around the price hike dates the impact of rise in inflation may come down or say base effect reduction.

2) There was an acute price rise in commodity and food prices which led to a quick rise in inflation . Such a steep rate of rise may not be emulated next year in current scenario so there could be another impact of stability from this side.

3) There is a belief that the liquidity is not a major concern in Indian banking system but its the confidence and sentiments which is not allowing a flow in the system even after adequate measures. Its a difficult thing to judge but when things become clear in the next 6 months it can lead to a possible surge in corporate lending in a low interest regime also. At the same time it could give strength to inflation as there could be lot of liquidity chasing things but can it be so quick again to bring up a rise in inflation seems difficult.

All in all as from my previous projections which went right on the economic timing of Sept/Oct to see the peak of weak economic data. So the next 3-4 months around Nov- Jan would see some weakness in data every now and then but may not be major as Oct ideally. As before the view remains of economic though process may change around Jan-Mar and start looking up around March- May 09. Lets c how it pans out this is just a projection personally which may not be adequately researched or accurate.

Would appreciate more comments on the above thoughts ! ...

 

[pokrate]

http://marketsunwinded.blogspot.com/2008/11/nifty-hurdle-3164-10-november-2008.html

 

[braja]

Thanx for the nice informative charts

 

[rajpersonal]

Sensex Technical View :
Sensex gives a close below 9600 which opens up doors to 8900/9300 zone. Now let us see some technical factors.

1) Gaps !
The 2 open gaps are at 9361-9297 and 8740-8900. Breaking below 9600 makes way for the gap at 9300 to be filled in near term. The lower gap at 8900 is an important support zone as it was a gap after a turning point and ideally it needs to hold up on closing basis for positive bias to remain.

2) Fibonacci Retracements
The 50 /61.8 % retracement levels are placed at 9300/8900. We could see a test of these zones in a corrective downmove.

3)Patterns :
Couple of days back many chartist were looking at a possible head and shoulders but till it doesnt breakout or crossover its just an academic exercise. So the current structure suggests 8500-8900 zone is important on closing basis if it sustains below that the low would be in danger. The time analysis suggests we should stay above the 7700 levels for around 20-40 sessions or 4-7 weeks. Till we dont breakout of this pattern of lower high lower bottom the pressure would remain.

The ideal strategy yet again is to react to market moves then to try guessing volatility. So once we reach closer to 8900/9300 zone it would be to close shorts and watch again. 8500 is a level below which the low of 7700 could be in danger. But better to wait for 2-3 sessions of closing before taking a major directional call.