Weekly NIFTY and Stock Analysis

[fragileninja]

Short-term uptrend over below 6,200. Watch-out for 6,000.

Sensex, during Muhurat Trading last week, created a fresh all-time closing high. However Nifty, which is both a broader, more scientific and more traded index, has so far attempted but failed to cross this very important obstacle. We therefore advised our readers to exercise caution and stay outside the stock market till a new high is created and sustained. We also said that retail participation, in the form of higher volumes and out-performance of Equal Weighted CNX 500 index (see chart below), is critical for this nascent bull market to sustain and blossom into the mother of all bull markets – an investment opportunity of a life time.

We believe that this bull market is inevitable and will be driven by turnaround in economic cycle as well as historically low valuations. (Price/Sales ratio at 2009 lows). However, it is possible that we may see another substantial correction before the bulls regain control and take Nifty to fresh all-time-highs.

In the short term, FIIs will continue to drive Nifty. The Net Index Future Long positions is a great representative of what FIIs are thinking and doing.

Our analysis shows that FII positions oscillate between -200,000 to +400,000 contracts. The chart below shows that FIIs reached the +400,000 level last week and since then they have started to lighten up their Long positions (book profits). In 1 week, FIIs unwounded 100,000 contracts or 25% of their portfolio. This is important data point to look out for, because FIIs have been the sole buyer in the market and if they stop buying than it very difficult for the market to continue to go up.

If FIIs continue to cover their Long positions then we believe that Nifty will swiftly move down to support zone around 6,000 level. At that time, we will need to see if FIIs re-enter Long contracts or start to Short index futures.

Source: http://livestock.cloudaccess.net/156-nifty-short-term-uptrend-looks-over-watch-out-for-6-000.html

 

[fragileninja]

In our last article, we discussed that Nifty's short term uptrend looked over and the Index is likely to test 6,000 levels soon. We advised our readers to watch out for FII activity around at support zone of 6,000, specifically shorts on Index futures to judge the direction of trend.

Since then, Nifty went down to 6,000 level on Nov 13, then bounced back to 6,200 on Nov 19 and now is languishing near 6,000 yet again. FIIs have so far been conspicuous by absence of a decisive position in the market. The Net longs have reduced almost 40% from the 400,000+ contracts seen near 6,300, but they are still in strongly positive territory at 240,000+ contracts on the long side. However, with the taper talk back in business, we need to see if FII inflows will continue unabated as before or slowly start trickling out like in June - August period.

We analyzed the performance of individual stocks in Nifty during the Nov 13 and Nov 22 period – days when Nifty closed below 6,000 in the current uptrend. Our analysis shows that during this period, there was a sell-off in IT and so called defensives stocks. Names like ITC, HUL, LUPIN CIPLA, SUNPHARMA are all down between 2% to 5%. High beta or volatile stocks actually performed well and gained in this period. TATASTEEL, JPASSOCIAT, AXISBANK gained between 5 – 10% during this period. The losses in the defensives were therefore compensated by the gains in high beta, such that the overall Nifty index remained flat. This is positive for the market and shows money flow from defensive to high beta sectors, which usually happens at the start of a major bull run.

Further analysis showed that the Equal Weighted CNX 500 index has outperformed Nifty during the recent fall. While Nifty has fallen more than 5% from its highs on Nov 3, this index is less than 2% from the highs it made that day. Moreover, BANKNIFTY and CNXMIDCAP indices have also performed better than Nifty during this period. This signifies stronger breadth than before and a more sustainable rally, if and when that happens.

As of now market is stuck between a range of 6,000 to 6,300 and has become what we call a ‘trader’s market’. A break of range on either side will result in an explosive move. Investors are advised to wait patiently for a strong close above the previous all-time highs before buying. While we continue to remain bullish, we will change our view if the Nifty futures close down below 6,000 accompanied by FII selloff. Whenever this happens, we will let you know.

Original article:
http://livestock.cloudaccess.net/158-nifty-at-a-point-of-inflection-with-positive-bias.html

 

[SKU]

Any bounce back expected till expiry ?

 

[fragileninja]

A gapup is likely tomorrow, because of positive global cues (Dow, S&P, RUT new life high on Friday). If Nifty future can cross 6070, then expect a strong bounce back.

Money flow already shows bottoming out. But to be safe, I will advice long only above 6070 NF. If you are already long then keep a SL of 5970 spot.

 

[fragileninja]

Here are the charts for the top 8 Nifty stocks. Together these stocks contribute over 50% to Nifty. The remaining 42 stocks are responsible for less than 50% of index's movement:

ITC, INFY, RELIANCE, ICICIBANK and LT are near support, while TCS, HDFC and HDFCBANK are a bit far from it. We need to see if the stocks near support cam bounce off it. If they do then these stocks along with Nifty become great buys. On the other hand, if one or more of these start breaking down (specially ITC and Nifty) below their support levels than Nifty is likely to follow suit.

Original article:
http://livestock.cloudaccess.net/ma...-analysis-of-most-important-nifty-stocks.html

 

[fragileninja]

Nifty resolves point of inflection with an strong upmove

We discussed in our last article - Nifty at a point of inflection with positive bias that Nifty is stuck in a broad range between 6,000 and 6,350. A break on either side of this range will result in explosive move. Last week, Nifty decided to remain indecisive and within this broad range, albeit in style, with a 200+ point upmove. We continue to remain bullish! We have discussed many reasons for our optimism in the last few months - historically low price/sales ratio, economic cycle potentially bottoming out, expectation of a new government and large FII position buildup probably due to one or more of these reasons. However, we are also cautious because of lack of participation of retail investors and the under-performance of broad market compared to Nifty.

In the last few days, we have observed an increase in participation of broad market. The Equal Weighted CNX 500 Index is now at a level higher than it was on Nov 3 - the day Nifty closed above 6,300. Banknifty and CNXMIDCAP are also outperforming Nifty in the current upmove. If Nifty futures can close above 6,240 than we believe that the chances of retesting 6,350 will be significantly high. We observed that Nifty has never tested 6,300 twice, within such a short time span in the past. Therefore, if the retest does happen then we will expect Nifty to decisively move past 6,350!

The chart below shows the resistance at 6,240. In the short term, Nifty needs to move above this level to continue with its short term upward momentum.

Banknifty is already showing more strength and higher momentum than Nifty. It is important for a high beta sector such as banks to outperform for the rally to be believable. A move above 11,300 will open further upside till 11,800 which may lead Nifty beyond 6,350.

The CNXMIDCAP index is showing the maximum strength among the 3 indices, indicating strength in the midcap stocks. A close above 7,800 will be positive and indicate more upside.

FIIs continue to maintain status-quo. During November expiry, they cut down overall long positions by almost 40%, from 390,000 to 240,000 net long contracts. We need to see if they start rebuilding the long positions or cut down the remaining to judge the direction for this month. The first day of the series hints towards the former, but we need to observe a few more days to be sure.

The Equal Weighted CNX 500 index closed at a higher level than it did on Nov 3 - the day Nifty closed above 6,300. This indicates that more stocks are participating in the current rally than before. As we have stated earlier, higher participation usually leads to a stronger and more sustainable rally in the stock market. We continue to believe that this may be the start of the mother of all bull markets - an opportunity of a life time. However, we need to see a close above 6,350 for us to be sure.

Original article: http://livestock.cloudaccess.net/160-nifty-resolves-point-of-inflection-with-an-explosive-upmove.html

 

[fragileninja]

Some stocks that are near their resistance levels. Take long positions if Nifty future closes above 6240 on hourly and the stock is above breakout level:

JPASSOCIAT - strong resistance at 58 and support at 50.

SBIN - triangle formation. Breakout above 1860 future level

ICICIBANK - breakout above 1090 future level

 

[fragileninja]

State election results maybe an excuse for a stylish breakout

Indian state election results for 4 states came out yesterday and BJP trounced Congress by a wider than expected margin. Infact, Congress is decimated and looking at a worst ever rout in Rajasthan and Delhi! Market may see this as people's rejection of Congress's misgovernance and an impending formation of Narendra Modi led, investor friendly BJP government at the center, which will be a strong positive. Political pundits will certainly revise their BJP seats forecasts upwards after the current showing. Markets will see this as a failure of Sonianomics (Food Security Bill etc.) and expect Congress to lean and attempt a different way of wooing electorate. It is possible though that Congress, due to lack of new leadership and ideas, may choose to continue down the same path with an even more feverish pace - which will strain the weak economy even further and create roadblocks for the next government.

Markets, however, are not run by elections and their results. So this news will be discounted quickly in the morning today. We need to watch out for a decisive gap-up above the previous all-time high of 6,350 on Nifty today and whether it can sustain by the end of the day. If Nifty sustains above 6,350 with an increase in volumes today, then we are likely witnessing the Ascending Triangle breakout that we talked about many months ago. There is also an impending Inverse Head and Shoulders breakout above 6,400. Once confirmed, these technical factors will give a Nifty target between 8,100 and 10,000 in the medium term. But for today, let us wait and watch what the market does - specifically, Nifty, Banknifty, CNXMidcap, Equal Weighted CNX 500, SBIN and JPASSOCIAT.

Nifty futures, daily charts show a resistance at 6,400.

Weekly charts, show several resistances between 6,300 and 6,500 zone:

S&P 500 is at an important point. A fall below the low of 1778, will indicate a short term top in the US markets while a rally beyond 1,814 will show that S&P is ready to go beyond the taper talk and move ahead.

Original article: http://livestock.cloudaccess.net/162-state-election-results-maybe-an-excuse-for-a-stylish-breakout.html

 

[fragileninja]

We are at a very interesting moment in time. Most global equity market indices are at or within 2-10% of their all-time (e.g. FTSE, the UK index) or previous bull market highs (e.g. Hang Seng, the Hong Kong index). If the markets break out of these previous highs then another significant up move is possible. However, a sizeable correction (10 – 20%) is likely if the markets fail to breakout.

The table below summarizes the performance of most important indices across the world. While the US markets are in confirmed bull market (arguably driven by sizeable QE), rest of the world markets have so far failed to follow US. Our hypothesis is that this cannot continue for long due to strong international trade and globalization forces. Either the world markets will pull down the US indices or they will start following the US indices to enter new bull markets of their own.

We expect start of a global bull market and significant surge in world indices if the FTSE and NIKKEI cross 7000 and 16300 respectively. However, the historically low level of volatility across markets suggests that globally the market participants are betting against a big move. Failure of indices such as FTSE and NIKKEI to breakout, despite many new highs in S&P suggests lack of upward momentum outside US. QE has been unarguably the primary driver of US equities so far and the US Fed is on course to end QE by Dec ‘2014. This may result in correction in US markets. The divergence between performance of RUSSEL and S&P suggests that the upward momentum in US equities is reducing and corroborates this hypothesis. We therefore expect that the global markets, including US, will correct significantly (at least 10 – 20% and possibly more) before they can start the next big up move. Please read the full article for analysis of each of these indices.

Original article:

http://livestock.cloudaccess.net/170-global-markets-expect-a-significant-correction-in-the-next-6-months.html

 

[fragileninja]

And the crack started with US markets down 2% and VIX up around 30%. S&P has now made a lower low and lower high. We need to break below 1900 to confirm a medium term top.