Divergent trends in nifty and its heavy weight components

Hello!

I thought it's a good time to talk to the group as there were confusing signals about the market direction for the coming days.
Following are my views I have posted in my daily news letter "The Forecaster" for August 31st 2005

Nifty up-move continues and Nifty tested 2373 during the day and closed at 2367.75. Just a shade below the first hurdle it has to cross if this rally has to sustain. Though volatility yesterday was not as high as it used to be earlier but still a concern. As we are writing here for many days that it is not a good for the bullish markets. We have received a few emails from the new subscribers asking why volatility is a concern as it provides wide swings and good trading opportunities because of decent price fluctuations.

Look this is quite simple to understand. When market decides to move up and gives constant signals in that regards participants get it and keep buying steadily where opportunities are available and law of demand supply moves the market with low volatility as participants are in agreement of its move. To make it clear I would give this example, Calm sea takes you to your destination with your own efforts to sail the ship with little or no support from the wind and waves. You may think that rough sea with high wind and wild waves would make it easier and requires little effort and energy. You may travel long distance with little effort but chances of your survival are remote. Rough sea is considered unsafe even by seasoned fishermen similarly volatility is rough sea of the market hence should be avoided.

Markets are very delicately poised when IT, PHARMA, FERTILISER and FMCG are showing bullish signs and Nifty is showing bearish pattern. This is quite unusual. Generally we give more weight to index pattern over the individual stocks or sector but this time above sectors have many index heavy weight stocks in it like Infosys Satyam Wipro Ranbaxy Dr. Reddys lab ITC and Reliance. So I am wondering what could drag the index down below 2300 if this pattern to get confirmed. If Nifty moves up to make new highs again and this H&S pattern fails this would be unusual and I have to scan my memory if I have ever noticed such phenomena.

Nifty may turn weak below 2350 and bullish if were to constantly trade above 2377 and finally break free of 2380 hurdle.

There is a possibility that this H&S pattern may fail if CNX IT index and FMCG stocks like ITC breakout. You would come to know of it. First clue will come above 2368.


New Stocks for investment

Buy Stride Acrolab around 304 or above 312. A 80 to 100 rupees move expected if flag get confirmed
Buy Creative eye above 18 target up to 30

Buy Ajanta Pharma around 86 – 88 or above 96 stop below 80 target would be 140

Watch out for ITC its range is shrinking for many days. Think it as a squeezing spring. A strong move is on the cards. Above 1720 – 25 it looks good for 1800 and below 1680 support comes at 1630 only.

Reliance was making a bullish flag on intraday charts. It broke out now and we expect it to make new highs to 830 to 850 if this were the correct pattern we have identified.

Your comments are welcome.

sincerely,

MB Singh
mbsingh@*****.com
www.technicaltradersofindia.com

Attached Images

	Nifty 30.png (20.3 KB, 21 views)
	CNX IT Index.png (31.5 KB, 13 views)
	ajanta pharma.png (24.4 KB, 21 views)

Hello Mr. Singh,

I thank you for posting your wisdom on this forum. I am not clear, what you are trying to say. I doubt even if you know what are you trying to say in this posting of yours. You are trying to be on both sides of it, bullish and bearish.

Technical Analyst of your caliber should give clear call, be it bearish or bullish. You shouldn’t be afraid of being wrong. There is nothing wrong to be wrong. No matter what you predict about the market, you are always fifty percent rights. With the knowledge you have acquired being a technical analyst, all you have to say is one percent more to let others know your bias.

Nothing personnel, keep posting.

Regards,

Wastej

Dear Wastej!

I appraciate your comments. I would like to tell you that technical analyses is totally based on probability, you would agree I suppose. I was pointing out in my posting about the contradicting signals by the indices and its main components. As my clientale include seasoned traders and investors, I some time initiate a two way dialogue among us. The purpose of my doing this is to discuss a situation, apart from announcing my views only.

You must be aware of the charts I have posted shows that Nifty 30 minutes charts suggest a head and shoulder pattern where as Nifty's heavyweight components like Reliance, Infosys TCS Satyam Ranbaxy Dr Reddys wipro and Zee are showing strength and were ready to breakout or few of them were not weak. If this is true How is it possible to drag Nifty down and by whom? that was the issue I was pointing out.

No doubt I was bearish when Nifty closed below 2340 before starting a fresh rally to smash all the resistances at 2368 2377 and 2400 now. I was trying to reposition myself to the changing scenario and letting my subscribers to take a view and get in to IT, INDIAN PHARMA, Reliance and a few other stocks and ignore nifty bearish signal.

Read this paragraph again and you would notice that I was not confused but clearly suggesting my subscribers what they should do in either situation.

Markets are very delicately poised when IT, PHARMA, FERTILISER and FMCG are showing bullish signs and Nifty is showing bearish pattern. This is quite unusual. Generally we give more weight to index pattern over the individual stocks or sector but this time above sectors have many index heavy weight stocks in it like Infosys Satyam Wipro Ranbaxy Dr. Reddys lab ITC and Reliance. So I am wondering what could drag the index down below 2300 if this pattern to get confirmed. If Nifty moves up to make new highs again and this H&S pattern fails this would be unusual and I have to scan my memory if I have ever noticed such phenomena.

Nifty may turn weak below 2350 and bullish if were to constantly trade above 2377 and finally break free of 2380 hurdle.

There is a possibility that this H&S pattern may fail if CNX IT index and FMCG stocks like ITC breakout. You would come to know of it. First clue will come above 2368.
I hope It is clear now. Some time things are more clearer and some time not. Probabilities are based on many things if this happen only than that would happen. People who dont understand often says why you guys say that if Infosys is able to break 2425 it would go to 2700. Why dont you say that infosys would go to 2700.
They dont understand that it is not us who drives the market but we just try to focus our ears to the whispers market provide us through charts. Some time we heard them loud as we have mentioned in our recommandation that Buy Stride Arcolab around 304 levels to get a Rs. 100 move, Buy Ajanta pharma around 88 to get a Rs 50 move buy Reliance around 710 to get a Rs 140 move.

I am confident that most analysts dont drag that much neck out. You would often hear that buy Reliance around 710 and it would face resistance around 725 and if it is able to break that possibility is that it can test 735 levels. There is nothing wrong even in it. Every analyst have different personality and mindset. Some focus on short term trading ideas and some focus on day trading. My experience suggest that you can kill time or make little money if your focus is on leverage and shorter time frame. I try to mould my subscribers in to short to medium term investors and trade on those sort of signals. Use little leverage and you are a class apart and posibilities to join the top 5% elite traders exists. Average person is greedy and he may not be aware of the fact. He want to make money with out putting it out on the table. Is in'tit like some one wanted to reap the crop without sowing even a single seed.

Please take my comments in a positive manner. I am not saying that you are wrong but trying to make my point across. Being wrong or right is a different matter. Every one make mistake and it is a good thing to make a mistake. A new mistake every time is positive signal, as it suggest that you are doing something. Repeating the same mistake time and again is insanity.

I would like to thank again for sparing your time for reading and than posting your views.

regards

MB singh

Hi mbsingh,
Long time no hear.....where 'd you disappear to?Anyway,welcome back.Nice write-ups.......Had noticed the bearish divergences on the Nifty and the impending breakout in certain stocks......was unsure how the index could possibly come down with the index stocks showing strength.Although I am still a bit wary,I must say that the trend is still up till it's over.....for now the party continues.And great calls,my friend,all neat patterns.Nice.......and keep em coming!

Happy Trading!
Saint

Hi Saint!

Thanks for ur comments. Yeah well said but its bull market and this time it is a long one. What would you say if I suggest that basic chart reading gives better results in such markets. Moving averages and trendlines are good tools to have decent indications in any situation and any time frame?

Making chart complicated using oscillators and indicators does not lead to anywhere.

regards,

MBS

Nifty up-move continues and Nifty tested 2373 during the day and closed at 2367.75. Just a shade below the first hurdle it has to cross if this rally has to sustain. Though volatility yesterday was not as high as it used to be earlier but still a concern. As we are writing here for many days that it is not a good for the bullish markets. We have received a few emails from the new subscribers asking why volatility is a concern as it provides wide swings and good trading opportunities because of decent price fluctuations.

Look this is quite simple to understand. When market decides to move up and gives constant signals in that regards participants get it and keep buying steadily where opportunities are available and law of demand supply moves the market with low volatility as participants are in agreement of its move. To make it clear I would give this example, Calm sea takes you to your destination with your own efforts to sail the ship with little or no support from the wind and waves. You may think that rough sea with high wind and wild waves would make it easier and requires little effort and energy. You may travel long distance with little effort but chances of your survival are remote. Rough sea is considered unsafe even by seasoned fishermen similarly volatility is rough sea of the market hence should be avoided.

The above is quote from your posting, you do not sound bullish at all.

Nifty may turn weak below 2350 and bullish if were to constantly trade above 2377 and finally break free of 2380 hurdle.

This paragraph from your posting further suggests that you want to be on both side of the market. The use of word "May" as oppose to "will" gives you room to escape from any situation.
.

MY PURPOSE OF WRITING WAS NOT TO CRITIZISE YOU, BUT WAS TO BRING BEST OUT OF YOU, WHICH IT DID.

Keep posting.

Regards,

Wastej

Yes,totally agree....just some trendlines,ma's,and analysing pivots will keep us in this trend ...sometimes simplicity is everything.Sometimes in trying to predict the top,many analysts lose sight of the present money making opportunities.............I am sure they will be right one day,if you predict a top from 6500-9000,am sure one day they gotta be right,but by then,my friend,people like us will be laughing all the way to the bank.

Sometimes we gotta choose whether we want to be right or we want to make money!

Keep your write-ups coming,
Saint

Hi Wastej...I've been following your posts closely with more than a little admiration and learning your trade as much as I can and a long way to go still.
You do display a quiet, self assured and nonchalant tone in your posts. Possibly besides being your personal nature, you seem to have a firm command over your subject. Besides this, your method is rather tactical in nature, and as a skilled player, you must necessarily be confident of your moves.
Here I am responding to your observation above on the word 'may' as opposed to 'will'.
Perhaps the issue here is not an 'escape', but rather an acceptance and acknowledgement of the reality that in the midst of so very many variables, it is infinitely probable that a tech analyst with all his/her wits and skills, would likely go amiss in predicting market moves.
An honest analyst first and foremost needs to address this extreme vulnerability, and a 'may' in place of a 'will' concedes to this fact most honourably.
The analyst has to find a way out of variables, probabilities and possibilities which depends on skill and experience, where a tactician has just one exact move available in any changing situation.
I have read with a lot of interest the above postings, and see where both you and Singh are coming from. My concern is not who is saying where the indexes are going, but with the need to spare some leeway for the analyst's job.
I am in no way suggesting that you as a tactician do not base your moves without analysis, but as a skilled tactician, you do have the space in which to alter your moves should the analysis differ from where the trend went.
Thanks and regards.

HEAD I WIN TAIL YOU LOOSE. (THIS IS THE BEST WAY TO TOSS A COIN) ONE CAN NEVER LOOSE, CAN NEVER BE WRONG.

The key point I was trying to understand, after reading Mr. Singh’s post, was, what Mr. Singh is saying.


I could not get clear answer. Did any one else get the clear answer? If yes, what was it?

I praise Mr. Singh’s capabilities as technical analyst, as I have read his posts earlier. In no way I was criticizing Mr. Singh. Under no circumstances I am trying to prove Mr. Singh is wrong. It will not give me any pleasure at all if Mr. Singh was wrong.

Little comments like I had posted, brings the best of a person, In this case, it did, I am glad for that.

Regards to you all.

Wastej

Dear Wastej!

I am thankful to you that you are talking so much pain and putting lot of efforts in your writing. I understand that you are not criticizing my post and you wanted to take the best out of me.

I was confused because Head and shoulder pattern on Nifty 30 minutes chart was in force, it was yet to get confirmed. One the other hand I was wondering how could Nifty be dragged down when a group of all the biggies stand on the other side of the market giving final touches before a strong up move.

It was a case of uncertainty and that is why I have used the word “may” and I was guiding my clientele that if nifty move above 2377 than market is bullish and nifty intra day chart pattern would be failing. Market would experience a strong rally because of breaking out stocks and also because many market players would be running to cover their short positions.

In the process of analyzing indices or stocks for that matter we come across situations where stock is in a trading range. To illustrate this you visualize a situation where after a nice long run up a stock consolidates in a trading range. No body can tell precisely where it would move finally. It may be a distribution pattern or just a consolidation to acquire enough energy and ration (read stocks) to start and sustain a fresh up move. So we do not try to be Mr. Right or we don’t have any interest in claiming that it was us who announced it first on TV. Let market decides it course and we would follow. We do not prepare a flight plan for the markets but follow that plan if we are able to get wind of it.

Read my original post once again where I have put my stock recos. You will see that I am following the same thing you wanted me to do. Here I have seen stocks I was pretty sure about their future price movement. So I extended my neck out to the farthest distance and announce to Buy Reliance now and it will test 830 850 levels, buy stride Arco lab around 304 it would give you approximately 100 rupees move. I have not used that word “MAY” because in my opinion chart was saying it loud.

Technically it is wrong what I have done. I must have used the word “May” Again it is a probability it may or may not happen.

This Monday I have been asked about my views on the markets during my shows on NDTV PROFIT and ZEE Business and I said that since Nifty is closed below 2340 it is quite bearish and I expect a sideways move within a zone of 2380 and 2300. The market has proved me wrong in just 2 days but still all my stocks are running. No one is complaining. You know why this happened? Nifty could not be dragged down further because that group of biggies started moving in the opposite direction.

I hope this will clarify the issue. You are most welcome for any further clarification.

Regard to you and all those participating in this discussion including Saint and AMITBE.

Have a good time

MBS