Time to book profits in Smallcap and midcap stocks

Since Feb 2009, Midcap and Smallcap stocks has been appreciated by almost 240% and 300% respectively. But both the indices could not made a new high, both the indices recovered almost 80% of entire fall ( from Jan 2008 to Feb 2009).

If you are holding any smallcap or midcap stocks then please exit them if it goes below 10 days low.

If BSE Smallcap index closes below 8992 then it may test 6000-7000 levels once again.

If BSE midcap index closes below 7215 then it may test 5600-700 levels once again.

Its a 34 th Month from the all time high and 21st month from recent low (March 2009), so december month can be trend reversal. So be cautious in the market and keep tight stop loss orders.

Following sectors looking weak on charts:

Capital Goods, Power, PSU, Real Estate.

We may see profit booking in following sectors:

Banking, FMCG,Auto, Consumer Durables, Metals, Oil & Gas.

Following sectors may outperform the broader market:

Pharma ( Healthcare), IT.

18950 for Sensex and 5690 for Nifty are crucial levels. If it goes below mentioned level on closing basis then that confirms the down trend. Happy Trading!!!!!!

Sell off in Nifty

Nifty has broken a major support of 5180 and sustained below that level, so as I mentioned earlier we must exit our long positions. Nifty broke its previous High (5344) and made a new high of 5398 but came down sharply from that level. We consider this as a false breakout as volumes were not much on breakout. But this is not the case in last week’s sell off. Nifty came down with good volumes and open interest was also increasing. Now any bounce back should be considered for exiting long positions.

Next week I am expecting nifty should take a support around 4930 and will give a bounce back from that level. Major resistance will come around 5130 and then around 5200. If nifty comes around 5200 one can go short with keeping stop loss above 5350.



Since last few months Nifty is making higher highs and higher lows but the momentum indicators are giving negative diversions which suggest this is just a bounce back of major sell off ( Sell off from 6300 to 2500). We will get the confirmation of major trend reversal only if Nifty makes lower low i.e. Nifty goes below 4667. If Nifty goes below 4667 then we may see a huge sell off in Nifty in next month or two. In that case Nifty may go down to 3700-3800 level which is the Gap yet to be filled on the chart.




To conclude, any bounce back must be used to exit long positions and go short around 5200 level with stop loss above 5350. Happy Trading!!!!!!!!!!!

Nifty Buy or Sell?????

In my previous blog I had given the targets for nifty for short term which achieved very fast. After that Nifty came up but it has started losing momentum. Nifty broke the recent high but volumes were very low, the same thing happened with Sensex. Now the question is that whether we should consider that as a breakout or not??? In my opinion breakout without volumes is very risky to trade. So let’s wait for Nifty to break its recent High (5344) to accumulate position once again.

Now the crucial support will come around 5245 and then 5180. If Nifty goes below 5180 that will confirm the break out was false breakout. But if Nifty sustains above 5344 then the next resistance will come around 5450-5500.

To conclude, put a stop loss below 5180 in Nifty and hold the long positions. If Nifty breaks 5180 then start exiting long positions. Happy trading!!!!!!!!!!!

Nifty after Budget….

As I had mentioned earlier Nifty took a resistance at 4950 levels. On the Budget day Nifty gave a breakout of Inverted Head and Shoulder pattern on daily chart and the target for the same is around 5190 level. 80% pullback of recent fall comes around that level only, so now that level has become crucial resistance. Nifty has created a gap on daily chart around 4930 level so the chances are that the nifty should come down to fill that gap. Nifty gave a break out around that level only so in the next week it will try to retest the support of 4930-50.

As I mentioned in the chart, this is a wave G which will going to finish around 5200-5300 levels. If nifty takes resistance at that level and comes down once again and breaks 4667 level then it confirms the top formation for medium term. This will confirm the major down trend in the market and achieve the lower levels as I have mentioned in my first blog.

But the counts will change if nifty sustains above 5300 levels on closing basis for 2-3 days. If that happens then the next target for Nifty will be 5400-5450 levels. The chances are remote for this scenario as volumes are down though Nifty is going up. So we may consider this as short covering and fresh buying will come only if it sustains above 5300 levels.

If we see sector specific ,following sectors looking well for investment for short term:
Auto, Banking, Capital goods, Healthcare, IT and Metals.

Technically following sectors are looking weak so exit from the stocks on bounce back
FMCG, Oil and Gas, Realty and Telecom.

To conclude, Nifty may give a bounce back up to 5200 levels for short term but the medium term outlook is still bearish. The trend will change only if Nifty sustains above 5300 levels for more than 2 days. Happy Trading!!!!!!!!!

Unwinding of Dollar carry trade and corresponding levels in Nifty….

In my first blog I had mentioned the support of Nifty (4760) which has already got broken and it made a new low of 4687. So it has confirmed the down trend, now the major support will come around 4652 and then 4531. Now we may see a bounce back from those levels but that will be a time when we can take short positions. As I had mentioned in my earlier blog, Nifty took a resistance of 4950 and came down once again. Now that level has become crucial resistance.

In last three weeks Nifty has corrected almost 12%. What was the reason for this sell off??? You must have heard about unwinding of Dollar carry trade, but what does that mean?? In this blog I am going to explain you Dollar carry trade and its impact on markets.

Currency carry trade is a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. Here's an example of a "dollar carry trade": a trader borrows 1,000 dollars from a US bank, converts the funds into rupees (INR) and buys a bond for the equivalent amount. Let's assume that the bond pays 5% and the US interest rate is set at 0.5%. The trader stands to make a profit of 4.5% as long as the exchange rate between the countries does not change. Many professional traders use this trade because the gains can become very large when leverage is taken into consideration. If the trader in our example uses a common leverage factor of 10:1, then he can stand to make a profit of 45%.

The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the rupee falls in value relative to the dollar, and then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless the position is hedged appropriately. Right now we are facing the same problem. US is in recession so US govt. is trying to reduce interest rates as low as possible to increase demand. But the financial institutes and traders in US are using this cheap money for trading. By adopting dollar carry trade strategy, they are putting huge money in financial assets which are giving them good returns. Everything was going well until dollar index was in down trend. Now the dollar index has reversed the trend & started coming up so they had to cut their positions to reduce losses dollar. This is called unwinding of dollar carry trade.

The dollar index has becoming stronger and stronger day by day. It has recovered from low 74.20 to 80.22. The dollar index has given a buy signal above 78.30, now the major resistances will come around 81.50 and 83.10 respectively. If dollar index goes to 83 then Nifty will come around 4531 levels. If dollar index breaks the resistance of 83.10 and sustains above that then the next immediate resistances will come at 86.50 and 89 (corresponding levels in Nifty will be 4000-3750) respectively.

Last week L & T, HDFC, SBI and ONGC were in sell mode. There are some more stocks who have given sell signal. VSNL, Vijaya bank, Union Bank, Tata power, Sterlite Ind, RCom, NTPC, Maruti, Mah and Mah, MTNL, JP Asso, Ispat, GMR Infra, Bharat forge, Andhra Bank and Reliance Ind. Please exit long position from these stocks.

Bottom line is that; utilize every bounce back to exit long position so that you can buy those stocks at much more lower level. Happy trading!!!!!!!!!

Reading between the lines…

This is my first blog so I was little bit confused. Whether I should start writing blog when the market has corrected almost 10% in last two weeks?? Is this the right time to start?? Then I realized that there is nothing like right or wrong time in the share market. So I am starting from today itself. Through this blog I am going to share my views, thoughts and recommendations about financial instruments like shares, commodities, forex, mutual funds and insurance.

Now let’s start with the share market. In 2003 Nifty was around 925 (Sensex-3000), from that level it started going up and made a top of 6300 (Sensex-21000) in the year 2008. Due to Global financial crisis, we saw a sharp correction in the market and nifty made a low of 2250 (Sensex-7700). After that we saw a bounce back to up to 5300 (Sensex-17700). Is this a bounce back or fresh rally in the market?? In my opinion this was just a bounce back. All the momentum indicators were gone in oversold region so that bounce back was expected. Always remember correction in bull market and Bounce back in bear is always faster than the main trend.

In last 10 months Nifty has appreciated by more than 100% from bottom (2250 to 5300). If you look at the chart below, you will see that the market is making new high but RSI is not making new highs and volumes are also going down. In technical terms we called it Negative Diversions. In last two weeks Nifty has corrected 10% and took a support of 4750-4800 levels (Sensex -16000). This week nifty has also broken 21 weeks EMA and closed below that level. Now the chances are that, in the next week or two Nifty will try to come up once again to 4970-5070 range (sensex-17000).

If Nifty takes a good resistance at 5070(sensex-17000) and again it comes down below 4760 (sensex-15980) that will confirm the new sell off in the market. Then Nifty will come down to fill the Gap of 3700-3800 (Sensex-12500). So be cautious in the market and Exit your long positions if Nifty breaks 4760 (Sensex-15980) once again.

These are the top 10 stock of Nifty on the basis of their weight age.I have mentioned stocks in red who have already given sell signal.

Lastly, this is my first blog so please feel free to comment and in the process help me improve my blogging skills. Happy Trading!!!!!!