Painful start to July Series...june 27, 2008

The global cues for today are very bad. We will have a gap down opening of around 2 - 3% today. The clearest sign of bearishness came from the FnO rollover yesterday. In spite of more than 1% rise in market yesterday, the puts did not reduce in value and the calls did not move up. NIFTY discount was very high indicating a very high amount of short rollovers. A lot of call writing in the system is a strong indication for a bearish case. Though I expected the short rally to touch around 4350 - 4400 before going down to touch 4000 again, global cues are not helping this cause. It will be interesting to see how market behaves here on. Strongest downside support for today comes at 4080 - 4090 in NIFTY spot.

I am not posting a NIFTY chart today as there is nothing much from an academic perspective. I am posting RCOM chart today. Just to understand the importance of trends. See how RCOM is nicely locked in a proper downtrend. If you see this chart, you will notice that the lower channel support comes around 463 today. 464 level is also a major support. So if we open gap down today and around this level, if we see RCOM stabilizing we can buy this stock with a stop loss below 463 for trading. On the other hand 2 successive closings below this line will give us a new downtrend from the current primary downtrend. This is just one of the readings. We will need to take into account other indicators like RSI and stochastics which are not yet too oversold. Lets see how it plays today...In case you buy RCOM for trading likely target can be 478 (15 rs intraday is very good profits anywayz). Also, keep in mind how NIFTY moves when trading stocks.

The overall trend is pretty difficult to guess today. Its quite possible that we will open low, go more lower and show same late recovery. Its better to go with the trend during the day. No more stock picks for the day, lets watch RCOM and see how it behaves of course market should also support it.

NIFTY outlook and update for June 26, 2008

Yesterday we expected market to open down, rise and then dip again. But contrary to our expectation, market stayed up due to a good amount of short covering. We didn't gain or lose anything though as we stayed away from market. Today again, short covering is expected to continue pushing nifty towards the 4300 mark. Right now, it may be too early to go long on a positional basis. Intraday longs seem ok for today. The broader trend is still down and a test of 4000 is still pending. So trade this market on a day to day basis now and avoid carrying over leveraged positions overnight. Today being FnO expiry day expect good volatility in the market.

STOCK PICKS
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RELIANCE INDUSTRIES (RIL) - CMP 2136. BUY target 2200. SL - 2125

BOMBAY DYEING - CMP 672.9. BUY target 697, 721 SL - 655

Dark Clouds Loom large over Dalal Street

I had to extend my vacation by one more day and could not post yesterday. It was nice though to stay away from market when bears were marauding markets. Maybe it was a missed opportunity on the short side, but market throws so many opportunities that there is nothing called a lost opportunity. Coming to today, I think the picture is pretty clear. Once inflation spooked us last week and we broke 4370, 4000 was definitely coming. Like adding fuel to the fire, RBI has hiked both the CRR and repo rates, a double whammy of sorts. So we should be opening gap down. However, post that it will be interesting to see if we rebound for sometime or just keep going down. I wouldn't suggest that you stay away from rate sensitive sectors like auto, infra or banks. I will say in this market stay away from market itself today. You will do yourself some good. NIFTY is oversold on intraday charts so even if it opens gap down, we should get some recovery rallies. But none of these rallies I think will hold in this market. If 4000 also doesn't hold then one may short and carry for a target of around 3600 (This is an Elliott wave target).

Get your shopping list ready, I think long term investors can make merry buying their favourite shares by buying their shares at a bargain...