Strong & Weak futures 13th April 13th April
This is list of 10 strong futures:
Essar Oil, JSW Steel, Gitanjali, Mah Life, JP Hydro, HDIL, JP Associates, Ind Hotels, Purva & Aptech Train.
And this is list of 10 Weak Futures:
Sterling Bio, Glaxo, Hind Unilvr, Hind Petro, Colpal, PFC, Wock Pharma, Divi's Lab, Lupin & Dabur.
Nifty is in Up Trend.
FII DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 09-Apr-2009 | 2076.63 | 1905.71 | +170.92 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 09-Apr-2009 | 1208.45 | 900.06 | +308.39 |
 | 3342.05 | ( -0.03 %) | -0.90 |  |
| 1 | 2 | 3 | ||
| Resistance | 3393.12 | 3444.18 | 3487.22 | |
| Support | 3299.02 | 3255.98 | 3204.92 | |
 | 10803.86 | ( 0.57 %) | 61.52 |  | |
| 1 | 2 | 3 | |||
| Resistance | 10938.67 | 11073.47 | 11214.83 | ||
| Support | 10662.51 | 10521.15 | 10386.35 | ||
Indian stocks continued their audacious climb last week and the Sensex closed with yet another hefty weekly gain. The strength in this rally will, however, be severely tested next week as the earnings announcements gather pace. But since many believe that all the negatives are 'already discounted' in the current prices, any positive surprises akin to the Wells Fargo earnings can only give a leg-up to this rally.
Second rung stocks walked away with the laurels last week; BSE Midcap Index closed 7 per cent higher while the Smallcap index gained over 9 per cent. Volumes touched the roof as investors returned to the bourses in droves lured by the rising stock prices. Cash turnover on the NSE on the last two trading sessions was over Rs 17,000 crore whereas the average daily turnover in February 2009 was only Rs 7,800 crore.
It is obvious that stock prices have run-up too fast and the daily momentum indicators are flashing some danger signals. Negative divergence is apparent in the 10-day rate of change oscillator and the 14-day relative strength index is at 73. The implication is that investors should watch their step in the short-term.
Let us step back a little and view the larger picture briefly. Following the decline from the 21206-peak that halted last October, Sensex had been moving in a sideways range. We had assumed that this was a halt before the final leg of the move from January 2008 peak unfolded. However the magnitude of the current rally denotes that one leg of the bear market was completed at the March trough (fifth wave failure) and we are in a counter-trend rally that is correcting the entire decline from last January peak.
The wave-counts, as we have pointed out before, are more lucid in the Dow Jones Industrial Average where the fifth and final wave achieved its target in March 2009.
If this is the 'B' wave of a long-term down-trend, first two targets are 11990 and 13000. Halt below either of these levels will mean that the index will spend the rest of the year in a range between 8000 and 13000 as the B wave unfolds in to a protracted sideways movement. It needs to be borne in mind, that according to this count, sharp up-moves such as that witnessed over the past month can be followed by harrowing declines. We will examine other B wave possibilities on a rally beyond 13000.
The short-term trend is positive but since the Sensex is approaching key medium-term resistance levels and momentum is beginning to slacken, investors should take some money off the table. Immediate targets for the current up-move are 10805 and 11600. Since the first target has already been achieved, Sensex can have a shy at the second target. The 200-day simple moving average present at 11340 is also a formidable resistance in the near-term. Supports for the week would be 10393 and 10060. Short-term investors should avoid fresh purchases on a decline below the first support. Medium-term view will turn negative only on a close below 9500.
Nifty (3342)
Nifty recorded the intra-week peak at 3401 and ended with a 131 points gain. The doji formation in the daily chart and the halt below the 200-day moving average at 3441 implies indecision in the short-term. A short-term correction can pull the index down to 3234 or 3131. Fresh longs should be avoided on a decline below the first support. Medium-term view will, however, turn negative only on a close below 3000.
Immediate targets for the current rally are 3326 and 3450. If there is a vertical break-out above 3450, next target would be 3911. However, targets for the B wave of the long-term down-move from the 6357 peak are 3680 and 4050. These could be the ceiling for the index for this calendar.
Global CuesEquity markets did not make any headway last week, but they did not cede any gains either. Most global equity indices closed with slight gains or losses. CBOE volatility index recorded a strong move below 40 to close at 36.5, the lowest closing low in the last six months. The implication of this move is that investors are beginning to believe that the worst of the bear market is behind them.
The Dow was tepid in the first three sessions of the week before retracing all the losses on Thursday. The index is however still testing the resistance at 8100. A break-out above this level will take the index to the zone between 8800 and 9500. Else it can decline towards 7500 again. S&P 500 has, however, broken above the corresponding resistance at 841 and the next target for the index is between 950 and 970.
Many of the Asian markets have put up a strong show in the rally since March. Indices such as Taiwan weighted index, Seoul Composite index and the Hang Seng have gained more than 30 per cent in the current rally. —
Reliance
There was no let-up in the bullish fervour on the RIL counter and the stock closed the week with a strong 4 per cent gain. It also held steadily above the 200-day moving average and moved past our first short-term target to an intra-week peak at Rs 1,768. RIL can move higher to Rs 1,786, Rs 1,920 or Rs 1,965 in the short-term, but negative divergences in the daily oscillators calls for caution in the short-term. Traders can buy in declines as long as RIL holds above Rs 1,600. Next support is at Rs 1,500.
The stock is already moving close to our medium-term target at Rs 1,825. A reversal from here will translate into a broad range between Rs 1,100 and Rs 1,800 for the ensuing months. Strong break beyond Rs 1,825 is needed to pull it to Rs 2,040.
SBI continued to face selling pressure at higher levels. The stock could not get past the resistance band between Rs 1,200 and Rs 1,220 indicated in our previous column.
A short-term consolidation in the range between Rs 1,050 and Rs 1,250 is possible for a few more sessions before the stock garners strength to move higher. The positive medium-term outlook will however get roiled on a close below Rs 1,000.
SBI is currently struggling to make headway and our medium-term view for the stock is neutral. Inability to move past Rs 1,250 over the next couple of weeks would imply that the stock could re-test its March lows over the medium- term. Medium-term target on a break above Rs 1,250 is Rs 1,368.
Tata Steel
Tata Steel put up a strong show in the last two trading sessions of the week to close with a whopping 16 per cent gain.
The stock has already raced to our medium-term target of Rs 250 and oscillators in the daily chart denote that the momentum continues to be strong in the short-term.
As we have been reiterating, the medium-term range for this stock is between Rs 150 and Rs 250.
A strong break beyond Rs 250 will give the next medium-term target of Rs 360.
If Tata Steel sustains above Rs 250 over the upcoming week, its short-term targets would be Rs 270 and Rs 318. Traders can buy on declines with a stop at Rs 248.
Next support would be at Rs 238 and Rs 222.
Maruti Suzuki
Maruti Suzuki recorded an intra-week peak at Rs 829 and closed with marginal gains. The 14-day relative strength index has reached the overbought zone and negative divergence is apparent in the 10-day rate of change oscillator.
The implication is that the up-trend is losing momentum. There is a strong resistance in the band between Rs 830 and Rs 850 and caution is advised as long as the stock trades below this band. Short-term supports would be at Rs 760 and Rs 712.
We retain a positive medium-term view as long as the stock trades above Rs 750. The parabolic up-move witnessed since March could take the stock towards the medium-term target of Rs 850 and Rs 950.
Infosys
Infosys moved in a range between Rs 1,350 and Rs 1,450 last week.
The stock held above the 200-day moving average though it has not cleared the resistance around Rs 1,450 yet.
The short-term trend in the stock continues to be up and it can move higher to Rs 1,475 or Rs 1,527 in the near-term. Short-term traders can hold their long positions as long it trades above Rs 1,380.
Next support for the week is at Rs 1,340.
The stock is poised at a key medium-term resistance.
A reversal from here can pull it lower towards Rs 1,000 again.
On the other hand, strong close above Rs 1,450 will give the next medium-term target at Rs 1,580
ONGC
ONGC achieved our medium-term target of Rs 920 and moved sideways thereafter. As mentioned in our previous column, target of the third wave from the Rs 637 trough is Rs 926.
The sharp up-trend from the March 6 trough can lose steam around these levels and a correction can ensue that pulls the stock lower to Rs 800 or even Rs 750. Firm break-out above Rs 960 is required to mitigate this view.
The short-term trend in ONGC is positive and short-term traders can buy on declines as long as the stock trades above Rs 850.A strong move above Rs 920 can take the stock to Rs 1005. Medium-term investors can hold the stock as long as it trades above Rs 800.
Nifty future may gain, but caution advised
Yet another fabulous week for the Nifty ended with the bulls striking back at the bears with a vengeance. The Nifty future closed the week at about 3355 points, gaining 4 per cent over its previous week's close. The Nifty April futures also ended in a premium of about 13 points over that of the spot. Open interest positions at 4.34 crore shares also suggests a higher participation. What's more, even the trading volumes remained consistently above Rs 55,000-crore mark.
Follow-up
We had advised traders to set a bear put spread strategy by buying 3300 put and selling 3000 put expecting a correction in the Nifty. But since the Nifty surged over the week, the option spread hasn't worked out in our favour.
Outlook
The Nifty future breached the 3250-mark quite confidently. As was mentioned earlier, it may now be heading for 3660, though there is resistance in between at 3450. On the other hand, if the Nifty future fails to sustain the current momentum, it will find a major support at 3250 and then at 2800. There however is minor support zone between 3060-75.
That said, we expect the Nifty future to open on a positive note and reach its first resistance at 3450. There has been a lot of hullabaloo among the market participants regarding whether the "worst" was indeed over for the markets. We feel that only a move above 4650 would warrant such a change in view, from the present bear clout to a bull one. Till such time, bears may keep striking at regular intervals to take control of the market. On that note, we feel traders should consider taking positions in the market only with a strict stop-loss in place.
Option monitor
The optimism in the market was quite visible, what with the 3900 call turning into active zone. In fact, all the calls in the range 3200-3900 remained active over the week. On the other hand, puts between 2700 and 3500 strikes were in the active zone. Interestingly, most of the puts saw steady accumulation on the long side, indicating that there still were expectations of a bear onslaught.
Volatility Index
The volatility index, however, gave out cautious signals. The index, which measures the immediate expected volatility of Nifty future, added value quite consistently. It touched an intra-day high of 50 but managed to close lower at 43.54, much above its previous week's close of 37.4. This is of significance as earlier whenever there has been a steady gain in India VIX, the market has subsequently crashed.
Recommendations
We suggest the following two strategies for the week.
Go long on Nifty future with a stop-loss at 3250. But since the stop-loss is well below the current levels, this strategy may best suit traders with a high-risk appetite only. Besides, as the results season is ahead, the markets could swing wildly in any direction.
Buy Nifty 3300 call, which closed on Thursday at Rs 140.80. However since Tuesday is a market holiday in the coming week, it could eat up time value. This means only a positive swing in the market can generate profit.
FII trend
The cumulative FII positions as a percentage of the total gross market position on the derivative segment as on April 9 stood at 35.24 per cent. They were predominantly net buyers, particularly in index futures in the F&O segment. But they have been offloading index options and stock futures. They now hold index futures worth Rs 12,540.03 crore (Rs 10,608.96 crore and stock futures worth Rs 15,872.01 crore (Rs 14,575.64 crore). Their index options were quite high at Rs 26,308.55 crore (Rs 22,952.15 crore).
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Arvind Parekh
+ 91 98432 32381
