Sunday, August 16, 2009

Weekly Market Outlook 17th-21st Aug 2009 >>Download the Latest Version of PIB 5.0 PowerIndiabulls Software (file attached)

DOWNLOAD THE LATEST VERSION OF PIB 5.0 POWERINDIABULLS SOFTWARE (file attached) WITH THE ADDITIONAL INTRADAY FEATURE IN FUTURES SEGMENT!
 
 
Strong & Weak  futures  
This is list of 10 strong futures:
Jindal Saw, FSL, Patni, Tata Motors, HCL Tech, Bharat Forge, Bhushan Steel, Aurobindo Pharma, HDIL & Cummins India.
And this is list of 10 Weak futures:
Union Bank Of India, Chambal Fert, Divi'S Lab, Suzlon, Federal Bank, Colpal, IOB, Nagarjun Fertil, Dabur India & Hind Uni Lvr.
Nifty is sideways
 
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 14-Aug-2009 1535.22 1661.32 -126.1
DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category Date Buy Value Sell Value Net Value
DII 14-Aug-2009 1220.88 777.14 +443.74
 
NIFTY SPOT LEVELS FOR 17TH AUG 2009
NSE Nifty Index   4580.05 ( -0.54 %) -24.95       
  1 2 3
Resistance 4612.92 4645.78   4672.57  
Support 4553.27 4526.48 4493.62

BSE Sensex  15411.63 ( -0.69 %) -106.86     
  1 2 3
Resistance 15508.86 15606.10 15676.72
Support 15341.00 15270.38 15173.14
 Index Outlook: Market clutching at straws
 
Sensex (15,411.6)
Even as the looming drought and swine-flu cast a cloud on the proceedings, market participants tried frantically to find a silver lining in the draft tax code and in Ben Bernanke's statement that the US economy appears to be "levelling out". The Sensex closed the torrid week with a modest 251 points gain.

Many of the leading developed market benchmarks have reached critical resistances. With the liquidity-prop turning as whimsical as the rains, it will be interesting to see how the next two weeks pan out for the equity markets. Provisional data released by BSE shows that FIIs were net sellers on all days except Thursday. Volumes were subdued even as the third and fourth-rung stocks perked up, which is a sure sign of an overstretched market.

If we consider the monthly chart of Sensex, the index has gained only 5 per cent from the closing level of June. In other words, the index has been biding its time in a range over the last two and half months. That this move is taking place just below the critical intermediate term resistance of 16,200 calls for caution since this occurs at 61.8 per cent retracement of the slide from January 2008 high. The 10-month rate of change oscillator is also poised at a level last recorded in December 2007 implying that prices have moved too fast.

Another point of concern is the buying fervour witnessed in our bourses over the last two and half months from both domestic and overseas investors. A reversal from these levels can lead to a flurry of profit booking that can exacerbate the decline. A weekly close beyond 16,200 would however tilt the scales in favour of the bulls and the sideways move discussed above would then be labelled as a consolidation phase.

The short-term trend is down since the recent peak of 15,940. The downward reversal from 15,545 last week reinforces the negative short-term view as does the 10-day ROC's decline in to the negative zone. We maintain a neutral medium-term view with the possibility of a move between 13,000 and 16,000 for a few more weeks.

Decline below 14,244 will make the Sensex head towards the medium-term support zone between 13,000 and 13,200. Long-term investors however need not fret unless there is a weekly close below 13,000.

The week ahead promises to be choppy. The Sensex can decline to 14,741 or 14,244 in the near-term. Short-term investors can hold their long positions as long the index holds above the second support. The short-term trend will turn positive if there is a close above 15,600 in the early part of the week. Upward targets would then be 16,002, 16,179 and 16,421.

Nifty (4,580)

The Nifty declined to an intra-week trough of 4,359 before ending with 98-point gain. The 10-week ROC's decline into the negative zone is a cause for concern and signals a possible termination of the medium term up-trend. We will, however, maintain a neutral view for the medium-term with a possible move between 3,900 and 4,700 in this period.

Long-term investors need not worry as long as the Nifty holds above 3,900.

The short-term trend in the index is down and it can decline to 4,389 or 4,246 in the near-term.

Fresh longs should not be initiated on a decline below the second support since that would signal an impending move to 3,900 again.

The negative bearish bias will however be mitigated on a close above 4,600 early next week. Subsequent targets are 4,731 and 4,861.

Global Cues
The going became slightly bumpy for global equities last week with many of the leading benchmark indices closing with losses. All the three major European indices, FTSE, DAX and CAC halted the rally witnessed over the past month. CBOE VIX spiked to 26.9 on Tuesday but closed the week closer to its lower boundary signalling that investors continue to be sanguine.

The Dow moved in an extremely narrow band between 9,200 and 9,400 before ending the week slightly in the red.

The sideways move witnessed over the last two weeks has resulted in a significant deterioration of the momentum and opens the possibility of a rounding top under formation.

ince the first target of the third leg from 6,469 low occurs at 9,575 and the index is also testing 38.2 per cent retracement of the entire slide from October 2007 peak, a significant intermediate peak is possible over the next two weeks. S&P 500 halted at 1013 last week that is exactly 38.2 per cent retracement of the previous down-move. The magic and precision of Fibonacci once again!

Many of the Asian markets were however gung-ho and indices such as Jakarta Composite, Philippine's PSE Composite, Seoul Composite Index, Thailand's SET and so on closed at new 2009 highs. Shanghai Composite Index took it on the chin for the second consecutive week. This index has lost about 7 per cent in a couple of weeks.

Commodity prices have also reached critical resistance levels. The Reuters CRB Index is once again testing the peak of 430. If this level is breached, the index can proceed towards 445.

Reliance (Rs 2,034.3)

RIL witnessed a volatile trading week and closed with Rs 38 gain. The stock has been in a narrow range between Rs 1,900 and Rs 2,100 over the last four weeks and there is a possibility of an upward break-out that takes the stock to Rs 2,200. The medium-term trend in the stock is down since the peak formed on May 22 and we continue to advise caution as long as the stock trades below Rs 2,200.

Reversal below this level can take the stock to Rs 1,645 or Rs 1,530.

The near-term trend in the stock is however up and it can attempt to move higher to Rs 2,123 or Rs 2,200. Fresh purchases should be avoided if RIL fails to close above Rs 2050 in the early part of next week.

State Bank of India (Rs 1,797.4)

The strong rally on Thursday helped SBI close the week with strong 3 per cent gains. The short-term trend has turned positive with this move and the stock can move higher to Rs 1,902 or Rs 2,045 in the near-term. Short-term traders can buy in declines as long as the stock holds above Rs 1,670. Next support is at Rs 1,620.

The key intermediate term resistance in the band between Rs 1,900 and Rs 2,000 will, however, continue to act as a strong impediment in the medium-term. This zone needs to be cleared to pave the way for a move to its previous peak at Rs 2,395.

Tata Steel (Rs 469.7)

Tata Steel declined to an intra-week low of Rs 420 before reversing to close with marginal gains. The hammer pattern in the weekly candlestick chart implies strength in the short-term and the stock can move higher towards Rs 490 or Rs 520 in this period.

The stock has, however, made two unsuccessful attempts to move above Rs 490 and short-term investors should therefore initiate fresh purchases only on a close above Rs 490. Short-term supports are at Rs 420 and Rs 390.

We however retain a neutral medium-term view for the stock and expect it to move in a range between Rs 320 and Rs 500. The resistance at Rs 500 needs to be crossed strongly to signal an impending move to Rs 557 or Rs 650.

Infosys (Rs 2,039.8)

Infosys too moved in a band between Rs 2,000 and Rs 2,100 resulting in a star formation in the weekly candlestick chart, denoting indecisiveness. The narrow move witnessed over the last two weeks is forming a rounding top formation that is a reversal pattern. Lower volumes and weakness in the daily moving average convergence divergence oscillator too indicate that there can be a decline in the short-term to Rs 1,927 or Rs 1,870. Short-term traders can hold the stock as long as it trades above Rs 2,000.

Medium-term view however remains positive. Break-out above Rs 2,100 will take Infosys to its previous all-time high.

ONGC (Rs 1,220.2)

The strong close of Rs 55 in ONGC on Friday made the stock close above the resistance level of Rs 1,200. If the stock manages to hold above this level early next week, it will signal an impending rally towards Rs 1,356.

But decline below Rs 1,200 will pull the stock down to Rs 1,120 or Rs 1,065 again. —

 
Stochastic oscillator
Stochastic oscillator was developed by George C. Lane in the late 1950s. It is based on the premise that as prices increase, closing prices tend to be closer to the upper boundary of the price range over a given time span.

On the other hand, in a downtrend the closing price tends to be near the lower boundary of the range over a give period.

Two lines are used in plotting the stochastic oscillator, the %K line and the %D line. %K line determines where the closing price is positioned in relation to the range of a given time period and can be calculated using the following formula,

%K = 100[(C-L14)/ (H14-L14)]

Where C is the latest close, L 14 is the lowest low for the last 14 periods and H14 is the highest high for the same 14 periods. 14 periods can represent days, weeks or months. The time period more commonly used for this indicator is 14 but it can be varied according to the need of the analyst.

The % D, second line of the stochastic is a three period simple moving average of the %K line known as fast stochastics.

The % sign placed along with the name of the line signifies that it is measured on a percentage basis on a range of 0 to 100.

When the reading is very high over 80, the closing price would be near the top of the range, whereas if the reading is low below 20 it is near the lower end of the range.

This oscillator gives reliable and fast signals and hence is quite popular among traders. Interpretation of this oscillator along with illustrations will be carried in the next column.

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Arvind Parekh
+ 91 98432 32381