Market Outlook for 16th Feb 2009

Headlines for the day

   Corporate News Headline

   NTPC is planning to bid for imported fuel-based 4,000 MW Ultra Mega Power Projects after acquiring coal properties abroad. (BS)

   RIL's gas supply of around 18 mmscd gas from KG basin D6 block to gas-based power plants in the country would increase power generation by 3,500 to 4,000 MW. (ET)

   Era Infra Engineering has bagged an order worth Rs. 675 mn from BHEL for civil construction and architectural work at a power plant in Karnataka. (ET)

   Economic and Political Headline

   With lending becoming a key area of concern amid declining industrial production, the Planning Commission said that banks have started providing more credit in the last few weeks. (BS)

   Indian Railways will invest Rs. 2.3 tn during the 11th Plan period to improve its rolling stock and increase productivity. (BS)

   Home prices in the US dropped 12%, the most on record in the fourth quarter, as foreclosures dragged down values and the recession pushed buyers out of the market. (Bloomberg) 

NIFTY FUTURES (F & O)
  Below 2927 level, expect profit booking up to 2907-2909 zone and thereafter slide may continue up to 2889-2891 zone by non-stop.

Hurdle at 2947-2949 zone. Above this zone, rally may continue up to 2956 & 2960 levels by non-stop.

Cross above 2978-2980 zone, it can zoom up to 2996-2998 zone and thereafter it will try to touch 3033-3035 zone and supply expected at around this zone and have caution.

On Negative Side, below 2846-2848 zone expect panic up to 2828-2830 zone and rebound expected at around this zone. Stop Loss at 2815-2817 zone.
  
Short-Term Investors:  
 Bullish Trend. 3 closes above 2728 level, it can zoom up to 2942 level by non-stop.

3 closes above 2942 level, it will zoom up to 3048 level by non-stop.
 

BSE SENSEX   
 False signal is likely. Traders can expect bounce.
  
Short-Term Investors:  
 Short-Term trend is Bearish and target at around 9166 level on down side.

Maintain a Stop Loss at 9725 level for your short positions too.

3 closes above 9725 level, it will zoom up to 10004 level by non-stop.
 

GLOBAL CUES & RUPEE

The Dow Jones Industrial Average closed at 7,850.41. Down by 82.35 points.

The Broader S&P 500 closed at 826.84. Down by 8.35 points.

The Nasdaq Composite Index closed at 1,534.36. Down by 7.35 points.

The partially convertible rupee <INR=IN> closed at 48.67/68 per dollar on Friday, stronger than Thursday's close of 48.85/86.

 HEALTHCARE Stocks May Fall

 

Weekly Index Outlook

Strong & Weak futures for Monday 15th Feb
This is list of 10 strong futures:
WWIL, Renuka, APIL, India Info, ACC, Jindal Steel, Shree Cem, Edu Comp, IDEA & Balrampur.
And this is list of 10 Weak Futures:
GDL, Aban, DLF, Punj Lloyd, HDIL, Yes Bank, Jindal Saw, Tulip, Omaxe & Patni Comp.
Nifty is in Up Trend.

Weekly Index Outlook

Sensex (9634.7)
Sensex started the week on an upbeat note with a 283-point rally, but it lost its way thereafter. All efforts to drum up an enthusiastic response to the forthcoming interim budget proved fruitless and the Sensex trudged along in an apathetic mood. This unresponsive attitude is probably good since there will then be lesser room for disappointment. FII activity was also muted. Volumes were nothing to write home about, in cash as well as the derivative segment. However, open interest moved higher past Rs 50,000 crore pointing towards revival in trading interest. High put call ratio points towards a circumspect stance being adopted by traders.

Sensex moved higher past the first target indicated last week to peak at 9725 on Tuesday. But it has been moving in a very tight range between 9300 and 9700 since then. This narrow move keeps the short-term up trend from the January 23 trough alive. Immediate resistance for the Sensex is around 9800. If this level is crossed there can be a foray in to the resistance band between 10,000 and 10,200.

The weekly Sensex close above the 50-day moving average is a positive. However, trend following indicators such as the oscillators are signalling that the index is losing momentum. The weekly momentum indicators are moving in neutral region, struggling to move in to the bullish zone. The implication is that investors need to stay watchful in the way ahead. These plodding moves of the Sensex have kept the wave counts unaltered. Sensex is forming a triangle since the last week of October and the E wave of this formation appears to be unfolding from January 23. According to this count, the current up-move faces hurdles at 9800 and then at the upper boundary of the triangle at 10,108. A close below 9000 will signal the end of this formation.

It is hard to envisage a blitzkrieg next week, given the tight range that the index is moving in currently. A rally past 9800 will take Sensex to 9976 or 10,240. Supports for the week would be at 9310 and then 9050. Short-term traders should desist from making fresh purchases on a decline below the second support.

Nifty (2948.3)
Nifty recorded a peak at 2957 on Tuesday and then moved sideways in a narrow band. Key resistances for the short- term are at 2970 and then at 3030. The current up-trend could extend a little further but a cluster of resistances just ahead makes a sudden reversal quite likely in the week ahead. Breakout above 3030 will take Nifty to 3110. Conversely, inability to move past 3000 will signal impending weakness and a decline to 2870 and 2790. The medium- term outlook for the Nifty remains sideways between 2200 and 3200. Investors should desist from making fresh purchases as the index nears the upper boundary of this trading range. Key medium-term support is 2760.

Global Cues
Global markets could not make any progress last week. Disappointment over the vague contours of the bank rescue package and grim economic numbers from Europe kept the lid on equity prices.

European markets were the worst affected and the DJ Euro STOXX 50 index declined 5 per cent for the week. One disconcerting point about last week's trade is the decline of Dow Jones Industrial Average below 8000. The index has closed blow this level for four consecutive sessions and a fall to the November trough at 7450 seems inevitable now.

Close above 8450 is required to mitigate the negative short-term view.

One of the strongest performers last week was Russia's RTSI Index that rose almost 20 per cent.

Shanghai Composite was the other dazzler with 7 per cent rise.

Interest appears to be re-emerging in the brow-beaten parts of the BRIC four-some. —

Maruti Suzuki

It was a strong 8 per cent surge for Maruti Suzuki last week The stock moved close to our near-term target at Rs 636 before tottering slightly. This remains the trend-deciding level for the near-term. A downward reversal from here will pull the stock down to Rs 560 or Rs 586. Conversely, a break-out beyond Rs 636 will take the stock to Rs 673. The resistance at Rs 636 is very important from a medium-term perspective too. Penetration of this resistance would pull the stock higher to Rs 750. As we have been reiterating, the area around Rs 550 is a reliable long-term support and the stock could be building a base around this zone.

Infosys

Infosys reversed lower from an intra week peak at Rs 1,325. Ten-day rate of change oscillator has declined in to the bearish zone after prolonged negative divergence. But the stock has supports at Rs 1,220 and Rs 1,160. Reversal from either of these levels would be the cue for short-term investors to initiate fresh long positions. Break-out above Rs 1300 will pave the way for a surge to Rs 1,460. We retain the medium-term range between Rs 1,060 and Rs 1,400 for Infosys. The stock has strong medium-term resistance between Rs 1,400 and Rs 1,500 and the medium-term view will turn positive only if this zone is surpassed.

Tata Steel

Tata Steel recorded a minor up-tick in the weekly chart, thanks to the strong surge on Monday. But the short-term term trend deciding level of Rs 202 has not been crossed yet.

Traders ought to stay watchful over their long positions as long as the stock remains below this level. Subsequent resistances are at Rs 212 and then Rs 225. Supports for the week are at Rs 180 and then Rs 165.The medium-term trend in Tata Steel remains sideways. However, the formation of higher peaks and troughs since January 23 augurs well for the stock. Investors can make staggered purchases every time the stock nears Rs 150.

Reliance

Reliance Industries moved in line with our expectation last week to an intra-week peak at Rs 1,414 but was unable to penetrate this level.

As explained last week, the area around Rs 1,400 is a strong resistance for the short-term. If this area is crossed, the stock can move to Rs 1,500. However, daily momentum indicators are weak and short-term traders should desist from fresh short positions on a decline below Rs 1,280.

The medium-term view for the stock is neutral. Investors ought to exercise caution since it is nearing the upper band of its medium-term range between Rs 1,000 and Rs 1,500.

SBI

SBI launched in to a surprise up-move last week and closed with 7 per cent gain.
Immediate resistances for the stock are at Rs 1,205 and then Rs 1,245.

Short-term traders can book profit on reversal from either of these levels.
However, if the rally continues, the next target would be Rs 1,350.

Supports in the week ahead would be at Rs 1,140 and then Rs 1,100. We adhere to a neutral medium-term view for the stock.

ONGC

The strong spurt in ONGC on Monday made the stock rise beyond Rs 700. But the stock continues to grapple with the resistance at Rs 736.

As explained in our last column, we retain a cautious outlook as long as the stock remains below this level. Supports for the week would be at Rs 636 and then Rs 615.The medium-term view for ONGC stays negative.

A strong push past Rs 750 would make this view positive.

The resistances to watch over the next three months are at Rs 800 and then Rs 866. The long-term outlook will turn positive only on a close above the second resistance.

Nifty future at critical stage
After weeks of being in the losing streak, the Nifty future managed an impressive turnaround, putting in a neat 3.75 gains on the table. While a bulk of the upsurge may have been helped by the squaring-off of short positions; that the week also saw fresh accumulation of Nifty futures suggests a turnaround in market sentiments too. The Nifty future now trails Nifty, which ended at 2948 points, by about six points only. That said, trading volumes continued to remain moderate at about Rs 31000 crore.

Recommendation follow-up
We had given three recommendations last week: 1) Shorting Nifty future with a stop at 2950, 2) Short straddle using 2800-strike for a maximum of two days and 3) Buying March 2500 put. All the three strategies would have ended in the negative.

Outlook
The Nifty future is at critical stage. Despite strong gains on Friday, when the Nifty future crossed its crucial resistance at 2950, albeit only intra-day, we continue to feel that Nifty future will encounter strong pressure going forward. That in spite of the strong show on Friday, Nifty future failed to close above 2950-level validates our view.

However, if Nifty future manages to close above 2950 convincingly, then it may face the next resistance at around 3050 first and then at 3250. On the other hand, if it fails to hold to the current levels and dips below 2875, then Nifty future may find a strong support at 2750.

Option monitor
Among the options, 2900 call and 2800 put shed open interest positions. Though 3000 call was very active, most of the accumulations were on the short side.

The Nifty 3100 call also witnessed short accumulations, indicating that Nifty could face strong pressure at higher levels. On other hand, there was significant accumulation of puts for strikes 2700, 2600 and 2500. Besides, the steady accumulation of options at Nifty March 2500 also suggests a downward bias for the market.

Volatility Index
India VIX or Volatility Index, which measures the immediate expected volatility, has weakened to 43.31 from the previous week's close of 50.65. However despite the fall, the volatility index managed to touch the 50-point mark many times over during intra-day trades. This suggests that some traders may still be sceptical about the current rally.

Recommendations
In the coming week, market may begin on a soft note. With expectations galore on the interim budget, the Nifty future may be subject to heightened volatility. The break-out however may set the direction for Nifty future for the ensuing weeks. Traders can consider setting a long straddle strategy. This can be initiated by buying 2900-strikes of call and puts (March), which ended last week at Rs 182.4 and Rs 142.15 respectively. While the profit in this strategy can be unlimited, the maximum loss may be limited to the premium paid. Note that this strategy can be kept open for a slightly longer period (say, more than a week). Traders with a penchant for higher risk can also consider buying Nifty March 2500 put.

FII trends
The cumulative FII positions as percentage of the total gross market position on the derivative segment as on February 12 was 33.43 per cent. The FIIs indulged in alternate bouts of buying and selling in the F&O segment. They now hold index futures worth about Rs 7,363 crore (about Rs 6,815 crore) and stock future worth about Rs 12,232 crore (about Rs 11,157 crore). Their index options jumped to about Rs 15,489 crore (about Rs 12,152 crore).

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	13-Feb-2009	1233.91	1247.06	-13.15

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	13-Feb-2009	774.71	558.34	+216.37

NIFTY & SENSEX SPOT LEVELS FOR MONDAY 15TH FEB

	2948.35	( 1.91 %)	55.30
		1	2	3
Resistance		2925.85	2958.65	2978.30
Support		2873.40	2853.75	2820.95

	9634.74		( 1.78 %)	168.91
			1	2	3
Resistance			9548.79	9631.76	9683.38
Support			9414.20	9362.58	9279.61

 

 

--

Arvind Parekh

+ 91 98432 32381

Weekly Index Outlook

Strong & Weak futures for Monday 15th Feb
This is list of 10 strong futures:
WWIL, Renuka, APIL, India Info, ACC, Jindal Steel, Shree Cem, Edu Comp, IDEA & Balrampur.
And this is list of 10 Weak Futures:
GDL, Aban, DLF, Punj Lloyd, HDIL, Yes Bank, Jindal Saw, Tulip, Omaxe & Patni Comp.
Nifty is in Up Trend.

Weekly Index Outlook

Sensex (9634.7)
Sensex started the week on an upbeat note with a 283-point rally, but it lost its way thereafter. All efforts to drum up an enthusiastic response to the forthcoming interim budget proved fruitless and the Sensex trudged along in an apathetic mood. This unresponsive attitude is probably good since there will then be lesser room for disappointment. FII activity was also muted. Volumes were nothing to write home about, in cash as well as the derivative segment. However, open interest moved higher past Rs 50,000 crore pointing towards revival in trading interest. High put call ratio points towards a circumspect stance being adopted by traders.

Sensex moved higher past the first target indicated last week to peak at 9725 on Tuesday. But it has been moving in a very tight range between 9300 and 9700 since then. This narrow move keeps the short-term up trend from the January 23 trough alive. Immediate resistance for the Sensex is around 9800. If this level is crossed there can be a foray in to the resistance band between 10,000 and 10,200.

The weekly Sensex close above the 50-day moving average is a positive. However, trend following indicators such as the oscillators are signalling that the index is losing momentum. The weekly momentum indicators are moving in neutral region, struggling to move in to the bullish zone. The implication is that investors need to stay watchful in the way ahead. These plodding moves of the Sensex have kept the wave counts unaltered. Sensex is forming a triangle since the last week of October and the E wave of this formation appears to be unfolding from January 23. According to this count, the current up-move faces hurdles at 9800 and then at the upper boundary of the triangle at 10,108. A close below 9000 will signal the end of this formation.

It is hard to envisage a blitzkrieg next week, given the tight range that the index is moving in currently. A rally past 9800 will take Sensex to 9976 or 10,240. Supports for the week would be at 9310 and then 9050. Short-term traders should desist from making fresh purchases on a decline below the second support.

Nifty (2948.3)
Nifty recorded a peak at 2957 on Tuesday and then moved sideways in a narrow band. Key resistances for the short- term are at 2970 and then at 3030. The current up-trend could extend a little further but a cluster of resistances just ahead makes a sudden reversal quite likely in the week ahead. Breakout above 3030 will take Nifty to 3110. Conversely, inability to move past 3000 will signal impending weakness and a decline to 2870 and 2790. The medium- term outlook for the Nifty remains sideways between 2200 and 3200. Investors should desist from making fresh purchases as the index nears the upper boundary of this trading range. Key medium-term support is 2760.

Global Cues
Global markets could not make any progress last week. Disappointment over the vague contours of the bank rescue package and grim economic numbers from Europe kept the lid on equity prices.

European markets were the worst affected and the DJ Euro STOXX 50 index declined 5 per cent for the week. One disconcerting point about last week's trade is the decline of Dow Jones Industrial Average below 8000. The index has closed blow this level for four consecutive sessions and a fall to the November trough at 7450 seems inevitable now.

Close above 8450 is required to mitigate the negative short-term view.

One of the strongest performers last week was Russia's RTSI Index that rose almost 20 per cent.

Shanghai Composite was the other dazzler with 7 per cent rise.

Interest appears to be re-emerging in the brow-beaten parts of the BRIC four-some. —

Maruti Suzuki

It was a strong 8 per cent surge for Maruti Suzuki last week The stock moved close to our near-term target at Rs 636 before tottering slightly. This remains the trend-deciding level for the near-term. A downward reversal from here will pull the stock down to Rs 560 or Rs 586. Conversely, a break-out beyond Rs 636 will take the stock to Rs 673. The resistance at Rs 636 is very important from a medium-term perspective too. Penetration of this resistance would pull the stock higher to Rs 750. As we have been reiterating, the area around Rs 550 is a reliable long-term support and the stock could be building a base around this zone.

Infosys

Infosys reversed lower from an intra week peak at Rs 1,325. Ten-day rate of change oscillator has declined in to the bearish zone after prolonged negative divergence. But the stock has supports at Rs 1,220 and Rs 1,160. Reversal from either of these levels would be the cue for short-term investors to initiate fresh long positions. Break-out above Rs 1300 will pave the way for a surge to Rs 1,460. We retain the medium-term range between Rs 1,060 and Rs 1,400 for Infosys. The stock has strong medium-term resistance between Rs 1,400 and Rs 1,500 and the medium-term view will turn positive only if this zone is surpassed.

Tata Steel

Tata Steel recorded a minor up-tick in the weekly chart, thanks to the strong surge on Monday. But the short-term term trend deciding level of Rs 202 has not been crossed yet.

Traders ought to stay watchful over their long positions as long as the stock remains below this level. Subsequent resistances are at Rs 212 and then Rs 225. Supports for the week are at Rs 180 and then Rs 165.The medium-term trend in Tata Steel remains sideways. However, the formation of higher peaks and troughs since January 23 augurs well for the stock. Investors can make staggered purchases every time the stock nears Rs 150.

Reliance

Reliance Industries moved in line with our expectation last week to an intra-week peak at Rs 1,414 but was unable to penetrate this level.

As explained last week, the area around Rs 1,400 is a strong resistance for the short-term. If this area is crossed, the stock can move to Rs 1,500. However, daily momentum indicators are weak and short-term traders should desist from fresh short positions on a decline below Rs 1,280.

The medium-term view for the stock is neutral. Investors ought to exercise caution since it is nearing the upper band of its medium-term range between Rs 1,000 and Rs 1,500.

SBI

SBI launched in to a surprise up-move last week and closed with 7 per cent gain.
Immediate resistances for the stock are at Rs 1,205 and then Rs 1,245.

Short-term traders can book profit on reversal from either of these levels.
However, if the rally continues, the next target would be Rs 1,350.

Supports in the week ahead would be at Rs 1,140 and then Rs 1,100. We adhere to a neutral medium-term view for the stock.

ONGC

The strong spurt in ONGC on Monday made the stock rise beyond Rs 700. But the stock continues to grapple with the resistance at Rs 736.

As explained in our last column, we retain a cautious outlook as long as the stock remains below this level. Supports for the week would be at Rs 636 and then Rs 615.The medium-term view for ONGC stays negative.

A strong push past Rs 750 would make this view positive.

The resistances to watch over the next three months are at Rs 800 and then Rs 866. The long-term outlook will turn positive only on a close above the second resistance.

Nifty future at critical stage
After weeks of being in the losing streak, the Nifty future managed an impressive turnaround, putting in a neat 3.75 gains on the table. While a bulk of the upsurge may have been helped by the squaring-off of short positions; that the week also saw fresh accumulation of Nifty futures suggests a turnaround in market sentiments too. The Nifty future now trails Nifty, which ended at 2948 points, by about six points only. That said, trading volumes continued to remain moderate at about Rs 31000 crore.

Recommendation follow-up
We had given three recommendations last week: 1) Shorting Nifty future with a stop at 2950, 2) Short straddle using 2800-strike for a maximum of two days and 3) Buying March 2500 put. All the three strategies would have ended in the negative.

Outlook
The Nifty future is at critical stage. Despite strong gains on Friday, when the Nifty future crossed its crucial resistance at 2950, albeit only intra-day, we continue to feel that Nifty future will encounter strong pressure going forward. That in spite of the strong show on Friday, Nifty future failed to close above 2950-level validates our view.

However, if Nifty future manages to close above 2950 convincingly, then it may face the next resistance at around 3050 first and then at 3250. On the other hand, if it fails to hold to the current levels and dips below 2875, then Nifty future may find a strong support at 2750.

Option monitor
Among the options, 2900 call and 2800 put shed open interest positions. Though 3000 call was very active, most of the accumulations were on the short side.

The Nifty 3100 call also witnessed short accumulations, indicating that Nifty could face strong pressure at higher levels. On other hand, there was significant accumulation of puts for strikes 2700, 2600 and 2500. Besides, the steady accumulation of options at Nifty March 2500 also suggests a downward bias for the market.

Volatility Index
India VIX or Volatility Index, which measures the immediate expected volatility, has weakened to 43.31 from the previous week's close of 50.65. However despite the fall, the volatility index managed to touch the 50-point mark many times over during intra-day trades. This suggests that some traders may still be sceptical about the current rally.

Recommendations
In the coming week, market may begin on a soft note. With expectations galore on the interim budget, the Nifty future may be subject to heightened volatility. The break-out however may set the direction for Nifty future for the ensuing weeks. Traders can consider setting a long straddle strategy. This can be initiated by buying 2900-strikes of call and puts (March), which ended last week at Rs 182.4 and Rs 142.15 respectively. While the profit in this strategy can be unlimited, the maximum loss may be limited to the premium paid. Note that this strategy can be kept open for a slightly longer period (say, more than a week). Traders with a penchant for higher risk can also consider buying Nifty March 2500 put.

FII trends
The cumulative FII positions as percentage of the total gross market position on the derivative segment as on February 12 was 33.43 per cent. The FIIs indulged in alternate bouts of buying and selling in the F&O segment. They now hold index futures worth about Rs 7,363 crore (about Rs 6,815 crore) and stock future worth about Rs 12,232 crore (about Rs 11,157 crore). Their index options jumped to about Rs 15,489 crore (about Rs 12,152 crore).

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	13-Feb-2009	1233.91	1247.06	-13.15

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	13-Feb-2009	774.71	558.34	+216.37

NIFTY & SENSEX SPOT LEVELS FOR MONDAY 15TH FEB

	2948.35	( 1.91 %)	55.30
		1	2	3
Resistance		2925.85	2958.65	2978.30
Support		2873.40	2853.75	2820.95

	9634.74		( 1.78 %)	168.91
			1	2	3
Resistance			9548.79	9631.76	9683.38
Support			9414.20	9362.58	9279.61

Trading Strategy: Set a Bear Put Spread

With the interim Budget announcement slated for Monday, the coming week promises to be high on both expectations and volatility.

The bias still appears negative regardless of the gains posted by the market in the run up to the Budget. We feel this fizz may be short-lived, unless of course the Budget announcement comes with surprise initiatives that can significantly cheer the markets up.

Given this backdrop, traders can consider setting a bear put spread for the week to benefit from any negative undertone in the market. This bear put spread can be set using Nifty February put options with strikes 3050 and 2800. You can do this by buying Nifty Feb 3050 put option (closed at Rs 139) and simultaneously selling Nifty Feb 2800 put (closed at Rs 35).

The spread will leave you with an initial debit of Rs 104 per lot, which is also the cost of setting the spread. While it is advisable to execute both the legs of the strategy simultaneously to benefit from lower margin money requirement, you can time the purchase and sale of options on Monday depending on the day's market movement.

Risk-return payoff: Essentially a low-risk and low-return strategy, this spread will deliver range-bound returns depending on the price movements of Nifty.

Maximum profit potential: The maximum profit will occur when Nifty moves below 2800. The maximum profit, however, will be limited to the difference between the two strikes minus the cost of setting the spread. In this case, the maximum profit will be Rs 146 a lot [(3050-2800) - Rs 104].

Breakeven point: The breakeven for the spread lies between the strike prices of the put options that have been transacted. In this case, it will be at 2904 points (3050 -146).

Maximum loss potential: When your spread is totally out of money i.e. when Nifty value is higher than 3050, the maximum loss that you can suffer will be limited to the money that was spent initially in setting the bear put spread i.e. Rs 104. So, in essence you will be taking a maximum risk of Rs 104 to earn a maximum profit of Rs 146 per lot.

Note that traders with a slightly less bearish view can consider setting bear put using Nifty 3050 and 2850 puts. This spread can be set for an initial debit of Rs 92 and enjoys a maximum profit potential of Rs 108. The breakeven point in this case will higher up at 2941.

When to exit? Since the maximum profit that can be earned though this strategy is limited, traders should consider booking profits and closing the positions as soon as the underlying trends below the strike price of the sold put option. On the downside, if you feel that the likelihood of the underlying moving down is low, you can consider a premature closing of positions even before it hits the maximum loss scenario.

Stock market movement seen range-bound

Consolidating now after free fall:

The capital market is expected to behave in a range-bound manner and the height it reached in 2008 is unlikely to be breached anytime soon, according to Mr Prince George, Managing Director and Chief Executive Officer, Doha Brokerage and Financial Services (DBFS).

In certain ways, what is now happening is consolidation of the market following the free fall. Any stimulus like rate cuts would only bring in temporary cheers as market participants, more specifically institutional investors and speculators, at this point of time were looking for opportunities to book profit with none having any clear-cut, long-term objectives, Mr George told Business Line.

He, however, said Indian economy had no fundamental issues to worry about. The global concerns have created a ripple effect in the domestic economy and the sudden decline in value in the global capital market has caused institutional investors to withdraw. India being a growing economy, such negative sentiments are bound to be there. What is needed is resilience and longer investments horizon. The Indian economy will surely bounce back ahead of the major developed and matured economies.

Policy initiatives
Referring to the policy initiatives by the Centre to get over the present crisis, Mr George said the first step taken by the Reserve Bank to ease money supply should be seen as a positive step. In order to increase the credit flow, the next step needed is to cut down the repo rate and the interest rate. The process has already begun with leading banks announcing a reduction in their lending rates.

On the role of foreign institutional investors, he said that it was wrong to say that the FIIs controlled the Indian stock market, though they played an important part in the directions the market took. There is good participation from the domestic institutional investors also.

To that effect, freeing up the P-notes regulation will have a positive impact. The P-note helps the foreign individuals to enter the Indian market without revealing their identity and ensures their participation. They do not come under the SEBI definition of either FII or Sub account.

Short selling
On short selling, he noted that the practice had certain negative implications, which principally came from the speculators and arbitrage position takers. Such strategy can adversely influence the market as it is mainly driven by profit-booking sentiments with no fundamental factors to support.

Short selling directly contributes to market volatility. However, the market in India is regulated responsibly within a good framework. Therefore, there is no reason to prevent short selling at this point of time, though eventually some restrictions may come.

On the stand of primary market investors in the present scenario, Mr George pointed out that India's GDP forecast was healthy at around seven per cent against the backdrop of a possible global recession. Several institutions in recent times have gone in for further reductions in GDP forecast. In an overall sense, the domestic economy will outsmart global GDP forecast by a significant margin.

With these growth expectations, well-managed corporations will certainly show steady returns and with the market valuations as they are now, it is an opportune time to increase primary investors' stake in their companies, provided they have sufficient liquidity.

Candlestick reversal patterns
There are certain candlestick patterns that give an early indication that a prevalent trend has run its course and is beginning to lose strength. Dark Cloud Cover pattern (DCC) and piercing patterns belong to this class. A DCC pattern is formed with two candles. The first candle is white and the second is black, forming the 'dark cloud' that hovers ominously, threatening the prevalent up trend. Needless to add, the DCC pattern occurs near the top of an uptrend.

The second candle in the DCC pattern gaps upward and then moves down, some way within the body of the first white candle but it does not cover the first candle entirely. If it did so, it would then get labelled as a bearish engulfing candle. The extent of penetration within the body of the first candle determines the strength of the pattern. When the second candle moves more that half-way within the body of the first , it implies that a trend reversal is imminent. Dark clouds (second black candle) that move less that half-way within the first candle can turn out to be a false alarm or minor halts within an up trend.

Dark Cloud Cover pattern

Refer the chart of Canara Bank which illustrates DCC pattern. In late September 2008, the stock encountered resistance at around Rs 230 and the uptrend was arrested with the formation of a dark cloud cover pattern. The stock reversed direction following this trend. The piercing pattern is the inverse of the DCC pattern. While the latter occurs towards the end of an up-trend, piercing patterns occur towards the end of a down trend and signal the possibility of a trend reversal from that juncture. This pattern is made up of two candles too. The first candle should be a long black candle as it would be part of the downtrend. The second candle would gap downward and then move higher well within the body of the second. Again, the extent of the penetration determines the strength of the pattern.

Piercing pattern

Refer to the chart of Reliance Infrastructure for piercing patterns. It isevident that the stock's downtrend was arrested in early July 2008 when a piercing pattern was formed. When the stock's decline resumed two months later, another piercing pattern was formed in late October 2008 that arrested this leg of the down-move.

A penetration that exceeds 50 per cent of the first candle's body should be a more reliable signal of a trend reversal.

--
Arvind Parekh
+ 91 98432 32381

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Market Outlook for 13th Feb 2009

Headlines for the day

Corporate News Headline
RIL is tying up nearly USD 6 bn to develop nine satellite discoveries in the Krishna Godavari basin. (ET)
Siemens has bagged a major order worth Rs. 2.12 bn from SAIL to provide an extra-high voltage power distribution package for the Rourkela steel plant in Orissa. (ET)
Tata Communications is planning to invest USD 430 mn in the Asia Pacific region to develop its Exchange at Singapore and to complete the TGN Intra Asia Cable system. (BS)

Economic and Political Headline
Industrial production fell 2% in December 2008—the highest year-on-year contraction in any month in 15 year, despite the stimulus package announced by the government to boost the sagging demand. (BS)
Inflation declined to 4.39% for the week ended January 31, 2009, from 5.07% the previous week. (ET)
The sales at the US retailers unexpectedly increased 1% in January, followed a 3% drop the prior month. However, such an advance may not be sustained as job losses climb. (Bloomberg)

Trading Calls 13th Feb 2009
USE STRICT Stop Loss for todays trading
Buy LITL-134 for 139with sl 131[Trade]
Buy Sunpharma-1108 above 1115 for 1160 sl 1095
Buy Tatamotors-136 above 138 for 156 with sl 134
Buy RNRL-48 above 49.5 for 55 with sl 47
Buy Powergrid-90 above 92 for 97 with sl 90

Strong & Weak futures
This is list of 10 strong futures:
WWIL, APIL, Renuka, BEML, Polaris, Shree Cem, Nagar Fert, Jindal Steel, Amtek Auto & Sesa Goa.
And this is list of 10 Weak Futures:
GDL, Aban, DLF, HDIL, Tulip, Punj Lloyd, Omaxe, Jindal Saw, Yes Bank & Tata Tea.
Nifty is in Up Trend.

NIFTY FUTURES (F & O)
Expect selling up to 2872-2874 zone for time being.
Hurdles at 2898 & 2906 levels. Above these levels, expect short covering up to 2923-2925 zone and thereafter it can jump up to 2940-2942 zone by non-stop.
Cross above 2958-2960 zone, it can zoom up to 2975-2977 zone and supply expected at around this zone and have caution.
On Negative Side, rebound expected at around 2855-2857 zone. Stop Loss at 2838-2840 zone.

Short-Term Investors:
Bullish Trend. 3 closes above 2728 level, it can zoom up to 2942 level by non-stop.

BSE SENSEX
Traders can expect selling further.

Short-Term Investors:
Short-Term trend is Bearish and target at around 9166 level on down side.
Maintain a Stop Loss at 9725 level for your short positions too.

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	12-Feb-2009	891.64	1076.96	-185.32

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	12-Feb-2009	517.12	432.75	84.37

NIFTY & SENSEX SPOT LEVELS TODAY

	2893.05	( -1.12 %)	-32.65
		1	2	3
Resistance		2925.85	2958.65	2978.30
Support		2873.40	2853.75	2820.95

	9465.83		( -1.59 %)	-152.71
			1	2	3
Resistance			9548.79	9631.76	9683.38
Support			9414.20	9362.58	9279.61

GLOBAL CUES & RUPEE
The Dow Jones Industrial Average closed at 7,932.76. Down by 6.77 points.
The Broader S&P 500 closed at 835.19. Up by 1.45 points.
The Nasdaq Composite Index closed at 1,541.71. Up by 11.21 points.
The partially convertible rupee <INR=IN> closed at 48.85/86 per dollar on yesterday, lower from its close of 48.69/70 on Wednesday.
SMALLCAP Stocks May Zoom

--
Arvind Parekh
+ 91 98432 32381

Market Outlook for 12.02.09

Headlines for the day

   Corporate News Headline

   Reliance Power received a letter of intent for the 4,000-MW Ultra Mega Power Project at Tilaiya in Jharkhand. (BS)

   ONGC´s plans for oil exploration in a national park in Rajasthan has hit a road block with the government deciding to carry out a detailed environmental impact study before granting approval. (ET)

   Corporation Bank entered into an agreement with Tata Motors for financing purchases made from the Tata group firm. (ET)

   Economic and Political Headline

   The government announced a Rs. 38 bn fund infusion into state-run lenders -- UCO Bank, Central Bank of India, and Vijaya Bank -- to soar up their capital adequacy. (ET)

   The US lawmakers agreed on a USD 789 bn economic stimulus plan that President Barack Obama said is urgently needed to keep the country from sliding into a deeper recession. (Bloomberg)

   The UK unemployment rose from 73,800 to 1.23 mn in January, threatening to further erode support for Prime Minister Gordon Brown as the recession deepens. (Bloomberg)

 

Strong & Weak  futures  
This is list of 10 strong futures:

WWIL, Renuka, Amtek Auto, BEML, Sesa Goa, Polaris, GE Ship, Ansal Infra, Nagar Fert & Maruti.

And this is list of 10  Weak Futures:

DLF, Aban, GDL, HDIL, Network 18, Jindal Saw, KPIT, Tulip,Omaxe & Bajaj Hind.
 Nifty is in Up Trend.

 

NIFTY FUTURES (F & O)
  Above 2926 level, short covering may continue up to 2949-2951 zone by non-stop.

Support at 2912-2914 zone. Below this zone, selling may continue up to 2885-2887 zone and thereafter slide may continue up to 2859-2861 zone by non-stop.

Buy if touches 2834-2836 zone. Stop Loss at 2808-2810 zone.

On Positive Side, above 2974-2976 zone it can zoom up to 3000-3002 zone and if crosses & sustains at above this zone then uptrend may continue.
  
Short-Term Investors: 
  Bullish Trend. 3 closes above 2728 level, it can zoom up to 2942 level by non-stop.

3 closes above 2942 level, it will zoom up to 3048 level by non-stop.
 

BSE SENSEX   
 False signal is likely. Traders can expect profit booking further.
  
Short-Term Investors: 
  Short-Term trend is Bullish and target at around 9678 level on upper side.

Maintain a Stop Loss at 9049 level for your long positions too.

3 closes above 9678 level, it will zoom up to 9993 level by non-stop.

 

Trading Calls 12th Feb 2009
USE STRICT Stop Loss for todays trading
Buy GNFC-61 above 62 for 75 with sl 60 [Trade]
Short HCLTech-115 for 110-105 with sl 118

Short Dr.Reddy-444 for 428 with sl 449
Short BoB-244 for 232 with sl 248

 

GLOBAL CUES & RUPEE

The Dow Jones Industrial Average closed at 7,939.53. Up by 50.65 points.

The Broader S&P 500 closed at 833.74. Up by 6.58 points.

The Nasdaq Composite Index closed at 1,530.50. Up by 5.77 points.

The partially convertible rupee <INR=IN> ended at 48.69/70 per dollar on yesterday, stronger than Tuesday's close of 48.72/73.

OIL & GAS INDEX Stocks May Fall

 

	2925.70	( -0.30 %)	-8.80
		1	2	3
Resistance		2949.60	2973.50	3009.50
Support		2889.70	2853.70	2829.80

	9618.54		( -0.30 %)	-28.93
			1	2	3
Resistance			9691.42	9764.31	9880.22
Support			9502.62	9386.71	9313.82

 

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	11-Feb-2009	903.24	938	-34.76

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	11-Feb-2009	472.96	548.23	-75.27

 

--

Arvind Parekh

+ 91 98432 32381

Market Outlook for 11.02.09

Headlines for the day

    Corporate News Headline

    Unitech has rescheduled more than three-fourths of its total debt amounting to Rs. 80 bn to tackle the slump in the real estate sector. (BS)

    Satyam Computer bagged new business in the manufacturing space by fire suppression technologies and advanced building support systems major. (BS)

    Tata Power has signed an MoU with Hirco to provide power supply and distribution solutions to residents and tenants of Hirco's Panvel special economic zone. (BS)

 

    Economic and Political Headline

    The government has decided to borrow an additional Rs. 460 bn between February 20 and March 20 to overcome the stress on government finances due to lower revenue collections and higher spending. (BS)

    The US President Barack Obama signalled that he would be open to seeking an expansion of the USD 700 bn financial-rescue program if the plan fails to restore stability to the US banking system. (Bloomberg)

    Treasury Secretary Timothy Geithner pledged the US government financing for as much as USD 2 tn of efforts to spur new lending and address banks' toxic assets, seeking to end the credit crunch hobbling the economy. (Bloomberg)

 

NIFTY FUTURES (F & O)
  Below 2903 level, expect profit booking up to 2873-2875 zone and thereafter slide may continue up to 2855-2857 zone by non-stop.

Hurdles at 2938 & 2941 levels. Above these levels, rally may continue up to 2950-2952 zone and thereafter it can jump up to 2968-2970 zone.

Cross above 2977-2979 zone, it can zoom up to 2995-2997 zone and supply expected at around this zone and have caution.

On Negative Side, rebound expected at around 2846-2848 zone. Stop Loss at 2828-2830 zone.
  
Short-Term Investors:  
 Bullish Trend. 3 closes above 2728 level, it can zoom up to 2942 level by non-stop.
3 closes above 2942 level, it will zoom up to 3048 level by non-stop.
 

BSE SENSEX  
  Traders can expect bounce.
  
Short-Term Investors: 
  Short-Term trend is Bullish and target at around 9678 level on upper side.

Maintain a Stop Loss at 9049 level for your long positions too.

3 closes above 9678 level, it will zoom up to 9993 level by non-stop.

 

Strong & Weak  futures  
This is list of 10 strong futures:

WWIL, Sesa Goa, GE Ship, Jindal Steel, BEML, Grasim, Polaris, BEL, Reliance & Praj Ind.

And this is list of 10  Weak Futures:

Aban, DLF, GDL, HDIL, Wel Guj, Network 18, Pantaloon, Punj Lloyd, Bajaj Hind & KPIT.
 Nifty is in Up Trend.

  

GLOBAL CUES & RUPEE

The Dow Jones Industrial Average closed at 7,888.88. Down by 381.99 points.

The Broader S&P 500 closed at 827.16. Down by 42.73 points.

The Nasdaq Composite Index closed at 1,524.73. Down by 66.83 points.

The partially convertible rupee <INR=IN> closed at 48.72/73 per dollar on yesterday, weaker than its previous close of 48.57/58.

Avoid Short Selling in METAL INDEX Stocks

 

NIFTY & SENSEX SPOT LEVELS TODAY

	2934.50	( 0.50 %)	14.60
		1	2	3
Resistance		2964.02	2993.53	3029.67
Support		2898.37	2862.23	2832.72

	9647.47		( 0.66 %)	63.58
			1	2	3
Resistance			9744.73	9841.98	9959.10
Support			9530.36	9413.24	9315.99

 

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	10-Feb-2009	1688.12	1319.16	368.96

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	10-Feb-2009	471.52	588.51	-116.99

--

Arvind Parekh

+ 91 98432 32381

Market Outlook for 10th Feb 2009

Headlines for the day

   Corporate News Headline

   BHEL bagged Rs. 70 bn contracts from various customers for the supply and installation of main plant equipment for thermal power projects. (ET)

   Nagarjuna Construction Company has bagged four new orders aggregating Rs. 7.12 bn from the Mumbai Metropolitan Region Development Authority. (BS)

   BEML has bagged the order for supplying 150 coaches valued at around Rs. 16.72 bn from the Bangalore Metro Rail corporation Ltd. (BS)

 

   Economic and Political Headline

   Given the impact of the global financial meltdown, the government projected Indian economic growth to slow down to 7.1% in the current fiscal against 9% in 2007-08. (BS)

   Treasury Secretary Timothy Geithner delayed the announcement of the Obama administration's financial-recovery plan as officials debated proposals aimed at addressing the toxic debt clogging banks' balance sheets. (Bloomberg)

   The US Treasury Secretary Timothy Geithner urged finance ministers from the G7 economies to act "promptly to restore health to the global economy. (Bloomberg)

 

Strong & Weak  futures 
 This is list of 10 strong futures:

WWIL, Sesa Goa, GE Ship, Jindal Steel, GMR Infra, Grasim, SAIL, GT Offshore, Balram Chini & Bhushan Steel.

And this is list of 10  Weak Futures:

DLF, Aban, HDIL, GDL, Wel Guj, Punj Lloyd, Divis Lab, Edu Comp, Orchid Chem & Tulip.
 Nifty is in Up Trend.

 

NIFTY FUTURES (F & O)
  Below 2883 level, expect profit booking up to 2842-2844 zone and thereafter slide may continue up to 2804-2806 zone by non-stop.

Hurdle at 2921 level. Above this level, rally may continue up to 2928-2930 zone by non-stop.

Cross above 2966-2968 zone, it can zoom up to 3004-3006 zone and thereafter it can touch 3030-3032 zone and supply expected at around this zone.

On Negative Side, below 2766-2768 zone expect panic up to 2728-2730 zone and buying can be done at around this zone. Stop Loss at 2703-2705 zone.
  
Short-Term Investors:  
 Bullish Trend. 3 closes above 2728 level, it can zoom up to 2942 level by non-stop.

 

BSE SENSEX   
 Traders can expect bounce.
  
Short-Term Investors:  
 Short-Term trend is Bullish and target at around 9678 level on upper side.

Maintain a Stop Loss at 9049 level for your long positions too.
 

Trading Calls 10th Feb 2009
USE STRICT Stop Loss for todays trading
Buy BEML-370 for 385 with sl 365 [Trading]
Buy GMRinfra-82 for 88 with sl 79
 
Buy ONGC-724 for 735 with sl 720
Buy RIL-1389 for 1426 with sl 1375
 
Buy SAIL-89 for 95-98 with sl 87

 

GLOBAL CUES & RUPEE

The Dow Jones Industrial Average closed at 8,270.87. Down by 9.72 points.

The Broader S&P 500 closed at 869.89. Up by 1.29 points.

The Nasdaq Composite Index closed at 1,591.56. Down by 0.15 points.

The partially convertible rupee <INR=IN> closed at 48.57/58 per dollar on yesterday, stronger than its previous close of 48.67/68.

 

NIFTY & SESEX SPOT LEVELS FOR TODAY

	2919.90	( 2.70 %)	76.80
		1	2	3
Resistance		2951.05	2982.20	3037.65
Support		2864.45	2809.00	2777.85

	9583.89		( 3.04 %)	283.03
			1	2	3
Resistance			9680.56	9777.22	9952.89
Support			9408.23	9232.56	9135.90

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	09-Feb-2009	1290.27	1004.88	285.39

 

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	09-Feb-2009	650.51	696.49	-45.98

--

Arvind Parekh

+ 91 98432 32381

Weekly Market Outlook

NIFTY FUTURES (F & O)
Above 2852 level, rally may continue up to 2871-2873 zone by non-stop.Support at 2819-2821 zone.
Below this zone, expect profit booking up to 2798-2800 zone and thereafter slide may continue up to 2779-2781 zone by non-stop.
Below 2723-2725 zone, expect panic up to 2704-2706 zone and buying can be done at around this zone. Stop Loss at 2679-2681 zone.
On Positive Side, above 2889-2891 zone it can zoom up to 2902-2904 zone and if crosses & sustains at above this zone then uptrend may continue.

BSE SENSEX
Traders can expect rally further.

Short-Term Investors:
Short-Term trend is Bullish and target at around 9678 level on upper side.
Maintain a Stop Loss at 9049 level for your long positions too.

GLOBAL CUES & RUPEE
The Dow Jones Industrial Average closed at 8,280.59. Up by 217.52 points.
The Broader S&P 500 closed at 868.60. Up by 22.75 points.
The Nasdaq Composite Index closed at 1,591.71. Up by 45.47 points.
The partially convertible rupee ended at 48.67/68 per dollar on Friday, stronger than from Thursday's close of 48.77/78.
SENSEX Stocks May Zoom

Headlines for the day
Corporate News Headline
RIL will take delivery of three deepwater drilling rigs starting this year as the company begins producing gas in the Bay of Bengal that may more than double the nation’s output. (Bloomberg)
Essar Steel is planning to raise production capacity to 25 MT per annum investing Rs. 178 bn to put up a 6 MTPA mega steel plant in Karnataka. (ET)
Hindustan Petroleum Corporation has decided to triple crude oil import from Iran while reducing supplies from Iraq next fiscal. (BS)
Economic and Political Headline
The government assured that it would look at "everything" to push the industrial growth impacted by global downturn. (ET)
Exporters finding it difficult to access foreign currency loans need no longer despair, as the Reserve Bank has raised the interest rate ceiling at which banks can raise export credit in the global market. (ET)
The UK manufacturing fell 2.2% in December from the previous month, the worst streak of contraction in almost three decades, and individual insolvencies rose 8.2% in the fourth quarter as the recession deepened. (Bloomberg)

Weekly Index Outlook


Sensex (9424.2)
Indian equities turned irresolute once more and wavered in a narrow range last week. Bulls warded off a further decline with talks of the goodies that might be doled out in the forthcoming stimulus packages in the US and India. But they could not succeed in luring wary investors back to the markets.

Sensex ended the week with marginal gains. Trading was extremely lacklustre last week as news-flow dried up. Volumes were extremely low in derivatives segment as well since traders are getting flummoxed by the whipsawing prices. Open interest is however creeping higher some positions are being taken ahead of the interim budget announcement.

It was status quo ante in Sensex last week as it neither moved higher nor lower but plodded sideways in a range between 9000 and 9400 instead. The positive divergences in the weekly oscillators continue to lend hope of the recovery extending further. The 10-day rate of change oscillator has moved in to the positive zone and the 14-dayrelative strength index is at 50 implying that the short-term outlook is positive.

The wave counts have not under-gone any change either. The short-term up trend from January 23 trough can have one more leg higher that takes the index to 9516 or 9824. The rally can halt at either of these levels and the down trend can resume. If the index gets past these resistances, the zone between 10000 and 10200 will act as the next impediment.

It is always difficult to decipher a sideways moving market as the traders would have discovered the hard way over the past two weeks. As mentioned last week, the fifth leg of a triangle is being formed since the last week of January. This formation can be followed by an X and another three or five wave formation. Such a move will keep the index vacillating between 8000 and 11000 for a few months. Even if the down-trend from the January 2008 peak resumes, it could halt between7500 and 8500.

The index could move higher to 9516 or 9824 in the week ahead. If the index is unable to get past the first resistance, it would mean that it can move down to 8650 or 8380. Traders can hold their longs as long as Sensex trades above 8950.

Nifty (2843.1)
Nifty too moved in a sideways range between 2750 and 2870 last week. The short-term up trend from 2661 can continue to take the index to2884 or 2967. The index can reverse lower from either of these levels. If the rally continues, Nifty will test the resistance band between 3070 and 3090. Conversely, a shaky start to the week that prevents the index from moving past 2900 will portend a decline to 2576. Supports for the week are at 2760 and 2660. Traders can hold their long positions as long as the index trades above the first support. The medium-term trend in the index is indecisive and a sideways move between 2500 and 3000 seems possible in this period. Global Cues

There was a strong rally in global equities that made most markets close with hefty gains. Volatility retreated after a sharp spike in the early part of the week. CBOE volatility index declined after recording a high of 49.5 on Monday. The over-200 points spurt in DJIA on Friday took the index well above the critical 8000 level. But the resistance zone between 8400 and 8500 needs to be surpassed to instill confidence that this rally can sustain. Latin American indices such as Brazil's Bovespa and Chile's IPSA recorded a fresh high for 2009 last week. European indices such as CAC, DAX, and FTSE gained between 3 to 5 per cent last week.

Chinese equities too shook off the lethargy to make new 2009 highs.

CRB index that tracks commodity movement stayed around the 360 level though sharp moves were witnessed in different commodities. Aluminium rebounded sharply after the breath-taking decline recorded over the last three months. Gold is hovering around the medium-term trend deciding level at $900. A reversal from here will cause a decline to $830 or $800. An upward break-out would give the next target at $988. —

Maruti

Maruti Udyog reversed lower from the short-term resistance at Rs 607 indicated in our last column. Key short-term support for the stock is Rs 545 and traders can play long as long as the stock trades above this level. A reversal above this level will pull the stock higher towards Rs 636. Strong medium-term resistance exists at Rs 636 where the 200-daymoving average is poised. Traders can initiate fresh shorts on a failure to surpass this level. However, positive divergences in weekly oscillators imply that the stock can trudge higher towards the next target at Rs 750. Stop-loss for medium-term investors can be at Rs 506.Reliance

It was a one-day-up-one-day-down kind of a week for Reliance Industries. The stock moved in a narrow band before ending with a meagre Rs 17 weekly gain. There can be one more spurt to Rs 1,364 or Rs 1,405. But the area around Rs 1,400 is a strong resistance that can derail any rally. Short-term traders can hold their longs with a stop at Rs 1,250. Next short-term support is at Rs 1,200.We had indicated that a symmetric triangle is being formed since the last week of October. The stock has not broken out beyond the upper boundary of this triangle yet. Medium-term view will turn positive only on a close above Rs 1,500.

Tata Steel

Tata Steel recorded an intra-week low at Rs 167.7 before reversing higher to recoup all the losses. The short-term trend in the stock is down since the peak at Rs 260. This decline can continue to take the stock down to Rs 146 or Rs 129. The near-term view will stay negative as long as it trades below Rs 202. Subsequent target is Rs 225. We retain a neutral medium-term view for Tata Steel.

This view will turn negative only on a firm close below Rs 146. Another upward reversal from the previous trough at Rs 146 will make the stock move in the range between Rs 140 and Rs 250 for a few more months.

SBI

SBI reversed lower after the sharp spurt on Monday to end the week with 3 per cent loss. The near-term trend in the stock is weak and it can decline to Rs 1,030 or Rs 990 in this period.
The 200-day moving average at Rs 1,180 will act as a strong short-term hurdle.

The near-term view will turn positive only on a close above Rs 1,200.The medium-term view for SBI remains neutral as long as it remains in the band between Rs 1,000 and Rs 1,400.
Since Rs 1,000 is also a long-term support, investors with a long-term perspective can bottom-fish around this zone.

ONGC

ONGC made a half-hearted attempt to move beyond the short-term trading range that had been shackling it down over the past three weeks.
We need a strong surge beyond Rs 660 to propel it towards the next barrier at Rs 736. A cautious outlook is maintained for the short-term as long as the stock remains below this level.
The stock will get support at Rs 642 and Rs 616 in the week ahead.
We maintain a negative medium-term view for the stock as long as it trades below Rs 750. A close above Rs 750 would pave the way for a rally to Rs 810.

Strong & Weak futures
This is list of 10 strong futures:
WWIL, Jindal Steel, Grasim, GE Ship, GT Offshore, Neyveli Lig, SAIL, Polaris, Balram Chini & ACC.
And this is list of 10 Weak Futures:
DLF, Edu Comp, Aban, Wel Guj, Punj Lloyd, Divis Lab, GDL, Gitanjali, Tulip & Auro Pharma.
Nifty is in Up Trend.

NIFTY & SENSEX LEVELS FOR 9TH FEB 2009

	2843.10	( 2.27 %)	63.05
		1	2	3
Resistance		2870.85	2898.60	2944.70
Support		2797.00	2750.90	2723.15

	9300.86		( 2.31 %)	209.98
			1	2	3
Resistance			9361.96	9423.07	9524.75
Support			9199.17	9097.49	9036.38

FUNDS DATA

FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
FII	06-Feb-2009	1273.17	1155.94	117.23

DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores)
Category	Date	Buy Value	Sell Value	Net Value
DII	06-Feb-2009	518.2	386.53	131.67

Bullish and bearish engulfing patterns

There are few candlestick patterns that give a fairly accurate warning about an impending reversal in prices. Bullish and bearish engulfing patterns belong to this class of candlestick patterns.
The ease with which they can be identified also contributes to their popularity and wide usage. To form the bullish and bearish engulfing patterns, what is needed is a pair of candles.
A bullish engulfing candle occurs following a significant downtrend when a large white candlestick's body absolutely covers a smaller black candlestick formed in the previous session.
It is enough if the body of the first candle is covered or engulfed by the second candle. It is not imperative that the shadows of the previous candle are covered.
This pattern is more successful when it is formed in the oversold area that occurs at the end of an extensive downtrend.

The larger the candle that is engulfed, the more effective the reversal signal is. Since the second candle is formed when the price opens lower that the previous day's close and closes strongly above it, it implies that the investor sentiment is turning bullish.

Let us illustrate bullish engulfing pattern with an example. Refer to the Bank of India chart below. The stock was on downtrend from mid-May to early-July 2008 low.
After forming a large bullish engulfing candlestick pattern at around Rs 200, the downtrend got arrested. Subsequently, the stock began to rally higher.

A bearish engulfing candle occurs towards the end of a significant up trend. When the body of a large black candlestick completely covers a smaller white candlestick's body, such a pattern is known a bullish engulfing pattern.
This pattern is more successful when it is formed in the overbought area that appears at the end of an prolonged uptrend.
Chennai Petroleum's chart represents bearish engulfing candlestick pattern. After finding support at around Rs 245 in mid-March 2008, the stock rallied up to Rs 400 levels.
However, after reaching an overbought level, the stock reversed direction forming a bearish engulfing candlestick pattern.
There was a change in investor sentiment at that peak which was indicated by the black engulfing candle. Later on, the stock's decline prolonged and it reached Rs 245.

Time spreads: Trade set-up for volatility bets
Many option traders lose on time spreads even though the underlying moves in the direction required of the set up. —

An options trader who recently set up put time spread lost despite the S&P CNX Nifty declining in value. We found that many options traders appear to be grappling with the following question regarding time spreads: Why are long spreads not profitable even though the underlying security moves in the required direction?

This article discusses the time spread and explains how the spread moves due to change in volatility and change in the time value.

It shows that the set up is optimal for traders who want to bet on volatility.

Trade set up
Suppose a trader has a neutral view on the S&P CNX Nifty but expects the volatility to explode. The trader could set up long time spreads (short spreads for imploding volatility) because they are also a bet on volatility.
We will assume that the trader prefers at-the-money (ATM) puts. The reason is that more traders currently hold a negative view on the market.
Besides, ATM options are more sensitive to change in volatility than in-the-money (ITM) or out-of-the-money (OTM) options.
The trader buys March 2800 puts and sells the February 2800 puts for a net debit of 65 points (Thursday prices) when the spot index is 2775.
How would the spread behave if the volatility moves up from 50 to 55 per cent by February 19, but the Nifty remains at 2775?

The March puts would be worth 190 points and the February puts would be 95 points. The trader could close the position for 95 points net.
With an initial debit of 65 points, the position would generate 30 points not including brokerage and slippage costs.

But what if the trader's view on volatility turns wrong? Suppose volatility declines to 40 per cent, the March 2800 puts would fetch 140 points on February 19, while the February contract would be worth 75 points.
The position could be, therefore, closed for 65 points. This leaves the trader with no profit on the position.
But why is the trade set-up considered more a bet on volatility than a view on the underlying?

Volatility Vs Time value
If the Nifty declines to 2650 by February 19 with no sizable change in volatility, the March 2800 puts would be worth 240 points and the February puts 170 points. With the initial debit of 65 points, the trader would be left with just 5 points profit.

Importantly, the 125 points decline on the Nifty would not be enough for spread to become profitable. The reason is that when Nifty declines, the near-month contract moves faster than the next-month contract. This can be understood intuitively.

Next-month ATM puts carry higher value than the near-month contracts. When the underlying declines in value after 14 days, the next-month contract loses more time value.
And this reduces the gain due to the ATM option becoming ITM.
The opposite is true with volatility - longer the maturity, greater the sensitivity of the option to change in volatility.

The next-month contract, therefore, rises faster than the near-month option when volatility increases from 50 to 55 per cent.
Traders can best appreciate time spreads when opposing factors- loss in time value and increase in volatility — act simultaneously on the position.

Suppose Nifty declines to 2650 on February 19 and the volatility jumps from 50 to 55 per cent. With the February 2800 puts at 96 points and the March puts at 191 points, the trader can close the position for 95 points. The initial debit of 65 points would mean that the position would carry 30 points profit.

An increase in volatility by 5 percentage points, thus, changes the position from a gain of 5 to 30 points.

Conclusion
Traders should appreciate the fact that time spreads are different from all other spreads, as time value and volatility have opposing effects on the position. It is, therefore, important for a trader to have a view on volatility before setting up the spread.

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Arvind Parekh
+ 91 98432 32381