Tuesday, July 19, 2011

EOD Analysis for 19th July 2011 and Outlook for 20th July 2011

The started with OI in Nifty futures of 23.5 million; however, once the 5580 mark was breached, another million of OI came into play and once the 5608 mark was breached, the OI in Nifty futures rose to 25 million. Whilst some downside was expected today, I have to admit that what happened today was exactly opposite to what I had expected yesterday; I expected Nifty to first touch the 5608-5655 zone and then come down slowly

Nifty just needs another 2 million in OI to make a crossover of 5690 and today's trade showed that such high can be triggered within 30 minutes via algorithmic trading; it is surprising to see that despite high gold and silver prices, Nifty soared today towards the end; I had specifically advised shorting Nifty in the 5608-5655 zone and Banknifty in the 11350-11425 zone; Banknifty will find it difficult to crossover 11425 zone on EOD basis but in case other heavy weights contribute and volumes come up, Nifty may show some strength on the upside and it would be prudent to hedge the Nifty shorts created in the 5608-5655 zone with August 5700 CEs in the ratio 1:1

Broader outlook remains the same
Crucial Levels on the Downside: 5408, 5440, 5480, 5532
Crucial Levels on the Upside: 5580, 5608, 5655, 5690

The bull story can only move further with 2 consecutive closes above 5740 and probability is 1% for July series. 2 consecutive closes above 5740 will open Nifty for a retest of 5890-5944 levels but there needs to be a lot of volume which still remain a concern with weak macro-economic clues

Most of the falls may be arrested in the 5480-5532 zone and to the extent 5408 is maintained on EOD basis, the last bull party is pending; If one checks the data for 2011, 5408, 5532, 5690 have been very strong resistance points especially 5532; every time Nifty has been range bound in the 5408-5532 zone, it needs at least a dozen attempts to crossover 5532; if until 10th August we don't go below 5408 on EOD basis, it is safe to assume that the intermediate bottom is in place and the range has shifted from 5408-5532 to 5480-5650; the bull party will not be a straightforward up move; there will be some range bound sessions but just that the floor and the ceiling of the range would have surged up marginally

As of now, I would still peg the expiry target of July series in the 5608-5690 zone and the revisions will be made on the basis of conditions above. Most critical upsides can only happen after the monsoon season. Dow has a pending 5% to 7% correction from CMP while FTSE has already come down significantly from 6150 to sub 5950 levels; it won't be surprising to see 1 more leg of correction and consolidation in Nifty before resuming the long upward march.

The next crucial date for Nifty is 23rd July which may manifest itself on 22nd or 25th July;

Some medium term stock ideas (4 to 6 month time frame)
Titan - Buy in the 200-210 zone for target 250-275
Sesa Goa - Buy in 250-260 zone for target 300-320
Canara Bank - Buy at CMP for target of 625-650
JM Financial - Buy at CMP for target of 40

Some longer term stock ideas (12 to 18 month time frame)
Nanveet Publications
Arshiya Logistics

Disclosure: I have no personal holdings in any of the counters mentioned above. These are just some recommendations based on my observations of charts and one is advised to consult a personal financial adviser before taking any positions

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