Tuesday, October 18, 2011

EOD Analysis for 18th October and Outlook for 19th October 2011

Following weak global cues, Nifty opened with a gap down but the OI in Nifty futures was hovering around the 24.5 million mark in the morning session and as usual, another 2 million OI added with the further fall. BNF as usual was the first to take steep cuts due to the anticipated financial turmoil in the western world. Frankly, this is a lame excuse used on all bourses. The fact that Greece won't pay it's debt has been known for more than 2 years now and that is a stupid excuse to rant upon again and again. What is critical to see is whether the printing presses get activated or not - US is literally working 24 x7 to print currency and same is the case with UK now; ECB so far has refrained from doing so but the day is not far when it does
[and this is the real problem - the onus of bailouts rests only with Germany now and with inflation already much more than anticipated, it is fearful of printing more money and increasing inflation whilst a debt default will result in panic sell across all asset classes - Catch-22 situation did I read- yes indeed!]

The Euro-zone crisis will manifest itself completely only towards Feb/Mar '12 in a full blown manner IMHO.

For now 5032 survived and this was the 5th consecutive day above 5032. It is critical for bulls to retain this on closing basis tomorrow which then has potential to be the bottom upto Friday on closing basis. A close below 5032 will open Nifty for a retest of 4944-4980 levels where if the falls are not arrested, there is a danger of retesting 4880. Since 5032 has survived, we can expect one leg of short covering to at least take Nifty towards the 5092 levels and if bulls manage a close above 5092, there is still a chance of retesting 5125-5150-5177-5196; a close above 5150 will give upto another 144 points on the upside and a close below 4880 will yield upto another 144 points in the same direction.

Weakness to be confirmed when BNF stages a close below 9500 which opens BNF for retest of 9000-9250 levels. Now on a stock specific basis, although a lot of counters were badgered today, Tata Motors still managed to retain the 180+ level, MnM managed to retain the 800+ level and Infy managed to retain the 2700+ levels. This still keeps the hope of another 20-30 points each in Telco and MnM and another 50-75 points on Infy. [underlying message - refrain from blind shorting]

Still looking at 9750 as sell levels for BNF and 5092-5132 as sell levels for Nifty - as always initially with a hedge and subject to conditions given above. 2 gaps still remain pending to be filled [5177-5328 on upside] and [4751-4888] on downside


GreatGambler said...

Hi Nagraj
"Open shorts around 9750 levels on spot with a hedge for the first short and 9800-9825 for the next one."
Can you pls give an example of what hedge you would do in the above scenario ? I am still learning
Thanks for the help

reachnagraj / theknight16 said...

Please have a look at the Futures and Options thread where this has been already explained in detail