Sunday, October 16, 2011

Global Markets Update - Special Coverage For Indian Bourses16th October 2011

On Nifty, The move upto 4950-5032 was very much anticipated but beyond that, there have been a couple of googlies that forced some of us to go back to the drawing board.

Now some autopsy as to why I got foxed with some stock specific action

1] INFY: We could not see beyond 2700 for this counter [because a close above 2700 would be a crucial game changer with possibly another century of points before heading south which seemed improbable] especially with so much aggressive Put Writing that took place at 2600-2700 levels

Reality: INFY made 2 attempts to cross over 2700 and on 2nd attempt, made the half century beyond 2700 in a jiffy! All Short Puts ran for cover and now this counter will make that desperate attempt to cross-over 2800 and the bearish stance [we are very sure of the bearish outlook unfolding soon] will be confirmed with a close below 2650 - until then one should not jump for shorts or Puts on this counter

2] RIL: Anticipated a rise towards 825 with a close above 750 but could not see beyond that. Now weakness will only be confirmed with a close below 775 and until then one should wait and avoid jumping on shorts here

3] LnT: There was a counter-trend rally towards 1375 pending but the short-covering rally went far beyond that. I was keenly looking at behaviour of 1350 / 1400 Call Options on this counter and saw a lot of aggressive call options being written here [looking at the rear view mirror, seems like that was Short Calls running for cover rather than fresh call options being written]

4] Tata Motors: This is one of the biggest failures in anticipating the counter-trend moves - so damn focussed I was in observing the behaviour of 150/160 Put Options behaviour because I was pretty sure that the counter-trend move won't go past 170 odd levels. There was Put Writing on-going here and with 2 googlies down already within 2 sessions, went a little further ahead to see what was happening at 190 Put Option and the same aggressive Put Writing came through over there that made me vary of some more steam here.

Our team has never staked a claim to fame nor has run out when something went beyond what we anticipated. We are only humans, prone to errors and when the moves fox us, we are upright in admitting that we are wrong at this point of time and provide the SLs [and at least fortunately for us, we adhere to our SLs]

Now coming back to the broader outlook, the bearish stance prevails. As mentioned on Friday. 3 consecutive closes above 5032 is pretty significant for Bulls and they now need 1 close above 5150 to stay in the game a little longer. A close above 5150 has potential to go all the way to fill that pending gap towards 5328 before reversing direction. Now only a close below 4980 will give first hint of weakness and 4880 will confirm the same.

Looking at the option chain for Deep ITM Puts and Calls on the NSE website, the pivot point is showing up at 3800 but IMHO, the deep correction pending that is expected to take toll on the bourses should not go below 4550 [but a weekly close below 4550 will give a retest of 4200-4400 levels in the 3rd week of November as per a critical pivot time analysis] The upside is capped at 5532 and it remains to be seen whether this manifests before or after Diwali - taking hedged positions is critical and as I have always said - cash continues to be king and we are coming to a stage where some counters are beginning to look attractive

In the auto-ancillary space, would be looking to enter Apollo Tyres at sub-50 and sub-40 levels with a 12 to 18 month time horizon; Now that Hangseng Bees are also available, would look to add some units in my DP account when Hang Seng starts trading in the range 12k to 15k [the current bounce pegs upside at 19500 on Hang Seng spot] BankBees can be systematically added in the range 7800-8800 on BNF spot and of course Nifty Bees forms a very good investment now in the range 3800 - 4500 with a 3 year target of doubling the net worth.

This is not the time to get into gold, silver etc as they are on a set path DOWN with current moves in consolidation mode. The negative divergence has already been confirmed by the negative price impact on copper and platinum!

We hope and pray for your profits and as always insist on staying hedged in trading positions until a trend is confirmed. Cutting losses is critical and warrants a deeper study [I think it is only fair for me to say yes we did get caught on the wrong side of the trend this week - if I harped about profits when moves played out as anticipated, it is a moral responsibility to stand out and say - stopped out and the week has not been good for the trading account]


animoitra2011 said...

Dear Nagraj ji pl send me invitation to join the Google group. My email id is .Regds.

vineeta said...

hi nagraj

kindly send me an invitation to join the google group. My email id is