Thursday, December 15, 2011

EOD Analysis for 15th December 2011 and Outlook for 16th December 2011

No major changes in OI even today despite a broad trading range. Good short covering seen after Europe open considering the pretty negative session in the morning. Banknifty still managing to hold the 8400-8500 zone but some more pain expected here. CNXIT is also due for some correction though the way counters are rebounding from the lows of the day are pretty encouraging. Premiums on futures are pretty healthy and that is a good sign for the days to come IMHO.

Critical Levels remain unchanged i.e. critical supports are in the 4720-4750 band and critical resistances are in the 4840-4880-4911 region. Short-covering can take Nifty to 4994 but need fresh longs to go beyond.

Some perspective on the corrective mode we are in
As per my personal analysis, there are 2 possible options from an EW-Fibo perspective of the downside targets

Option1: We take the First Major Corrective Wave from 6338 to 5177 = 1161 and hence the complete corrective wave structure should in the end have around 1.618 times initial length from the point where the correction started. [Can go upto 2.618 also but considering the time factor, inflation adjustments etc, 1.618 seems reasonable enough to me]

This gives us 6338 - 1.618(1161) to about 4460 levels; since this is on Py degree, time will be anywhere between 8 months and 25 months [PyA from 6357 to 2252 happened in 8 months, 2252 to 6338 happened in about 24 months]. And it is no surprise to see massive corrective rallies in between as we have been following Euro-Dollar literally [Euro-Dollar 1000 pips down, 630 pips up {1 pip = 0.0001} whilst on Nifty, we have roughly been doing 1160 points down, 650 points up]

This option says some more correction pending on our bourses.

Option2: We take it on one degree smaller i.e. just the November '10 correction 6338-5690 = 648
Since this is on a smaller degree, the maximum correction across the full structure will be 2.618 times initial length.

6338 - 2.618 (648) = 4641 in about 13 months.
With this option, one can conclude that the correction is over and now the markets will consolidate for a few more weeks before starting the next leg up.

Looking at the global cues and the way Dollar Index is spiking and the sharp correction that took place in gold last night [margin calls in all likelihood], my personal vote is for Option1

Confirmation that correction got over at 4640 levels ONLY AFTER we get 2 consecutive weekly closes above 5250 levels. So players for the long run can start looking at good scrips and adding them to the DP account with a 2-3 year horizon regardless of which option is in play. I have not an iota of doubt in my mind that sound businesses purchased in SIP mode now until the next 4 to 6 months will deliver a CAGR of 30% or more by Diwali 2014

For a trading perspective, confirmation that Option 1 in play ONLY AFTER a 2 closes below 4720.[1 close below 4720 can only go upto 4600-4640 levels IMHO]


animoitra2011 said...

So Naagi dada shall have 2 go for long from tomorrow onwards.Also which are the highest weightage dates after 21st Dec according to time price charts ?Thanks & Regds.

reachnagraj / theknight16 said...

Taauji: yes IMHO risk reward is in favor of longs to be accumulated in a staggered manner between tomorrow and Wednesday.

Next set of high weightage days are in January and will be highlighted after Dec expiry.

If you see the pattern of high weightage days, they just come once in 4 to 6 weeks. Spidy's formula recommended - trade little - trade healthy.....HHHHHH

animoitra2011 said...

Thanks.But Dada means brother in Bengali.Lol.

reachnagraj / theknight16 said...

akto akto asche babu moshai; jus a bit of fun no worriyaan.....