Monday, January 16, 2012

EOD Analysis for 16th January 2012 and Outlook for 17th January 2012

Volumes showed some increase today with OI in Nifty futures hovering around 26 million [Jan+Feb+Mar series - from today until expiry, I will be taking all 3 into account]. Banknifty saw some correction but in the last hour had a good short-covering session considering the low of the day, CNXIT saw some short-covering and bell weather stocks like Tata Motors, Tata Steel extended their gains. Oil and Gas continued to remain weak - to summarize, the index management seems to be doing well to manage Nifty index levels and ranges tight. VIX opened pretty low but picked up steam within 1 hour of open - still as long as it is below the 25-27 band, bulls can keep calm. Alert mode above 25 and panic mode above 27 [fear above 29!]

Critical levels and outlook remain unchanged; tomorrow is a high weightage day and whilst my personal bias is downside, critical levels, volume and momentum need to be respected.

For Upside:
To the extent the 4800-4840 band remains intact and volumes support, Nifty still has potential to retest 4911-4944-4994 levels. [at least 10% more volumes than current levels]

For Downside:
First sign of weakness will be going below 4785 with volume and momentum but IMHO the 4690-4720 band has potential to support the fall once at least. However, closing below 4690 will tilt the scale completely in favor of bears once again and we need to brace for some steep cuts [and a close below 4690 can keep VIX well above 27-28 levels]

An EW / Fibonacci Perspective For Longer Term:
Normally, I leave the EW outlook to Raghuji only but this weekend, our family had some nice private discussions / healthy debates on the longer term outlook and just would like to present my personal view on the same. [Credits for this discussion to Wave Rider, Raghuji, Shriram bhai, Super Falconji; the points below are what I put forth to the team]

Nifty entered a corrective mode from Jan '08 taking steep cuts from 6357 to 2252 in 8 months which was a Py-A in a 3 wave format; Py-B commenced from the lows of 2252 and hit 6338 in Nov '10 and the structure seems more of a DZZ to me. Now we are in Py-C mode from 6338 going down in DZZ format with a minimum target of 4460 [can go to 3800 or all the way back to sub 3k levels but we should not try to look so far at this point of time IMHO] Upto 3800, the entire structure can still fit in as an A-B-C with current Py-C as a DZZ; below 3800, we need to look for a Flat.

3800 levels mark a 61.8% retracement of the 2252-6338 upside leg

From a Fibonacci time perspective, the entire A-B-C structure can be estimated to take a time of 34 to 55 months. 48 months are done now in Jan '12 and we can expect a final bottoming out process between March '12 and June '12. After that, IMHO, Nifty will likely resume its bullish trend with a 21-34 month target of making new highs by Diwali 2014 [and this possibility is open regardless of what happens on Dow, FTSE etc] This also fits in with the fact that markets tend to start going up after monsoon session, provided other factors help.

Unfortunately, the confirmation that the bull market has indeed returned and the market has bottomed out will only be generated when Nifty takes out the Upper Trendline of the Downward sloping channel that Raghuji has marked in his special updates blog [You can see the post and picture by following this Link]:. Until then, we have to consider upsides as a bear market rally. On a sector specific level, the positive news will be confirmed by the leaders in the Banking and Infrastructure pack IMHO. At some point of time, price action will simply defy bad news and fundamentally it seems right. With develeraging becoming a real threat and economic contraction a reality in G-8 countries, the growth areas will continue to be BRIC countries once again [how much each portion contributes is a different discussion]

Just wanted to relay the big picture as well and hence this long post. From tomorrow, will continue with the shorter term outlook and levels.

1 comment:

reachnagraj / theknight16 said...

Forgot to add one point for upside:
It should read:

As long as Nifty holds 4800-4840 and takes out 4880 with Volume and Momentum, 4911-4944-4994 are realistic targets for.
[4880 is a critical resistance zone and so far the volumes and momentum have not been able to take this out both intra-day and closing basis in the recent past]