Friday, January 27, 2012

EOD Analysis For 27th January 2012 and Outlook For 30th Jan 2012

First day of the series and not surprisng to see OI in Nifty futures drop to 26 odd million [it was hovering around 38 odd million in the last 2 sessions during expiry]. Yet another gap-up session! Banks led the fall in the morning session but good gains brought in by Reliance, IT pack and bell weather stocks continued their winning streak, thereby keeping the index relatively stable. VIX rising marginally but still well below 23 to keep bulls relaxed for now. Nevertheless, the Feb series has started on a firm note and this is the 2nd consecutive close above 5150 levels [4th milestone achieved by bulls in 4 weeks time!] This rally certainly has bewildered many including me but it is remarkable because the rise from extreme lows, with all negative news flow, bulls have defied the odds - broad market participation and rise with volumes considering a 1 month period - hats off to the bulls!

System is overbought and over-heated but still no signs of cooling down at all! Banknifty is showing some signs of cooling off but still the rise from 7800 levels is significant - there is a time bomb sitting there in the form of NPAs and loan restructuring and I am reasonably confident that this has not been discounted in the current rise.

The volumes and momentum along with the rise in stocks like Sesa Goa, Tata Steel, Tata Motors, LnT, Maruti etc have been phenomenal [Infra pack covered below]

On a fundamental level, the infrastructure sector related stocks are seeing a lot of buying especially counters like JP Associates, IDFC, IVRCL, IFCI, some of which are now challenging their 100/200 DMAs. For the longer term, this perhaps is a good sign with just one caveat - is it due to the tax saving investments due this time of the year which will reverse the gains ??? Nevertheless, with a 2 year horizon, I think stocks mentioned above have found their bottom and even in case of a round of panic selling, these will perhaps just retest the bottoms once again before marching up and I have not an iota of doubt that these counters will do well. Earlier, the valuations were a bit of a concern but now these seem good propositions to buy on every dip. IFCI in particular has a lot of value locked in with the potential NBFC license IMHO.

Critical levels and outlook remain unchanged. Monday is a high weightage day for price action and IMHO the direction will be set by Dow/FTSE/DAX weekly closes today.

As long as falls in Nifty remain restricted to 4911 levels, it will just be a healthy/routine correction/profit booking. First sign of weakness with a close in the 4880-4911 zone [ideally below 4880] and panic to enter the system only with a close below 4690!

I have shared some of my observations on Wave Personality / Amplitude from an EW perspective but will leave it to Raghuji to blend the EW outlook in his special signature style.

Other Updates

Dow: Phew - what a rise that was last session; upto 12600 was on expected lines but beyond that definitely has surprised a lot of people incl me. Likewise on SnP 500 and unless it posts 2 consecutive closes below 1300 now, one should be vary of a further rise here.

FTSE: Upto 5750 was definitely expected but now it has gone a shade ahead - outlook remains unchanged. First sign of weakness only with 2 consecutive closes below 5550 and eventual targets remain sub-4900 levels

DAX: The rise beyond 6400 was phenomenal and weakness only to set in with 2 consecutive closes below 5750. Eventual targets remain sub-5k levels.

Euro-Dollar: The pair is on its set path to 1.25 odd levels with eventual targets at 1.185. Relief rallies will keep coming from time to time and to the extent 1.325 is not breached on the upside for 2 consecutive sessions, no change to the outlook here.

Gold: In dollar terms, yes this rise was expected but how much further it will extend depends on other conditions like QE, Euro-contagion etc - unless the recent high of USD 1925 odd levels is not taken out, my outlook is negative with targets USD 1350-USD 1450 / ounce

Silver: Outlook same as that of gold with targets at sub USD 25 levels.

Some Blogs To Share

My dear pal Shriram Okha has started his own blog 'Random Words' with some basic mathematical / Classic TA techniques and the same has been added to my blog list.

Another blog I came across courtesy links shared by some of my FB friends that I really liked a lot

Chart Dreams: Link: - it is an excellent treatise on EW and Fibbonacci Ratios / Mathematics

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