EOD Analysis For 24th February 2012 and Outlook For 27th February 2012

OI in Nifty futures dropped to 26 million [not surprising after expiry] and profit booking would be fairly logical. VIX hovering around 25


Critical levels and outlook remain unchanged from yesterday;

Expecting some volatility on both upside and downside towards the budget week based on what we saw last year
[An initial spike as the budget was being delivered, then a sharp fall and then a huge climb of almost 200 points on a Friday after the budget was digested - so the pattern of ups and downs can be expected to continue during the budget week this time as well - best played by straddling OTM options IMHO]

For Satyaji et all - I had mentioned in one of my posts earlier as well that as far as major swings are concerned, I just take the following timelines [still learning and sharing what I know so far]

Dates Primer:

4 critical dates that remain unchanged every year
21st March - Spring Equinox
21st June - Summer Solastice
22nd September - Fall Equinox
21st/22nd December - Winter Solastice

For the other critical dates, take the swing tops and swing bottoms of the previous year and add 377 calendar days to it - around that time, a major swing opportunity will come through [though direction needs to be observed on current trends. Here, tools like EW, SAR, Trendlines help IMHO]

Last year, we had the following swing tops and bottoms

5th Nov '10 -> Swing Top of 6338; 377 days later was 16th Nov '11 and hence I said there will be a fall around this period - partial tukka I agree :D
4th Jan '11 -> Swing Top of 6181; 377 days later was 15th Jan '12 [I was expecting downside here based on Nov '11 action but trend was UP :(]

11th Feb '11 -> Swing Bottom of 5177; 377 days later was 22nd Feb '12 [Based on Jan '12 experience I was expecting a fall around this period :D but stood corrected with the term 'bearish' We got a correction of almost 140 points from the high of the day!]

For future dates of 2012, we need to see trend at that time but pretty sure that the time frame around these time zones will provide good tradeable swings ;-)

6th April '11 -> Swing Top of 5944; 377 days later will be 16th Apr '12 [2012 being a leap year]

20th June '11 -> Swing Low of 5196; 377 days later will be 30th June '12 [also note that 21st June comes in this period only!]


8th Jul '11 -> Swing Top of 5740; 377 days later will be 18th Jul '12

26th Aug '11 -> Swing Bottom of 4720; 377 days later will be 6th Sep '12

28th Oct '11 -> Swing Top of 5399; 377 days later will be 8th Nov '12

20th Dec '11 -> Swing Bottom of 4531; 377 days later will be 30th Dec '12

Full Moon days have larger odds of being down days

After some costly lessons in summer '11[got ripped off with Puts from 5550 to 5850 and revising stop loss at every rise of 50 points!] and subsequently under guidance of my seniors, I am trying to imbibe what spiderman keeps saying - 'trade little, trade healthy' and always as wave rider says, trade with the edge of hedge because we are all human; if not sure of a trade setup, stay out. So now one has the support/resistance levels [given last Friday] as well as major time periods for 2012 [given today]. I sincerely hope it helps readers.....
The reason why I am timing the primer posts around this period is because it is very special to me personally. This week marks a one year anniversary when I first came across my seniors / gurus on mmb i.e. Wave Rider, Raghuji, rcg[ji] Harshal bhai, Suranaaji, Sarmaji and comrades like Shriram, Bhatiaji, Sunny bro and the journey has been extremely fruitful so far. Today's post is dedicated to my seniors. All I have is 'Attitude of Gratitude' for the way you literally held my fingers and taught me the basics.

AAAAAAAAHHHHHH - Too much gyaan Nagi! Enjoy your weekend. [Hope you will also enjoy the tit-bits on diversification v/s diworsification from time to time :D]

The Airline Saga - Core Competence Lessons

We all know that in the recent past, Kingfisher airlines and Air India have been in the news for obviously all the wrong reasons. As far as Air India is concerned, it is nothing but government's vested interests to make as much graft as possible with all tenders, leases and of course, there is a huge union as well that can make or break the vote banks. So tax payers money will continue to be swindled to a point when there probably won't be a revolution [and let us not forget here that the same applies for most state carriers globally like Air France, Lufthansa, Iberia, British Airways etc etc etc and the list is endless]

As far as Kingfisher is concerned, it was not meant to be a company fit for aviation in the first place. I see no reason why an Indigo manages to run an airline effectively and pay creditors in time whilst Kingfisher cannot. Have to admit here that the Indian government definitely has made the life of airlines difficult by not moderating the taxes and duties on ATF in comparison to most countries [even in developed countries, ATF is on an average at least 10% lower than in India]

Kingfisher has itself to blame for the woes it is going through; first of all, it by itself had no competence whatsoever to enter the aviation business. After the take-over of Air Deccan, it had the good fortune of an able operations leader Capt Gopinath who should ideally have been allowed to run the airline. If costs on the fuel aspect alone were not enough, the airline also got into trouble with a lot of bloated direct/indirect fixed costs.

Frequently trying to change the makeover of the aircrafts, shifts in identity / cluelessness in vision and mission[first it wanted to be a premium air carrier like what the UB Group is always meant to be; then suddenly it decided to have a stripped down version as well with Simplifly and Kingfisher Red only to reverse them later!! These have huge implications on cost over-runs] Has the management of Kingfisher ever looked at the basic aspect of standardizing fleet and operations to deliver synergies? [This is one of the most crucial aspects of Indigo - of course Indigo borrowed its best practices from the western world]

The Plain Vanilla Indigo Model

Standardized aircraft i.e. the technical crew at all stations need to be trained on a single kind of aircraft engineering. This itself is a major cost saver in hiring technical crew, the most important aspect of safe aviation and of course turnaround time.

A standard KPI of turning around an aircraft in 25 minutes [of course delays do happen but that is the KPI Indigo follows and most of the times achieves it] If one is wondering why is this so critical - picture this

An average flight duration is 120 minutes in India and an aircraft needs to rest for about 6 hours each day.
By ensuring a KPI of 25 minutes, Indigo ensures that its total time per flight is 145 minutes and this allows Indigo to make 7 fllights per aircraft per day [24 hours - 6 hours of rest = 18 hours; 18 hours x 60 minutes = 1080 minutes / 145 minutes = 7.44 and the 0.44 will have to be kept aside as buffer for operational constraints] The marketing budget is kept limited, the booking system is kept as simple as possible and of course the system is priced with dynamic pricing concepts. The break-even load factor is about 65% to 70% but the key thing to note is that they do 7 trips per flight per day by and large!

Contrast this with Kingfisher that tried all permutations and combinations of aircraft and that brings the average turnaround time to 40 minutes making the average time per flight 160 minutes i.e. 6.75 trips per aircraft per day [some will be doing only 6 whilst others may manage 7 as well] Each additional trip per aircraft is 'Additional Revenue' and Lower costs as every minute an aircraft is grounded at the airport, it owes money to the terminal. So in the process of creating a premium King of Good Times airline, the company has totally messed up the operations.

Not to mention the bloated costs of maketing and wasteful expenditure by not following basics. Moreover, Indigo is one of the only airlines that I am aware of that keeps a provision for hedging risks in oil price shocks thereby having as much control as possible on the total costs of fuel for a particular year.

Jet Airways has also been largely successful if we cumulate their performance since inception. The current times are turbulent for aviation and all are aware of it. Spicejet too is going through the same problems.

What makes the Kingfisher story so blood boiling is blatant violation of rules and regulations. TDS deducted from employees' salaries but not deposited with the exchequer! Non-payment of debts to Oil Marketing Companies, Airports for amounts rightfully due to them. Cancellation of flights at their own whims and fancies and then claiming once that the cancellation was planned and once saying that it was unforseen circumstances. If the flight cancellations were planned, the customers should have been notified well in advance or bookings should not have been issued at all!

Now, they are at a stage where they are reneging on employees' salaries and aviation staff are as middle class as any of us are and have their obligations to fulfil. The government is talking double standards by saying no bailout in front but forcing state lenders like SBI to do the needful backdoor and forcing Oil Marketing companies to supply fuel to the airline!

Diversification is good, Di-Worsification is not; the Kingfisher story does not end with airlines alone; the company has flushed money down the drain through cricket teams, formula one, yatches, all at the expense of shareholder money but when it comes to money for creditors - 'Sorry!!' The founder company i.e. the UB Group is undoubtedly very good in the business of spirits and recently, displayed strength in the real estate segment as well. I think it is a fair point to own up and say - perhaps certain businesses are not our cup of tea and give it up to able leaders and players in the industry.

I keep repeating the theme of diversification v/s diworsification as time and again we can see this. Kingfisher is not the only example - same is the case with Bharti Group; apart from the core competency of telecom, the business has ruined shareholder value in the form of shipping, retail, insurance and what not!

The Tatas and Birlas are running diversified businesses but not just by inheritance alone; they have identified their core strengths in each business; by and large knowing what is the Weighted Average Cost of Capital in each venture and then targetting a Return on Equity / Assets greater than cost of capital. The leaders are well educated and groomed from grass root levels despite having the silver spoon from the beginning.

To summarize, aviation business like any other business needs good operations and finance management and not everybody's cup of tea. Darwin's law must be followed and survival of the fittest must be allowed rather than backdoor financing bailouts and pressurizing oil marketing companies to fuel airplanes even if there are amounts outstanding for more than 180 days [even that is honest tax payer's money]

Simplify and Simplify Mr Mallya - please don't take tax payers and parent company shareholders for your royal ride!

EOD Analysis for 23rd February 2012 and Outlook For 24th February 2012

OI in Nifty futures pretty much unchanged from yesterday.

Critical levels and outlook remain unchanged; even in case of severe profit booking, expecting 5177-5196 to hold out on closing basis till 29th Feb '12.

Just some points to highlight once again

Volume: Today being expiry, high volumes are logical and some drop can be anticipated in the next couple of sessions; as long as the OI in Nifty futures is around 27-28 million or so, bulls can manage the upside

Price: 5408 on a weekly closing basis will be critical tomorrow; holding 5408 on closing basis tomorrow means more steam for bulls and a close below 5408 on weekly closing basis tomorrow means more room for correction. 5408-5532 on closing basis is a good consolidation zone based on last year's data as well.

2 consecutive daily closes below 5408 and we are near certain to retest 5200 and expect that to be the floor for the next 5 sessions or so

2 consecutive closes above 5532 and we can see an attempt once again to take out 5608-5655-5690 [here the volumes will be crucial as mentioned above]

Profit-booking and consolidation phases are healthy and good for the market; odds as of now are stacked in favor of bulls

Last but not the least, a word on BankNifty [I don't have my EOD files and charts yet :(]; my gut feeling is that yesterday's candle was an ONR4 [I have addressed the query to my seniors late last night and await an answer; today seems to be an inside bar; this counter may surge again or stage a further correction so caution advised [alert and savvy traders can straddle this opportunity via futures ;-)]- will update later tonight in comments section once I have time and data in place :D

EOD Analysis For 22nd February and Outlook For 23rd February

Volumes in Nifty futures saw a BIIGG surge today with OI hovering around 40 million! Now this kind of volume can help Nifty gain 150-200 points on the upside and equally on the downside also!
Critical levels and outlook remain unchanged from yesterday
After a relentless rally of almost 1100 points and one day prior to expiry, a few sessions of profit booking / consolidation is fairly logical and healthy for the market.

Expecting 5177-5196 to hold out on closing basis till 29th Feb '12 even in case of sharp profit booking sessions;

EOD Analysis For 21st February 2012 and Outlook For 22nd February 2012

Positive start to the day aided by positive global cues; OI in Nifty futures surged to 36 million today [indicating a lot of roll-overs on both long/short side IMHO considering relative intactness in futures premium] These volumes are good to sustain current prices and on the other hand, bring in some retracement of the rise as well.

Despite all major index makers in green/flat territory, VIX surged to 26 [seems like an aberration]

Critical levels and outlook remain unchanged;

For upside, 5608-5655-5690 will be critical resistances on closing basis; the volume concern expressed last week has been resolved today; 2 days to go for expiry and as mentioned on Friday as well, I stand corrected with the term 'bearish'; we may see some profit booking and perhaps some crushing of OTM Calls written
[We have had only 1 meaningful correction session in 2012 so far and Put Writers have been milking out the bears!!]

As far as bears are concerned, 5532 and 5408 are the 2 crucial levels; once 5532 is breached on closing basis to the downside, a retest of 5408 will be on the cards;

5177-5196 band expected to hold out on closing basis until 29th Feb '12.

Wave Count Review - 19th February 2011

Dear Readers
Attached is the slide set with different EW scenarios; frankly, there is nothing much to write home about as most of the points are almost identical to what Raghuji regularly covers in his blog; some jargon here won't even help initiate the next trade!

The comments and notes are self explanatory;

EW Review: Please click EW Review on the left hand side to download the charts and counts......

PS: 2 major points to remember;

EW works best at index level [individual stocks may at times demonstrate valid EW patterns but these may not happen consistently as EW principles are based on mass psychology best demonstrated by the index; so please use EW to identify turning points and which market cycle we are in......

The anticipated moves basis EW patterns must be cross-checked with other indicators as well; [trendlines, volume and momentum as Raghuji keeps insisting all the time in his blog!