Archives : INFOSYS RESULT FAILS TO CHEER THE MARKET - 15/10/2010.
INFOSYS RESULT FAILS TO CHEER THE MARKET - 15/10/2010.
 

IGNORING GOOD NEWS.

 

Despite posting better than expected results, the market continued its fall which had started on Thursday. Infosys not only beat market expectations, but also upped its guidance in dollar terms. The market ignored the good news and sold off just as it did after LIC Housing and Axis bank posted good results. The market is ignoring the good news and as a result the posting of good news becomes a fresh trigger for sell-off.



INFOSYS RESULT FAILS TO CHEER THE MARKET - 15/10/2010.
 

IGNORING GOOD NEWS.

 

Despite posting better than expected results, the market continued its fall which had started on Thursday. Infosys not only beat market expectations, but also upped its guidance in dollar terms. The market ignored the good news and sold off just as it did after LIC Housing and Axis bank posted good results. The market is ignoring the good news and as a result the posting of good news becomes a fresh trigger for sell-off.

 

IIP DATA SHOCKS THE MARKET.

 The IIP number came in at 5.6% for August 2010, which was much below market expectations. The Manufacturing sector which is having a weight of more than 80%, is facing a slowdown as it grew 5.9% in August 2010 as compared to 16.7% in July 2010. Mining and Electricity sectors are also showing signs of slowing down. Unpredictable sharp volatility in the Capital goods production is creating a disconnect between the market expectations and actual IIP data. Capital goods witnessed a jump of 50% in July 2010, but reduced by 40% in the August 2010 number. The RBI may hold the rates this time due to the subdued performance of the Industries as can be seen from falling IIP numbers.
 

CONSOLIDATION: A HEALTHY SIGN.

 

After witnessing an almost vertical rise, the market has paused for breath and that needs to be construed as a positive sign. The market went very close to the previous all time high, but profit booking at higher levels made sure that we might have to wait for few more days. The market needs to consolidate before attacking the previous high. Some consolidation is positive for the market as it will help the market form a higher base. Many oscillators were showing negative divergence on the daily charts and as a result the sell-off at higher levels. The market closed below the 20dma and as a result the short term trend has turned down. The medium and long term trend remains unaffected.

 
TECHNICALLY SPEAKING. 

The Sensex opened the week at 20250, made a high of 20864, a low of 20090 and closed the week at 20125. The Sensex lost 125 points on a weekly basis. Similarly Nifty opened the week at 6105, made a high of 6284, a low of 6050 and closed the week at 6062. The Nifty too lost around 41 points on a weekly basis.

 

Both Sensex and the Nifty have formed a small black body bearish paper umbrella formation on the weekly charts. The bearish paper umbrella has a small black body but long upper shadows which was a result of the market selling off from higher levels. On the daily charts there are two black candles which have been formed representing two black crows formation. Once again this is a bearish candle formation.

 

In the current upmove both the indices have rebounded from Sensex 19771 and Nifty 5932 and in the process have registered higher bottoms. Sensex has formed higher bottoms at 19771-17819 and Nifty has formed higher bottoms at 5932-5348. The short term uptrend will be in danger only if both the indices close below their higher bottoms i.e. Sensex – 19771 and Nifty – 5932. The long term trend will remain intact as long as Sensex 17819 and Nifty 5348 remains intact.

 

In the immediate term the Sensex has trendline support at 20015 and Nifty at 6042. If the market closes below the above mentioned levels, then we will see a correction of the recent rise i.e. from Sensex 17819 to 20854 and Nifty 5348 to 6284. In that case, the correction levels for the Sensex are at 19695-19336-18978 and Nifty 5926-5816-5706.

 

In case the market corrects, it is likely to take support at the 38.2% retracement level i.e. at Sensex 19695 and Nifty 5926, which is almost coinciding with the previous higher bottom at Sensex 19771 and Nifty 5932. Expect strong support to emerge between 19771-19695 for the Sensex and between 5932-5926 for the Nifty.

 

Let us we consider the Bullish Inverted Head and Shoulders formed on the weekly charts. Sensex fell from 15579 in Aug 08 to 7697 in Oct 08. The target for this fall is at Sensex 23461. Similarly Nifty fell from 4649 in Aug 08 to 2252 in Oct 08 and the target for this fall is at Nifty 7046.

 

On the moving averages front, both the indices have just closed below their 20dma (Sensex – 20215 and Nifty – 6080) and as a result the short term trend has turned down. At the same time both the indices are well above their 50dma (Sensex – 19160 and Nifty – 5757) and 200dma (Sensex – 17717 and Nifty – 5312) and hence the medium and long term trend continue to remain positive.

 

MACD continues with its Sell signal even though in positive territory. The Stochastic oscillator is no more in overbought territory but has given a Sell signal as %K has cut the %D line from above. The ROC continues with its Buy signal as it remains in the positive territory. The momentum oscillator like the RSI (55) has given a Sell is moving lower after remaining in overbought territory for almost a month. ADX is at 47, suggesting that the current trend is now matured and ready for some profit booking. The Directional Indicators +DI and –DI continue with their Buy signal, but have now started moving towards each other. MFI has moved lower at 44, signaling a short term Sell and suggesting some profit booking has occurred at higher levels. Also the OBV has signaled a Sell. Many oscillators like the RSI, MACD and MFI were showing negative divergence since sometime and the current fall is a result of that.

 

The OI PCR is at 1.32 which is quite healthy. Highest Open Interest build up is seen at the 6000 Put which should act as a near term support. Strong Call writing is seen at the strike of 6200 which will provide short term resistance to the market. In short the Nifty is likely to move in between 6000 on the lower side and 6200 on the higher side.

 

Sensex has Trendline Support at 20015 and Nifty has Trendline Support at 6042.

 

For the week ahead, Sensex will find Support at 19896-19706-19472 and will find Resistance at 20383-20669-20907.

 

For the week ahead, Nifty will find Support at 6011-5947-5894 and will find Resistance at 6147-6223-6302.

 
INDEX LEVELS:
 
 S3S2S1CLOSER1R2R3
Nifty5894594760116062614762236302
Sensex19472197061989620125203832066920907
  
LAST WEEKS RECOMMENDATIONS: All the recommendations reached their targets. The star performer for the week was Amar Remedies, which increased by an astonishing 19%.
 
STOCKReco. PriceTgtReachedLot SizeProfit
Buy Mphasis659673672500Rs.6,500
Buy Hexaware8287874000Rs.20,000
Buy Fortis1711771772000Rs.12,000
Buy BoB942985985500Rs.21,500
Buy AmarRem1141301352000Rs.42,000
    TotalRs.1,02,000
  
THIS WEEKS RECOMMENDATIONS:
 
STOCKCMPSLTgt-1Tgt-2
Sell BEL1752176817251695
Sell TechMah752761737721
Sell Mphasis625634611595
Sell Videocon267271261253
Sell BGR744756728709
 

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