Archives : VOLATILE TIMES AHEAD - 25/04/2014.

VOLATILE TIMES AHEAD –  25/04/2014.

USE HEDGING STRATEGIES.

May is the series that traders dread the most because of the very high volatility and this year the India VIX has already hit a three year high at 39. It is expected to climb further up from here. Hence traders should adopt a cautious approach while trading in this series i.e. one should use hedging strategies as much as possible to overcome such high volatility.

ROLLOVER ANALYSIS.

Nifty has witnessed a rollover of around 60% which is much lower than the three month average of around 65%. This can partly be attributed to the sharp upward rally witnessed in the second half of April series which may have led to profit booking in April series itself. But the Bank Nifty witnessed slightly higher rollover of 69% as compared to the average of around 66%. Besides Bank Nifty, high long rollovers were observed in stocks such as Aurobindo Pharma, Tata Global, Exide, Crompton, Bhel, HDFC Bank and IDFC.

Please Note :  There will not be any update on 02/05/2014. New update will be directly on 09/05/2014. Inconvenience caused is regretted.

 


VOLATILE TIMES AHEAD –  25/04/2014.

USE HEDGING STRATEGIES.

May is the series that traders dread the most because of the very high volatility and this year the India VIX has already hit a three year high at 39. It is expected to climb further up from here. Hence traders should adopt a cautious approach while trading in this series i.e. one should use hedging strategies as much as possible to overcome such high volatility.

ROLLOVER ANALYSIS.

Nifty has witnessed a rollover of around 60% which is much lower than the three month average of around 65%. This can partly be attributed to the sharp upward rally witnessed in the second half of April series which may have led to profit booking in April series itself. But the Bank Nifty witnessed slightly higher rollover of 69% as compared to the average of around 66%. Besides Bank Nifty, high long rollovers were observed in stocks such as Aurobindo Pharma, Tata Global, Exide, Crompton, Bhel, HDFC Bank and IDFC.

TECHNICALLY SPEAKING.

Sensex opened the week at 22644, made a high of 22939, low of 22636 and closed the week at 22688. Thus it closed the week with a gain of 60 points. At the same time the Nifty opened the week at 6789, made a high of 6869, low of 6772 and closed the week at 6782. Thus the Nifty closed the week with a small gain of just 3 points.

On the daily charts both Sensex and Nifty have formed a Bearish Engulfing pattern which is a bearish reversal pattern occurring at the top. Short term trend reversal will be confirmed if a bearish day follows on Monday. Also it has occurred very near to the short term target zone of Nifty as mentioned in last week’s article. On the weekly charts, both indices have formed a small body formation with long upper shadow which indicates selling pressure at higher levels. Thus both daily as well as weekly charts suggest a bearish bias in the near term.

Since a Bearish Engulfing pattern has been formed, we take the Retracement of the recent rise from Sensex 21573 to 22939 and Nifty 6432 to 6869. Thus the Correction levels are at Sensex 22417-22256-22095 and Nifty 6702-6651-6599. We find that the 50% Retracement level coincides with the intermediate bottoms at Sensex 22247 and 22197 and Nifty at 6665 and 6650. Thus the market has a strong Support Zone between Sensex 22256-22197 and Nifty 6665-6650. Only if this support zone is taken out, the market will start the correction of a higher degree.

Both the indices completed a Bullish Flag pattern when Sensex closed above 22023 and Nifty 6562. The pattern has a potential target of atleast Sensex 23126 and Nifty 6912 and on the higher side Sensex 24083 and Nifty 7191. These targets are likely to be achieved as long as Sensex remains above 21573 and Nifty above 6432.

The market has left behind a Bullish Upward Gap (Sensex 21539-21525 and Nifty 6413-6403). This Bullish Gap is acting as a strong support which got validated when the Sensex reversed from a low of 21573 and Nifty from 6432. Also the Bullish Gap mentioned above is also a Measuring Gap and as per Gap theory the target falls at Sensex 23101 and Nifty 6886.

Pattern formation is a dynamic process the indices have witnessed completion of Rising Wedge formation in weekly line chart. Rising Wedge has a natural tendency to give a bearish breakout but here it has given a bullish breakout and hence one can expect a strong upmove towards a potential target of Sensex 24429 and Nifty 7326.

When the indices closed above the previous top, both the indices completed a Bullish pattern in the intermediate term and the targets as per that falls at Sensex 23003 and Nifty 6897.

Thus as per Gap theory and Pattern analysis, Sensex seems headed towards a target of 23003-23126 and Nifty 6886-6912 in the intermediate term.

When the market overcame the previous top and made fresh lifetime highs, it marked the end of six year consolidation. On the weekly charts both Sensex and Nifty have completed a Bullish Saucer formation and the targets as per that will fall at Sensex 24799 and Nifty 7454 on the lower side and Sensex 27081 and Nifty 8145 on the higher side. The targets are likely to be achieved over a period of next 20 months.

Current rally has started from a low of Sensex 19963 and Nifty 5933. Hence it becomes imperative that this support level holds so that the indices can move towards higher targets. Thus a breach of Sensex 19963 and Nifty 5933 will derail the current bullish rally.

Both Sensex and Nifty are above the short term average of 20dma (Sensex – 22491 and Nifty – 6732) but it is likely to retested this week. Both the indices continue to remain above the medium term average of 50dma (Sensex – 21708 and Nifty – 6476) and the long term average of 200dma (Sensex – 20562 and Nifty – 6115). Thus the trend in the short term, medium term and the long term timeframe continues to remain bullish.

MACD is in Sell mode even though it is in positive zone. ROC is still positive and continues with its Buy signal. RSI (61) has reduced slightly but still suggests Bullish momentum. MFI (49) has dropped centerline and hence suggests negative money flow for the market. Stochastic Oscillator %K (78) is in Sell mode as it is below %D. ADX (37) has reduced slightly indicates that the uptrend might be consolidating. The Directional Indicators continue in Buy mode as +DI continues to remain above -DI. OBV continues in Buy mode. Both the indices continue with their Buy signal on Bollinger Band. Some of the Oscillators have turned bearish and some are showing negative divergence of the first degree and hence one can expect some profit booking at these levels. 

Open Interest Put Call Ratio O.I.PCR for the May series is at a reduced level of 1.04 which indicates the market is now in a balance. Highest Open interest build up is seen at 7000 Call and 6500 Put. This suggests that the market expects a trading range with support coming in at 6500 levels and resistance around 7000 levels.

The Trendline Support for the Sensex is at 22225. The Trendline Support for the Nifty is at 6540.

For the week ahead, Sensex will find Support at 22326-22040-21704 and will find Resistance at 22939-23236-23534.

For the week ahead, Nifty will find Support at 6665-6575-6473 and will find Resistance at 6869-6941-7068.

INDEX LEVELS:

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

6473

6575

6665

6782

6869

6941

7068

Sensex

21704

22040

22326

22688

22939

23236

23534

LAST WEEKS RECOMMENDATIONS:

STOCK

Reco. Price

Tgt

Reached

Lot Size

Profit

Buy ICICI

1262

1297

1318

250

Rs.14,000

ReLInfra

522

538

541

500

Rs. 9,500

TataGlob

157

162

160

2000

Rs. 6,000

Buy Arvind

191

198

197

2000

Rs.12,000

MuthootFin

178

188

179

2000

Rs. 2,000

Total

Rs.43,500

THIS WEEKS RECOMMENDATIONS:

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy Lupin

992

976

1018

1046

Buy AuroPharma

579

568

598

618

Buy UPL

230

225

238

247

Buy AllahabadBnk

98

95

103

108

Buy IBReal

66

63

71

77

WATCH OUT FOR:

Lupin
.
MTNL

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

Copyright © 2000 - 2018 Jatin Sanghavi. All rights reserved.
No part of the material on this website may be reproduced or distributed in any forms or by any means, electronics or mechanical without the written permission of the author.
Sitemap