BEARS & CRUDE KILL THE BULLS - 23/05/08 Market opened the week with a gap down and was never able to challenge the opening level itself. The market had a pretty nasty fall and had to succumb to the bear power. On the weekly formation the Sensex has formed an opening MARUBUZO. This formation has very bearish implication for the market. In this rally the Sensex was trying to form a higher top and higher bottom formation but in the process Sensex has formed the lower top and is on the verge of registering a lower bottom. A lower bottom formation will be in place once the Sensex breaks the support of 16546..
CRUDE ON THE BOIL.
INFLATION NEVER FAILS TO SHOCK.
HOW TO TRADE?
LAST WEEK S RECOMMENDATIONS:
THIS WEEK S RECOMMENDATIONS:
WATCH OUT FOR GITANJALI GEMS – 306.
Oil hit unprecedented levels as the rally crossed and oil spilled over to $135 levels. This meteoric rise will certainly harm the growth story of emerging economies like India and China. Main reason for such a spike in the prices of crude being long term production worries and a near term focus on tight supplies. But more important reasons for this vertical rise can be speculation and a weak US dollar. The rise of crude has been helped by the fall in the value of the US dollar against major currencies, and as a result investing in commodities like crude started to look cheap. Also the FED cut US interest rates and pumped in billions of dollars into the financial markets to ease a credit crunch, has helped oil rise dramatically. Inflation remained stagnant at 7.82% v/s 7.83% last week. Inflation is still rising but at a lower pace. A fuel price hike will certainly increase the inflation to a very high level. A Rs.5 hike in petrol price and Rs.3 in diesel will take inflation above 9%. Double digit inflation, too cannot be ruled out. The government will have sleepless nights, as it knows very well that the voting public is not very kind to such a government where inflation rises to such levels.
Sensex opened the week at 17366, made a high almost same as the opening at 17367, low of 16626 and closed the week at 16649. The weekly loss was 785 points. The Sensex opened with a gap down and continued its downward journey and ended the week at the bottom. Thus, it has recorded a long black candle, which will have bearish implications. The Sensex had begun its upward journey from the low of 14677 and had just started formed higher top and bottom, but the Sensex now already has broken that sequence of higher top and bottom and has registered a lower top and is now on the verge of breaking the bottom at 16546. The long term trendline resistance is at 17356, above which the long term trend will turn positive. Immediately, the trendline which was supporting the Sensex has now turned into resistance and is at 17057. On the higher side trendline resistances will be at 17370 and 17448. The trendline support is at 16431. The next support will be at 16365, where the 50dma is placed. If we consider the Sensex rise from 14677 to 17735, then the correction levels are placed at 16567-16206-15845. For the week ahead Sensex will have Resistances at 17045-17367-17525. Support will be at 16546-16457-16206-15845.
Nifty opened the week at 5157, made a high of 5160, low of 4940 and closed the week at 4946. The weekly loss was 211 points. The immediate previous bottom is at 4913 and it is coinciding with the 50dma support. The long term trendline is at 5095 and the uptrend can resume only on close above that. Nifty has given head and shoulder breakout and its immediate targets are 4850 and 4788. Nifty has gone up from 4468 to 5298 and is now correcting this rise and the correction levels are 4883 and 4785. The trendline support is at 4783. Immediate trendline resistance is at 5040. For the week ahead Resistance will be at 4998-5040-5095-5160. Support will be at 4913-4883-4785.
Since market is in a down trend and the Nifty 4946, is now headed towards 4785 as the first target. One can buy naked 4900 PUT. Also one can sell out of money CALL options for the strikes of 5000 and 5100.
Three cheers to our reader as once again we hit jackpot. Inspite of the market being so bad, all our recommendations reached their targets. With the stars being ABAN, NIIT Tech and Great Offshore.
ABAN @ 3873 tgt was 4160 reached 4290.Jindal Steel @ 2400 tgt was 2485 reached 2485.NIIT Tech @ 151 tgt was 162 reached 162.Great Offshore @ 699 tgt was 740 reached 775.
GITANJALI GEMS 306 SL 297 TGT 320-327.
SUZLON 294 SL 289 TGT 304-311.
TATA CHEMICALS 383 SL 377 TGT 394-401.
TATA ELXSI 203 SL 195 TGT 217-223.
PSL HOLDING 387 SL 377 TGT 394-401.