US economy is on the brink of a major recession, which will affect global markets. The global engines will have to be China and India. If the US economic data continues to be weak, then the Fed might have to go back on its stance and induce further round of rate cuts to breathe life in the dying US economy. Another point to ponder here is the inflation figure coming in at a record 5 year low well below 3%, this might set the ball rolling for having a rate cut in the Indian market. If this rate occurs, and it coincides with US fed rate cut, then there will be a deluge of dollars. I don’t want to hazard a guess about where will the Sensex reach if these events occur in the near future.
The Darlings of the traders RNRL and RPL got butchered this week and lot of traders lost lot of money. The darling were butchered mercilessly and RNRL fell from a high of 195 to a intra week low of 135. Whereas RPL reached 294 touched intra week low of 202. The mark to market losses unnerved most of the traders as the losses mounted and the margin increased simultaneously. The fact that RPL got under the futures curb, didn’t exactly help the matter.
Sensex closed on Thursday at 19058. It was unable to clear the previous high of 20238 and broke the support of 19255. The Sensex is undergoing a correction of the rise from 17171 to 20238. The correction levels are placed at 19066-18705-18243. The Sensex touched a low of 18917 and closed just above 19000. The short term trend has turned down and hence every rise will be met with selling pressure. The trendline support is at 18834-18453. The trendline resistance is at 19416-20414. Generally the Sensex has bounced from the support of 30DMA last time around and this time it is at 18630. So support is expected around the zone of 18800-18453. The medium term Sensex technicals will remain positive as long as it is above 17510. For the week ahead resistance is at 19416-19678-20009. Support is at 18834-18630-18453-18343.
Nifty closed on Thursday at 5698. It made a low of 5650 and returned after finding support there. That was the first retracement level. The Nifty is undergoing a correction of the rise from 5070-6012. The correction levels are placed at 5652-5541-5430. The trendline support is at 5454 and 5312. The trendline resistance is at 6030. The Nifty found support in the last fall at the 30 DMA which is now at 5503. The medium term outlook will stay positive as long as it stays above 5133. Nifty OI PCR is 1.16. This indicates lack of short positions and so when we have a fall, the market will not find cushion and the fall can be drastic. 5900 and 6000 strikes calls have seen lot of addition of OI, which suggests the Nifty may face resistance at those levels. For the week ahead, resistance is at 5861-5957-6012. Support is at 5650-5541-5454-5312.
HOW TO TRADE ?
This week we suggest to contruct a Bear Spread for Nifty. Also Gail is showing great strength, one can go long in Gail 467 and hedge it by selling Nifty futures. One can buy Gail futures and hedge it with by buying a Nifty Put. Also one can use a protective put strategy in GMR Infra 206.
LAST TIME’S RECOMMENDATIONS:
Once again full marks. All reached their targets, except may be NTPC which will reach its target this week. Also the star was undoubtedly RNRL which was recommended at 141 reached 195, just calculate the profit on a single lot of 7150…7150x54=Rs.3,86,100. Amazing is not the word.
THIS WEEK’S RECOMMENDATIONS:
GMR INFRA 206 SL 194 TGT 216-234.
BIOCON 592 SL 568 TGT 607-616-631.
NALCO 374 SL 351 TGT 394-404.
IOC 512 SL 496 TGT 536-572-599.
HINDALCO 203 SL 190 TGT 212-222.
GAIL 467 SL 452 TGT 493-558.
DENA BANK 79 SL 74 TGT 85-89.
DIWALI DHAMAKA.- By JATIN SANGHAVI-08/11/2007This time we are specially recommending stocks for a long term view till next Diwali and hope our readers benefit by this.
NTPC 240 : This script has consolidated and has formed a bullish formation. The script has potential targets of 475 to 625 in the medium to long term. The target will be achieved as long as the scripts stays above 206. Not to be missed.
NALCO 374. After a long consolidation, it has managed to give a breakout. Potential targets by next Diwali 493-750. The outlook will stay positive as long as it remains above 270.
TRIVENI ENGG.137: This sugar stock is really sweet from a one year horizon. It can reach 204-330 in the medium term and possibly much higher levels in a one year horizon. The outlook will stay positive as long as it remains above 106.
SAIL 243 : The script now resides in some very strong hands and is believed to be worth its weight in gold even at the current rate. Possible target will be 475. The outlook will stay positive as long as it remains above 205.
TORRENT POWER 180: This is the dark horse, which has possible targets of 246 and 500. The target will be achieved as long as it remains above 125.
WISH YOU ALL HAPPY DIWALI
PROSPEROUS NEW YEAR