Archives : BACK TO 10,000 ! - 26/03/2009.

Back To 10,000 ! – 26/03/2009.

  • Please note that this article is written on Thursday 26/03/2009, because of the Informed Investor Exhibition starting from Friday. So all rates are Thursday’s closing rate.
 Classical Bear Market Rally.

We are in a midst of a powerful bear market rally. The way the market has moved from the lows of around 8047 on Sensex to above 10000 levels makes one say that this is a classical pull back rally, which will make many people think that finally the bull market has started. The real bear market rallies are like mirages found in a desert, only when you go near you find it to be an illusion. Similarly Bear market rallies also provides an illusion in the form a strong pull back and easily deceive lot many people into believing that this is a resumption or start of a new Bull run. But the fact remains otherwise.

 

Bear market rallies have their foundation in short covering. Short covering provides for one of the most beautiful sight that the stock market has to offer and that is a short covering rally in the midst of a strong bear market, which is exactly what we are witnessing now. This is a robust bounce back as the Sensex has gained almost 25% from the lows. It looks that this rally might have the fire power to add some more percentage points before returning to normal bearishness.

  • Who says one cannot make money in Bear market???
  • INFLATION NEARS ZERO.
  • SENSEX.
  • NIFTY. 
  • Strategy corner: 
  • this weeks recommendations:

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Back To 10,000 ! – 26/03/2009.

  • Please note that this article is written on Thursday 26/03/2009, because of the Informed Investor Exhibition starting from Friday. So all rates are Thursday’s closing rate.
 Classical Bear Market Rally.

We are in a midst of a powerful bear market rally. The way the market has moved from the lows of around 8047 on Sensex to above 10000 levels makes one say that this is a classical pull back rally, which will make many people think that finally the bull market has started. The real bear market rallies are like mirages found in a desert, only when you go near you find it to be an illusion. Similarly Bear market rallies also provides an illusion in the form a strong pull back and easily deceive lot many people into believing that this is a resumption or start of a new Bull run. But the fact remains otherwise.

 

Bear market rallies have their foundation in short covering. Short covering provides for one of the most beautiful sight that the stock market has to offer and that is a short covering rally in the midst of a strong bear market, which is exactly what we are witnessing now. This is a robust bounce back as the Sensex has gained almost 25% from the lows. It looks that this rally might have the fire power to add some more percentage points before returning to normal bearishness.

Who says one cannot make money in Bear market???

One can make money in a bear market and that too good money. If one considers short covering rallies that have happened over the past one year of Bear market, then easily can make money provided they change their outlook and start thinking as a short term trader. One needs to remember Bear market rallies are short and swift, and offer good percentage returns, if one trades wisely with the help of technical analysis knowledge. Any investor or a trader is more than happy to settle for a return of anywhere in the region of 15%. In a Bear market rally, one can easily earn a return of around 15 to 20% in specific stocks from their lows and that too in a short span of time. One needs to be on their toes and book profits for such returns.

 INFLATION NEARS ZERO.

Inflation fell to 0.27% for the week ended March 14, 2009 as compared to 0.44% in the previous week. Slowly but surely it is marching towards the zero mark and soon it will not be any surprise to find the inflation at sub zero levels or deflation setting in. Once again the focus will shift towards the RBI for having another round of interest rate cuts.

SENSEX.

Sensex opened the week at 9040, made a high of 10061, made a low of 9040, and closed on Thursday at 10003, thus registering a weekly gain of 1037 points until Thursday.

 

The Sensex has given a strong Trendline breakout at 9861 on Thursday, which was the expiry for derivatives, and now is headed up.

 Last week we mentioned the Sensex has formed a Flag pattern and the targets were 9724-9940. These targets were achieved by the Sensex on Thursday as it managed a close above 10000 levels. Now the pattern targets are suggesting 11407-12891.

The ROC and MACD are in the positive zone and are indicating a Buy. The RSI is at 70 and is indicating continued Bullishness.

If we consider this rise to be a correction of the fall from 15579 to 7697, then the correction levels are 10708-11638-12521.

The Trendline Resistance is at 10501-10860 and Trendline Support is at 9850-9309.

 For the week ahead the Resistance is at 10250-10469-10750. Support is at 9861-9633-9281.

NIFTY. 

Nifty opened the week at 2807, made a high of 3103, low of 2807, and closed on Thursday at 3082. Thus the weekly gain till Thursday was 275 points.

The Nifty has given a strong Trendline breakout at 3026 on Thursday, and now is headed up.

Last week we mentioned the Nifty too had formed a Flag pattern and the targets were 2969-3055 and we achieved those targets when we managed a close at 3082 on Thursday. Now the pattern targets are suggesting levels of Nifty 3399-3755.

The ROC and MACD are in the positive zone and are indicating a Buy. The RSI is at 70 and is indicating continued Bullishness.

If we consider this rise to be a correction of the fall from 4649 to 2252, then the correction levels are 3167-3450-3719.

The Nifty April series is witnessing strong PUT writing at 2900 levels which will act as a support in any fall.

The Nifty has Trendline Resistance at 3225-3420. The Trendline Support is at 2957.

 For the week ahead, the Resistance is at 3141-3198-3240. Support is at 3027-2914-2860. Strategy corner:

Last week was a Super Duper Success as the RPL 85 Call almost gave returns of 1200% or 12 times as the Stock reached 97 levels.

This Week Construct a Bull Spread for IFCI 19.60 and is expected to reach 22-24 levels.

So Buy 20 CA at Rs 1.5 and Sell 22.5 CA at 0.90. The Net premium outflow will be Rs 0.6 and max profit will be Rs 1.9.

 this weeks recommendations:
  • BUY EDUCOMP 2141 SL 2094 TGT 2233-2265-2350.
  • BUY REL INFRA 564 SL 551 TGT 579-596.
  • BUY IFCI 19.60 SL 18.60 TGT 21.95 - 22.65 - 24.50.
  • BUY HINDALCO 52 SL 48 TGT 58-62.
  • BUY NEYVELLI LIG 80 SL 77 TGT 86-91.
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.

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