Archives : CORRECTION CONTINUES. - 23/11/2007

CORRECTION CONTINUES. – 23/11/2007

                 Correction, which started on the eve of Diwali, continued for the third straight week. It was mentioned that the Sensex needed to close above 20000 and Nifty to close above 6000 to achieve higher levels. Both Sensex and Nifty failed to conquer their respective levels. Sensex touched 19971 and corrected, while Nifty touched 5981 and corrected. Just see, this is the power of analysis.

  1. INDIAN MARKETS CORRECT IN SYNC WITH GLOBAL PEERS.
  2. POWER SECTOR HARDEST HIT IN THE CORRECTION.    
  3. RPL: FINALLY READY TO BREAK FREE.
  4. SENSEX: 
  5. NIFTY:
  6. HOW TO TRADE?
  7. LAST WEEK’S RECOMMENDATIONS:
  8. THIS WEEK’S RECOMMENDATIONS:

INDIAN MARKETS CORRECT IN WITH GLOBAL PEERS:

             Indian market, which was continuously outperforming its Asian and emerging market counterparts, finally fell prey to the correction, which was lurking around the corner. China, HongKong, Taiwan, Korea are almost down by 15 to 18% from their recent highs. India, which until now was correction proof, too finally joined the correction. The US market is trading well below the 200 DMA and is now in a bear phase. Global markets will definitely get affected, but India will present a case for decoupling over a period of time, but it will have to fall in line in with global markets. But the out performance will be there even in the downfall. Over a period of time, Indian market will decouple itself as it is more of a internal consumption story and the dependence on the US market, bar the IT sector, is very minimal as compared to other economies.           

POWER SECTOR HARDEST HIT IN THE CORRECTION. 

           Power sector, which was the darling of the stock market till few weeks back, was the hardest hit in this correction. All stocks in this sector have corrected substantially and present a good case for trading buy. Investors can argue otherwise, but please remember we are in a momentum market. It should be remembered that this sector is the leader in this bull run. Also please note that the IT sector is looking oversold and may witness a relief rally.

RPL: FINALLY READY TO BREAK FREE.

            Watch out for RPL on Monday, as it gets ready to sail free, out of the F&O curb. Lot of traders will celebrate now as it was under the curb for more than a week. Many lost their fortune as it fell from lofty levels of 295 to 197 levels. Now it will be interesting to see how it catches up with the remaining of the market. It may open with a gap with possible targets of 229 to 247. Any close above 247 will pave the way for the previous top to be tested and possibly achieve targets of 330-364 in the medium term.              

SENSEX:

            Sensex opened the week at 19895, achieved a high of 19971, low of 18182 and closed the week at 18852. The weekly loss for the Sensex was 846 points. Sensex failed to reach and close above the figure of 20000. As a result, it underwent a correction and found support at the 50 DMA level and managed to bounce from there. Now the 50 DMA is placed at 18310. The Sensex has a trendline resistance at 19221 and 19804. The Sensex is undergoing a correction from 19971 levels and the correction levels are placed at 19076 and 19288. If the Sensex manages to close above 19288, the correction will be over and Sensex will be on its way to test levels of 19804-20238. If the Sensex breaks 18182, then it will directly head towards the previous bottom of 17171. For the week ahead, Sensex has resistance at 19076-19288-19804. Support is at 18548-18310-18182.

NIFTY:

            Nifty opened the week at 5908, made a high of 5981, low of 5394, and closed the week at 5608. The weekly loss for the Nifty was 298 points. Nifty has a trendline support at 5511, and trendline resistance at 5764 and 5934. Nifty underwent a correction from 5981 levels and the correction levels are 5688 and 5757. Nifty must close above 5757 for the correction to be over and target higher levels of 5934 and 6012. Nifty should not break 5394, or it will head towards the previous bottom of 5070. Nifty OI PCR is 1.19, which showed some improvement in the past two days. Nifty futures too closed at a premium of 12 points over the cash, indicating some short covering. 5400 and 5300 strikes show lot of addition in open interest, thus signaling some sort of support at those levels. For the week ahead, Nifty has resistance at 5688-5764-5934. Support is at 5514-5430-5394.

HOW TO TRADE?

            This week I suggest use a hedge strategy for RPL. RPL 209 target is 229-244, so hedge it using Nifty futures. Buy RPL futures and short Nifty futures. Also IT stocks are looking oversold. One can buy Tech Mahindra 1035 keep a SL of 981 for a target of 1084-1097.

LAST WEEK  S RECOMMENDATIONS REVIEW:

            Once again inspite of the correction our recommendation have fared brilliantly. The Star was of course ESCORTS.

ESCORTS 143 TGT WAS 172, REACHED 173.

ALOK IND 72 TGT WAS 84, REACHED 84.

ITC 205 TGT WAS 212 REACHED 215.

GESCO 695 TGT WAS 760 REACHED 814.

GNFC 190 TGT WAS 203 REACHED 203.

ORBIT CORP 706 TGT WAS 787 REACHED 840.

CHAMBAL FERT 72 TGT WAS 82 REACHED 81.

HOCL 78 TGT WAS 87 REACHED 83.

THIS WEEK S  RECOMMENDATIONS:

  • JINDAL ST & POWER: 12105 SL 11444 TGT 12990-13429.
  • WELSPUN GUJ: 398 SL 384 TGT 418-437.
  • BAJAJ AUTO: 2542 SL 2485 TGT 2575-2684.
  • NEYVELLI LIGNITE: 214 SL 193 TGT 227-258.
  • ESCORTS: 147 SL 140 TGT 156-167.
  • RPL: 209 SL 206 TGT 222-229-247.
  • NTPC: 236 SL 227 TGT 245-258.
  • TCS: 960 SL 935 TGT 1007-1031.
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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