After the defense of the 'Fort of 5200' can we see a counter attack now?

The 'Fort of 5200' was successfully defended amidst weakness in the global markets. And as soon as global markets gave a reversal signal, bulls went for the kill and have managed a 'text book' breakout.

Classical TA theory gives targets of 5640 and even 5880 on the Nifty. The word 'distribution' was used a hundred times on various channels over the past week. Was it distribution at higher levels or accumulation at lower (5225 - 5250) levels? As of now, it seems the latter is true.

- Why would a leading stock which is coming out with results on the 13th hit all time highs (Infosys)?

- Why would the Nifty Midcap and Nifty Junior cross the previous highs?

- Why would the Open Interest of 5200 and 5300 puts keep rising?

- Why would the favourite whipping boys Oil & gas and Telecom make ferocious strides in the last 2 weeks?

I always maintain - any charts can have 'n' number of bullish arguments and an equal number of bearish arguments. However, I really cannot find any bearish arguments for the Nifty right now, except for the fact that recent highs 5366.75 and 5399.65 have not yet been crossed.

I feel it is a matter of time now, and since there are many who still have a bearish view, a cross of these levels can bring in huge short covering. Those who bought on dips to 5220 - 5250 last week, have already got a cushion of 100 points and trailing the stop loss is easy now. For those who might have missed the bus, a tighter stop loss can be 5290 on Nifty futures to make a fresh entry.

A small dip first?

An extremely quick and brief update from the rainy beaches of Goa.....

It was an extremely volatile week that ended with a very big fundamental news for the oil and gas sector in India. The stocks from this sector will definitely be re-rated.

However, Nifty has given a bearish pattern for the weekly chart and any dip lower than the low last week (5259.9) will trigger this pattern, and the immediate supports are near 5245 and 5205. However, in my opinion, a dip to even 5160 - 80 will be healthy for another and probably a final attempt to cross 5400 on way to 5545. So, any dip this week can be an opportunity to buy as low as possible, with a stop loss below 5150.

A dip below 5150 - will most probably signal curtains to the bull run opening up targets difficult to believe right now - so, let us wait and see whether and where Nifty takes support.

No high is a high in a Bull market

The bearish possibility last week was completely negated as soon as Nifty crossed 5060 first and then 5170, closing well above these levels.

I have seen many chart patterns get repeated over a few months / years, and I have spotted a very similar pattern that occurred in August 2009. Nifty fell to 4350 levels in 2 successive weeks in August 2009 only to close near the highs in both weeks. The third week saw a breakout from these hammer candles, above 4578.8 and then Nifty travelled all the way to 5181.95 over the next 9 weeks.

A similar pattern has been created now, when Nifty fell to 4961 and 4967 in successive weeks and crossed the weekly hammer candle when it crossed 5139 on the first day of the week gone by and has not looked back ever since. A chart showing the similar patterns on weekly charts is shown. However, the markets are now at overbought levels, and if the same pattern is to be repeated, a small correction is due this week - expiry is a good trigger. As shown in the daily charts of August 2009 and current, I expect a dip to 5180 - 5220 at some point, maybe before expiry.

As long as 5150 - 5170 are held in the dip as a worst case, Nifty can resume its upward march. Likely targets -------5450 - 5545.

If and when (more of 'when' and less of 'if' Nifty does give a dip, I am sure, lot of people might start shouting about the end of the rally and will also start giving targets of 4650 and 4200.

However, options data for July suggest a pleasant surprise for bulls in July too.

STAY LONG FOR JULY AS LONG AS 5150 HOLDS.

I am expecting a similar pattern in the world markets - a dip and a rise to about 5% above current levels at least (DOW 10750, S & P 1150 to give some figures)

The HungAry Bear

The levels mentioned in the chart last week need to be referred again and that tells the whole story.

Nifty went to the first level on Monday and was banged down on Tuesday, 1st June, then recovered and rallied for the rest of the week to touch the second level right near the close on Friday, surely tempting many to carry longs over the weekend!

A friend @girish_k tweeted on Friday evening -

girish_k @ap_pune PIIGS are Hung(a)ry for more :D. So apt.

However, the charts had said it earlier - the trigger keeps changing.

Those who followed my old posts when I used to mention - bulls are constantly raising the bar - now, exactly the reverse is happening. 'Bears are lowering the bar'.

2 weeks back, the bar by the bears was at 5278, then at 5200. Now this bar is at 5150-70.

A gap down opening on Monday is almost sure, and if Nifty opens below 5060, it will create a dangerous formation on charts, and moreover, if the close is also below 5050, the bar will get lowered to 5060 straightaway.

The laggards of the recent past - telecom and sugars led the rally in the past 10 days, and the index heavyweights - Reliance, Tata Steel, ICICI Bank, did not do much - could it have been called a rally at all?

Tata Steel below 473 is heading for a quick drop to 466 and then 433!!

Agreed - Harbhajan Singh scores a quick 30-40 in 15 balls once in a while - but can one bank on him?

A close below 4940 opens a target of 4535! All depends on the extent of the bounce after the deep cut expected in the next couple of days.

Trading guidelines - if Nifty opens gap down below 5060, hold shorts as long as close is below 5060. If after the fall, Nifty rises sharply, and crosses 5060, one can go long and see if 5150 is getting crossed, failing which 4535 is a logical target in the days / weeks to come. All this is for the next few days and not for tomorrow. For tomorrow, I am afraid, we might close at the lows.

Disclaimer - These views can change intra-day depending on the market movement.

PS - For those who asked about HungAry, google 'Hungary crisis' and you will get the answer.

Cease fire on Dalal Street last week

Last week saw a fierce fight between the bulls and the bears, and although some would say that bulls won, I am not sure.

A V shaped recovery was only to facilitate expiry of huge quantity of options that had been written, and the 'maandavli' was to ensure that expiry is near 5000. No one would have expected on Tuesday when Nifty made a low of 4786, that there will such a sharp recovery.

Yes, a recovery was on the cards at the huge support zone of 4760 - 4800, however, it was the ferocity that shook out many.

The maandavli of bulls / bears is over for the May settlement and a fresh settlement has begun.

2 important levels are shown on the chart, where bears might try to hold the bull by the scruff of their necks.

I still feel this is not a correction, but a 'downtrend', and such V shaped recoveries can bring out the bulls only to be shocked by a gap down opening.

It is going to be a fun filled month of June - definitely not for the weak hearts, where again, the range can be big.

I am expecting at least 4650 in June.

Above is purely my view and will go wrong if the market keeps going up, and crosses and closes above 5200 on the Nifty.

THE BEAR MIGHT BE TIRED NOW

The image says it all.

As expected in the update on 9th May, Nifty has lost almost 9% from the April close to the lowest level on Friday, all in just 3 weeks. This has made all indicators on the daily time frame extremely oversold, and a pullback rally is in the offing now.

In my opinion, the bear, after a tremendous onslaught over the past few days, looks tired now and needs a rest. This is true all across the world markets.

This is also generally a period, when the baby bulls come out and rejoice, and start shouting that the last 2 weeks was just a correction, and that Nifty is now headed for 5500 levels and then 6500 and then....

I seriously doubt this!

Just one word of caution for the bulls - please keep an eye in the rear view mirror - and look for the charging bear once he completes his rest.

For those who believe the next rally will just be a relief rally, levels given on the chart will help.

The first confirmation of this will be seen if Nifty spot rises above 4947 on Monday, which confirms the bullish hammer pattern that Nifty made on Friday. Once this is done, the previous low of 4842 should not be breached - this is the stop loss for any longs now.

A rally to 4990 - 95 before Thursday is possible, but it may not cross and close above that level in this May expiry.

Subsequent to that, there might a fall to 4900 - 4910 level, and then a rise to 5055, which will be a key resistance. A cross and close above 5055, can take Nifty to 5185.

I seriously doubt if 5055 or 5185 will be crossed in June.

THE BEARISH VIEW WILL BE NEGATED ONLY ON A CLOSE ABOVE 5200.

I have a suspicion, a lot of bears will be trapped in the next couple of days, and then as always, a lot of bulls will be trapped again later.

I might be completely wrong, if Nifty cannot go above 4947 and keeps falling - but the risk: reward is in favour of being bullish for now.

ANOTHER ROLLER COASTER RIDE IN THE OFFING?

Amazingly, Nifty behaved exactly as antcipated last Sunday.

Now, over the weekend, everyone is wondering - what next?

Everyone is now looking at the 200 DMA which is at 4981 as of today.

One hint regarding whether this level will be broken is generally given by Options data - and it seems bulls are intending to defend the 200 DMA at least for now.

Have an eye on the following levels:

4900 ce - 165 (current 200); if the level of 165 is broken decisively on the gap down on Monday, then 4981 might be tested.

However, there is a catch.

Someone is trying hard to prevent Nifty from going down in a hurry. Apart from the Options data, this is more apparent from something else that was noticed in the last few minutes on Friday.

NiftyBEES made a low of 507.6 (equivalent to Nifty 5076) and rocketted to a high of 518.25 (Nifty level of 5182) within a matter of 5 minutes almost towards the close. Moreover, this was with very heavy volumes of 12500 after 3.25 pm. Refer chart posted here.

This only means one thing - Nifty might again surprise everyone, by recovering from the lows next week, and might rise all the way to 5180 levels once by expiry.

All this sounds strange - but stock markets have a tendency to surprise everyone - on the downside, and also on the upside.

So, be prepared for another roller-coaster ride next week.

Keep an eye on 5026 on Nifty spot to start with and the 4900 Ce level given above, and then 4981 and also the NiftyBEES and you will know what the Nifty wants to do.

For long term investors, do not invest in Bharti right now in a hurry. Although it can give some fast upmoves, it seems to be going towards a good support of 232 soon, and if that is not held, then even 134 is possible, and then all the way down to 59!!

Do not invest in telecom stocks in a hurry!!

Correction starts -with a bang

As has been mentioned on several occasions, Nifty could not close above the crucial 5350 - 5400 band and the month of April gave too many whipsaws - the market refusing to go down. This led many to believe that this will continue forever. However, one needs to be aware that a major contributor towards the rise in the Indian markets have been the FIIs.

Whenever the FIIs decide to sell, they are not bothered about the support levels and invariably, this leads to gap down openings in the Indian market. The major reason for this is the fact that DOW retraced exactly 61% of the crash of 2008 and could not close above 11300.

Although everyone is saying that the 200 DMA which is currently at 4961 will hold, I have my doubts. The 200 DMA being tested twice within 3 months (8th February and now) is not a good sign.

The market is in an oversold state right now, and there might be a rally to 5148 - 60 level next week. The best possible scenario is a rise to 5225.

As long as Nifty stays below these levels, it can start its downward journey and the next fall, can take it to 4766, perhaps in May itself. Nifty can be out of the woods only on a close above 5280 in May - which seems extremely unlikely for now.

The logical question in everyone's mind will be - where will this correction end?

I would not be surprised to see Nifty at 4200 or even 3790 some time this year - yes, in 2010.

NIFTY FOLLOWING LEVELS SO FAR

Nifty has followed the road map charted a few weeks back and is at a very crucial resistance band.


5180 - 5220 is a band which will be extremely difficult to cross, in the same way that 5090 - 5110 acted as a support.

However, the fall might not be fast, since lots of traders are stuck with short positions and they will cover on every drop, thus supporting the market.

A close near the lower band - as close to 5100 as possible - will be an invitation for bears to attack overnight, taking Nifty below 5090.

As seen on numerous occasions, such levels are generally crossed only with the help of a gap down.

Time for caution to hold longs overnight, since bulls might run out of steam any day.

EDGE OF THE CLIFF

The stage is set for the bears.

Will they? Won't they?......

They need to ensure Nifty gapping down below 5060, else be ready for a fightback.

AAL IZZ WELL.....Is all really well??

A lot of people have a wrong understanding of the science and art of Technical Analysis.

Technical analysis is not a tool for prediction, like what astrologers attempt to do. TA takes help from historical data and shows what are the possibilities for the future. There are those who just follow the trend and and prefer to get stopped out, or there are some who pay heed to the various possibilities and take action in 'anticipation'. The former use TA only as a science and the latter understand the science behind TA and use their mental creativity as an 'art.

Hence, I always maintain that TA is a science and also an art!

It all depends on perception. It was this perception that did not allow any shorts till 4830 was being held before the budget, and the result is a 6% rally in Nifty in 4 days.

However, now, there are some roadblocks ahead. Although TA as a science says to be long, TA as an art suggests caution.

A glance at the daily chart shows a striking similarity between the chart when Nifty was 5310 and now. What happened after 5310 is known to all - whether the same will get repeated is something no one wants to even think of at this stage. The post budget rally has brought in a sense of euphoria and the market is HOT now. The bears are known to strike when the market is HOT.Is all really well??

If the similarity between the first week of January and now holds true, we might have already seen the short term top, or are very close to one.

The hourly chart also shows a lower top in Stochastics and also a sell on MACD, and hints that Nifty is headed down.

If Nifty cannot cross and close above 5115 - 5135 on Monday, it is safe to say, we are headed downwards.

Downwards to where?? Everyone knows the huge support at 5050 - 5070, and if the bears cannot break this intra day, they will try and do it overnight.

Below that, the level 4960 -70 is also a critical level, and if Nifty holds this level, it is safe to take longs again, with a stop of 4930 and stay long for this month!

An interesting combination to go long will be Nifty near 4970 and the leader near 980 once again.

It might sound funny that I am cautioning against fresh longs and advising possible shorts - especially when the US market squeezed the shorts on Friday, and FTSE of UK made a new 2010 high.

But yes - the risk: reward ratio is certainly not in favour of fresh longs at this red hot stage !

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ANNOUNCEMENT - A full day course has been planned - on the Science of Technical Analysis and the Art of trading stocks and Nifty futures - in Pune; The date is Saturday, 3rd April.

Those interested in more details can get in touch on the yahoo id timethemarket@ymail.com

FOLLOW CHARTS AND IGNORE NOISE.....

As mentioned, the 2 key stocks that held the 200 dma outperformed the index by a long way - Tata Steel and ICICI Bank.

It is amazing how, if one just follows charts, and keeps the 'noise' out, a completely different picture emerges. I have heard many are still going short or averaging earlier shorts, believing that this is just a pullback rally. So what is it is just a pullback rally!

A rally is a rally is a rally; it is no untouchable that one is not supposed to trade long in it.There will be enough signals when this uptrend ends, to sell longs and go short.

The long call at 4870, with a stop of just 40 points is 150 points ahead, and a reversal will also be spotted within 30-40 points from the top, if not earlier. The 2 key levels that all will be looking at now are 5060 - 80 and 5160 - 5180; however, there is another important level which will come into play tomorrow - no, it is NOT 5050! If Nifty manages to cross this level smoothly, the writing is on the wall, and Nifty will follow the levels posted 2 weeks back - yes, who says the trend changes every day?

The low on Nifty spot today needs to be keenly watched, and if bulls manage to hold this well, bears are in serious trouble in this 'pullback rally'. It is too early to talk about the importance of the low today, and it will explained at an opportune time.

Amongst the key stocks, the 'leader' of the Indian stock market is fast losing its credibility and it has to do something as early as tomorrow - readers will know which stock is being referred to; and a 3% rise is expected in this stock sooner rather than later.

So, ride the uptrend till it lasts and be ready to sell and go short.

You can get 'live' updates on

http://twitter.com/ap_pune or

http://twitter.com/TimetheMkt


A full day course is being planned - on the Science of Technical Analysis and the art of trading Nifty futures - in Pune; The tentative date is Saturday, 3rd April.

Those interested in more details can get in touch on the yahoo id timethemarket@ymail.com

Bulls on ventilator support

Apologies for the long absence, will be updating regularly now.

It has always been observed that once the 200 dma is crossed upwards comfortably (in April 2009 this time), the market invariably comes down sooner or later to test the 200 dma.

As is said, bulls live above the 200 dma and bears live below it - however, these are testing times for bulls, and they need to utlilise all ammunition at their disposal - for survival above their lifeline.

The job is that much harder when some key stocks have settled below the 200 dma.

A quick check shows that Bharti, Rcom, Hindustan Unilever have settled well below the 200 dma, Reliance, ONGC, SBI and NTPC are just below the 200 dma, but for more than a week now. Bulls have very little ammunition left!!

Out of the index heavyweights, only ICICIBank and Tata Steel have managed to survive above the 200 dma.

This doesn't augur well for the near future, unless the key stocks go well above the respective 200 dma very soon.

Looking at Nifty - after making the low of 4675 very close to the 200 dma, Nifty managed to claw back upwards, however, bears became active again near 4830 and 4930.

A glass can be seen as half full or half empty.

Looking at the optimistic side - after managing to hold the 200 dma, Nifty took a pit stop at 4830, and another at 4930.

Now, without going below the low on Friday. Nifty needs to cross 4950 fast and close above it. Bulls seems to have some backing from the international cues, with the DOW closing well on Friday and Nikkei futures were trading at + 190 around 11pm on Friday IST.Hang Seng has been battered and bruised and one can expect the bulls in Hong Kong to retaliate on Monday morning.

The indication is that we should have positive cues from Asia on Monday morning, and it needs to be seen, if these positive cues are enough for Nifty to cross 4950, which is just 2.2% away from current levels.

If 4950 is crossed successfully, I would not be surprised to see 5150 - 5170 in February, maybe on the day of the budget.

If 5200 is not crossed, by Friday, it opens a big window of opportunity for bears - and we shall see what they intend to do next weekend....

However, MISSION 4950+ first.