The leader of the next bull run ?

The title might surprise quite a few when they see the stock that has been mentioned below.

However, one basic shortcoming of following charts only over the past few years can tend to mislead into believing that this stock is not doing anything for the last 5 years.

The stock is Reliance Industries Limited. This stock was the darling of investors once upon a time, especially in the Gujarati community, who will still be loyal to it. (I have also heard that there are some traders, who never go short in RIL, as a mark of respect to the tremendous wealth it has generated for them in the past).

The duration of a trade is directly proportional to the time frame on which one studies the chart ! 

In my view, to get a long term view of this chart, one should not look at the performance of the stock price only over the past 5 years. It is clear as shown below, that this stock has been sideways over the past 5-6 years (weekly chart below)

A very long term monthly chart also does not show much promise and it can also be termed bearish (monthly chart below).

The above monthly chart is on a linear scale. The same monthly chart on a LOG SCALE now gives a different picture as shown below:

The monthly chart has a support of a trend line (blue) near 780, and a very long term trend line support near 550 - 570.

A look at the yearly chart of RIL:

In my view, after the steep rise till January 2008, the stock is only consolidating, and might do so till it touches the long term trend line. However, since nothing can be said with certainty, it is better to buy some quantity for the long term near 780- 790, and then finally near 560 - 570.

A text book pole - pennant formation can also be seen on the long term chart, and if the support at 550 - 560 holds, I would expect this stock to give a breakout for a target of minimum 3000 over the long term.

I am sure, people will be afraid to buy this stock especially due to all the negative news regarding gas prices among others coming in the media on a regular basis.

However, old timers in the stock market will be aware that this stock thrives on a dose of bad news, and the best time to buy this stock is when the news get really bad.

If one believes in the India growth story and the fact that our stock market is headed for much higher levels in the next 3-5 years, I firmly believe RIL will be one stock to watch out for.

Reason for being bearish on Tata Motors

I am no expert in Elliot Waves or in Harmonic patterns, but follow simple basic TA.

As seen in the chart below, Tata Motors had a good support near 359-360 since the last 3-4 months, and that support was broken recently.

Although the 200 dma gave support near 332, as long as 360 is not crossed, the lower levels can be revisited.

A short opportunity has a very low risk near 357--360 cash levels.

 

Nifty - a possible scenario

After the flop show before expiry, here is something that bulls can look forward to:

This has happened in the past, and 'might' happen again.

On 30th January (expiry day), Nifty spot made a low of 6027.25, and Nifty futures made a low of 6025.1. This was Nifty January futures.

Nifty SPOT chart:
 

On the same day, Nifty February futures made a low of 6062.35.

Nifty futures chart:

 

This was mainly due to the premium on February futures. It has happened a few times in the past, that once the next month becomes current month futures, it visits the previous low again.

Nifty futures made a low of 6034 today, whereas Nifty spot went much below the low of 30th January (5994.95 low today).

A lot of people might be waiting to see what happens at the 200 day moving average, which is just a bit below today's low and also the double bottom near 5975 (spot).

It is possible that Nifty futures might just test 6025 and bounce from there, thus keeping the '200-dma-bulls' waiting.

If at all Nifty does give a bounce from Nifty futures 6025, the bounce retracement levels are 6130-35, or 6170 - 75, or even 6215- 20 on Nifty SPOT.

Watch Nifty futures 6025 closely tomorrow and in coming days !!

First signs of expiry at higher levels on Thursday

It was not without reason that I mentioned of a possibility of expiry being above 6200.

If the charts shown below are right, we might be seeing a repeat of what happened in August 2013.

Nifty made a low at 5118 just a day before expiry, and some action started in Nifty options that gave a hint of the big rise that followed till expiry.

The August 5100 CE chart is shown below with the Open Interest of that CE option. (this is a 5 min chart).

5200 Aug CE made a low near 20 on 29th August, and after 1 pm, the Open interest in this CE option started dropping drastically.

The 5200 CE rose all the way from 20 to expire at 210 in just 10 hours !!

If one looks closely at the 6100 CE chart of today, a similar pattern can be seen emerging.

The 6200 CE also shows a similar pattern:

If this shedding of open interest continues tomorrow, Nifty can rise.

As regards levels in Nifty, the high before the RBI policy today 6171.8 needs to be crossed fast tomorrow, for bears to panic.

This is just an initial sign and needs confirmation tomorrow by way of drastic fall in Open interest of the 6100 and 6200 CE options.

A gap fill, or a huge island reversal ?

On looking at the daily chart of Nifty futures closely, it can be seen that there isa gap from 25th November (high 6141.5) which was never filled till date.

Even today, the selling took Nifty futures to 6142.5, still leaving a gap of 1 point.

Bulls can say the gap has been filled. If Nifty futures does not go below 6141, we can see a bounce in the market (maybe to try and fill the wide gap left today).

However, should Nifty futures open with another gap down below  6141 tomorrow, this can be a huge island reversal !! (extremely bearish till it remains below 6141).

Watch the open and low tomorrow.

 

In case of gap down on Monday, what to expect

With the way US markets closed on Friday, it is almost a certainty that our markets will open with a gap down tomorrow.

In case of a gap down, the support zone marked on the chart might come into play, and if held, longs can be initiated.

I still believe expiry will be near 6250 or above (I can be wrong, please do your own research before going long).

Options data will provide a clue about expiry levels as Monday and Tuesday progress.

 

Sesa Sterlite - an interesting trade coming up ?

Sesa Sterlite broke out of a Pennant formation on 20th January on hourly time frame and completed the text-book target.

The stock is now repeating the same pattern and a break out above the pennant (211 fut), has the potential to take it to 226-230.

The pattern might play iteself in the first hour itself tomorrow, and once the breakout happens, a 220 CE can be bought near 2-2.5 for a target of 6-8.

Where is Nifty heading in January ?

online poll by Opinion Stage

An unique Pair Trade

This is a combined chart of Tata Steel 410 CE and Tata Motors 360 PE.

The pair is showing a bottoming out formation near 11.

One can buy BOTH for a combined total near 13.5, with sl below 11.

Below the Sl, one can exit the leg which is going against the trade, and ride the one going for.

PLEASE IGNORE THE LABELS AND TITLE ON THE CHART ! 

 

A poll on Infy stock movement before the results are declared on 10th January

online poll by Opinion Stage