DON'T SELL AT OR BELOW 6060 ITS TIME TO COVER SHORT

n  The equity market generates an endless series of folk myths – snippets of conventional wisdom that supposedly reveal how traders think and thus how the markets will react.

n  You know: “sell in May and go away.” “Always buy new highs.” “Bulls make money, bears make money, pigs get slaughtered.” And many, many more.

n  The current folk myth concerns the “January effect,” the prediction that if the first week in the New Year is green the rest of the year will be green too.

n  Maybe, maybe not. But this year there was a strong attempt to make sure the first week closed positive … and it almost failed. The extraordinary effort required to eke out a very modest advance on Friday afternoon testifies not to the market's strength, but to its weakness.

n  So much so that we are now calling for a decline this month, especially in the segment that interests us, the NIFTY AND SENSEX.
The rest of the year may be green; but we see a real possibility the SENSEX AND NIFTY already breached its December lows around 20568 and 6129 before January is out. This is a danger sign now indicates that the market is topped out for the first quarter of 2014.  
This should not be very surprising. After an almost unprecedented rally in December – up with selected stock snatch both the index in to NEW high – a retracement was virtually baked in the cake. And Thursday afternoon's push to close positive was a clear attempt to manipulate investor sentiment.

n  By Monday the reversal is due and some suckers rally or bull trap of kind move is likely to unfold. Today being expiry day of JAN 2014 probably it will make a temporary bottom near 6080 to 5980 (being important swing low and daily chart is now in the oversold territory) looks obvious: it was the worst single week in Indian equity indices since August, and all are now negative for the year. The price action (see the chart) was extremely bearish.

n  This week we may see consolidation, with 6250 to 6220 max as major resistance levels. But the support has fallen to 5980 to 6080. If we see a bounce in the early session Thursday after a weak open we will be looking for short entries at higher lvl say around 6250 area. However on Thursday open is weak say gap down below Wednesday’s low and trades above that low then a smart bounce will take place or if it continues its downward journey 5^th consecutive day then from Monday a bounce will start. We are of the opinion that avoid stock which moved down along with the NIFTY and buy on decline stock which resisted to go down with the NIFTY. As their individual trend is considered as +ve.

n  Note that our longer-term outlook is still bullish. A healthy correction in a requirement for another leg up in the bull market. But for the short term the smart money – and ours – will be looking for ways to get short if NIFTY closes below December low.

n  In the above chart just see a downward parallel trend channel which as a support area at 6060 as mentioned yesterday and now oscillator is also entering in to oversold area indicates that the bottom is near and selling short at lower lvl say around 6080 or lower will be a dangerous affair.

n  NO short pl now and cover 100% short near or below 6080 lvl.

BANK NIFTY CLOSED 10437.65: DN -0.81%. Trend is down, swing is down and flow is down.

Now we have reversal lvl at 10660, support at 10100 due to support line of downward slopping parallel trend channel and now oscillator entered in oversold area indicates some bounce must come. Expect change in mood above 10660, more sustainable rise above 10880 while down side support is at 10350 area. Daily and weekly chart entering in oversold hence avoid fresh short.

Trading idea for FEB MONTH CONTRACT:

·         BHEL: RS 162.30. BUY FOR POSITION LONG AS STOCK HAS BEEN OBSERVED IN ACCUMULATION PHASE SINCE 2^N WEEK OF DECEMBER. CLOSE ABOVE 172 WILL GIVE PRICE TGT OF RS 200 IN THE MONTH OF FEB.

·         DENA BANK: Rs: Rs 54.40. Buy with SL of Rs 51 for swing trade and delivery. Stock can move further up to Rs 58 to 60. Close above 58 can bring more surprise.

·         VIJAY BANK: Rs: Rs 41.85. Buy with SL of Rs 38 for swing trade and delivery. Stock can move further up to Rs 48 TO 52. Close above 43 can bring more surprise.

·         DISH TV RS 48.35: ACCUMULATE FOR DELIVERY AS STOCK SEEMS TO BE BOTTOMED OUT AND CLOSE ABOVE 50 SHOULD GIVE TGT OF 56 TO 60

·         SUNTV: RS 355.50. INITIATE BUY ABOVE RS 360 FOR TGTOF 380 TO 390.

RBI DISAPPOINTS MARKET MEN

n  In the above chart just see a rectangle pattern was formed and on last trading day it has just closed nar the support area (while horizontal line). Also day was like a DOJI with minor bearish candle.

n  If we look at various indicator then it is placed like: 13 DMA, 6274, 50 DMA 6241, 200 DMA 5980, ADX in sell mode, RSI and STK% is in oversold while ST is at 6263 for daily and 6195 for weekly. MO is at 6363 while WO is 6178. First imp resistance is at 6178 and then 6218 lvl.

n  The weekly RSI is at half way and placed at 40.42, while daily is at 22.47.

n  STK% is at 24 while MACD is at 1.35 area. The volatility indicator now at -2.02 and in the past when panic came it arrived is moved up from -2 to -0.14 moved away from extreme bearish lvl. Indicates bounce should take place.  

n  The overall picture is bearish as it has opened with bearish gap in weekly and trading below EMA and Swing is bearish. Unless it trades and close above 6260 area.

n  As per my long term chart as I said earlier we have been topped out at 6480 and progressing in a corrective move in long term structure. In first quarter of 2014 I don’t find chances of moving above 6480 recent peak.

n  Our long term probable TGT for the first quarter is 5955, 5794 as the near term TGT lvl.

n  Strategy: Cover short around 6060 or if open is weak below yesterdays low and trades above 6150 lvl. Expect further bounce.

n  On higher side 6210, 6266 are important key resistance lvl. While Fibonacci of last move is 6229, 6255 and 6282 are the key ratios.

n  Position trader stay short with SL of 6330 and final 6360 as the key reversal lvl.

n  SECTOR UPDATE: Metal index made a bottom at the previous GAP area and turned with strong swing reversal. Expect further up move. Minor hurdle is at 2405. Realty turned up from deep oversold lvl and this could give bounce only and not expecting much change in medium to long term. Commodities index also showed some improvement due to highly oversold value. While FMCG is passing through consolidation and currently at its strongest support area. Close above 17000 lvl you can expect further bounce and probably resumption of uptrend. Small cap index turned bearish so be cautious in stock of B group of small cap section. Media is entering in larger corrective decline as its weekly index is turned down. It can resume up trend only above 1751 on closing basis. IT sector from last 2 weeks we are giving warning and be cautious approach. Any rally in IT sector should be used to unwind investment for short term to medium term a small to large correction is offing. Pharma sector is becoming ill and may go to bed for to have glucose. Keep taking exit from any bounce. Banking and PSU banking both are in a deep red area and need more tonic or some fresh events to revive.

n  STOCK OPTION SEGMENT: FRESH LONG BUILD UP IN: HDIL 6.57%, APOLLOTYRE 5.92%, FRL 3.99%, GLENMARKET 3.99%, TATA STEEL 3.47%, SAIL 3.11%, DABUR 3.03%, PFC 2.93%, RANBAXY 2.63% (MAY BE CORRECTIVE RALLY OR SHORTCOVERING IS UNDER WAY), HAVELLS 2.46%, UNITECH 2.44%, AUROPHARMA 2.40%, UBL 2.21%, SSLT 2.15%, RECT 1.89% AND BHEL 1.89%. WHILE FRESH SHORT BUILD UP IN MARUTI WITH -9.27% HIGHEST AMONGST WEAK SHARE, THEN BETWEEN 2. TO 5 IRB, IDEA, UPL, AXISBANK, ABIRLANUVO, LUPIN, SUNPHARMA, DIVIS AND SIEMENS WERE MAIN LOOSER. WHILE SOME LONG UNWINDING OBSERVED IN CIPLA, INFY, TECHMAHINDRA,

BANK NIFTY CLOSED 10554.20: DN -0.30%. Trend is down, swing is down and flow is down.

Now we have reversal lvl at 10725, support at 10330 as anticipated in last mail and now oscillator entered in oversold area indicates some bounce must come. Expect change in mood above 10850, more sustainable rise above 11050 while down side support is at 10480, 10350 area. Daily and weekly chart entering in oversold hence avoid fresh short. Above 11050 we can see 11115, 11314 at the most.

Trading idea for FEB MONTH CONTRACT:

·         Apollotyre: Rs 111: Stock is trying to come out from bearish grip. Oversold status calls for a strong bounce. Buy and hold with SL of 106. Close above 112 should give probable TGT of 118.

·         AUROPHARMA: Rs 423.05. Turned neutral and closed below its EMA and remains above support area of 413. Either buy above Rs 424 or sell below Rs 410. At present it is in NO trading zone.

·         GLENMARK: Rs 558: If you have observed from last 3 days stock was appearing in OI build up list and in just 2 days stock flared up almost 8% in 2 days. Now it is closed above its resistance giving indication of free bird. Buy on deep only and stay long with SL of 532. Close above 555 can bring more attraction and miracle in the price.

·         HAVELLS: Rs 750: The basic structure is bearish but due to oversold condition a bounce is emerging. Buy only for bounce with strict SL of 738 and look profit 50% at 757 and another at 765 area. Above 765 try your luck with progressive SL.

·         HDIL: Rs 43.95: Stock is neutral and just showed bounce due to very wide bearish candle on previous trading day. Bounce may continue but unless it close above 47 do not get tempted to create long for position or swing trade.

·         HINDALCO: Rs 114.90. Stock is having very strong support at Rs 111 area and resistance at Rs 116.50 area. Further strong up move can unfold above Rs 116.50 on closing lvl then expect 122 and 125 as the near term tentative TGT.

·         DENA BANK: Rs: Rs 54.40. Buy with SL of Rs 51 for swing trade and delivery. Stock can move further up to Rs 58 to 60. Close above 58 can bring more surprise.

·         UPL: Rs 186.65. Stock turned weak and further damage is expected after a bounce up to Rs 174. A price lvl where one can think of making long. At current price you may observed bounce but avoid long for position or swing long.

·         TECHMAH: Rs 1756: Stock is moving away from up trend and further damage is expected. SELL with SL of 1804 and stay short for TGT of 1728 and 1700.

·         HDFC AND HDFC BANK both are loosing momentum hence be cautious in this stock if you are making long.

Control Your Emotions in Trading !

Traders who cannot control their emotions will rarely make any successful trades and will quickly join the 95% of traders who lose money consistently.

The three emotions that traders suffer from are; fear, hope and greed. To be successful you need to suppress these emotions, banish them like demons.

All these emotions are detrimental to making money and being a good trader. Some traders even have all three emotions at some point in time. So how can a trader suppress these emotions?

Firstly, don't take high risks by trading more of your capital than you should. A rule of thumb is to not risk more than 5% of your capital (MAX) on any one trade. If you keep to that rule there is no chance to lose all your capital.

Make a plan and stick to it. Make yourself a set of rules and keep to them. For example if you have a rule which says that your risk reward ratio is 1:2 or 1:3 then keep to it. You'd be surprised how many traders reverse their risk reward ratios.

ENJOY TRADING.