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.