Finally, we did get a positive Friday after 5 consecutive down (4 out of 5 were severely down) Fridays. It was again a combination of short covering and value buying at sub 5200 levels. The sentiments were again low as IIP data was at its lowest in 20 months. We believe that more than just short covering, it was more to do with value buying by HNIs and institutions that helped the indices to claw their way back up. From a high of 6181 in the first week of January we have lost more than 1000 points in about 5 weeks. Nifty has consistently made lower lows and lower highs and momentum has been so strong that even slightest of rebound have been sold into. Most of the sectors have suffered but the bears have been particularly harsh on infra stocks in this leg. Most of the infra stocks have more than halved in value over last 4-5 weeks. But, the question is whether we have hit a sustainable bottom? It would be too early to take a confirmed call on that as it usually is. Nifty has lost almost 18% and around 5400 also we suggested that Nifty had lost almost 15% from recent top and we could be nearing a sustainable bottom. But, that was not to be as Nifty went through the support at 5350 as momentum picked up on the downside. Technically, we are still in the lower low, lower high spiral. Nifty has initial resistance around 5385 and then significant one around 5440-50. Banking stocks bounced back sharply on Friday and led the overall rebound. Positive divergence in leading indicator, RSI is visible in banking heavyweights like HDFC bank, Axis and SBI but many mid cap banking charts still may not be out of woods. Tata Motors came out with very good numbers just at the closing bell and might see a positive open on Monday. However, it might encounter resistance around 1225-1230. TCS has strong support around 1070-80 and could see a technical rebound from current levels. Renuka sugars that also came out with results on Friday is looking weak and a breakdown is possible below Rs 82. One needs to keep a stop below Rs 82 for all long positions. Hindalco is another one that has displayed weakness over last 3-4 sessions and needs to trade consistently above Rs 220-222 to retain the bullish bias. Certain infra stocks like LITL, GMR Infra, Reliance Infra and IVRCL may have seen what we call climactic selling as they witnessed huge volumes last week. But while it may suggest that these stocks may have seen intermediate bottoms it may not necessarily mean an immediate upside. These stocks could enter a consolidation phase before making an attempt to move higher. To summarize, while we may have some evidence of a market that could be bottoming out it would be too early to take a firm view on that. For traders wishing to go long, it would be better to buy call options or to hedge long futures with put options to minimize risk.
No comments:
Post a Comment