Bloomberg has an article on the Chinese stock market bubble, here . China, it says is trading at 31.7 times reported earnings, while the USA trades at 18.9 for the S&P 500. As per the NSE website, the Nifty is trading at 20.31 times reported earnings.
When we view the charts alone, we find that India has recouped more of the bear market losses as compared to the Chinese market. Yet, India remains less expensive. This tells us that the 2007 top in China was in fact a bubble. The other side is: Indian stocks have the potential to rally more before they enter a 'bubble' stage.
The trend is up. The current price pattern is that of a consolidation. In my earlier post written on Sunday, I mentioned a pattern target of 5110. Here is the complete post:
The Nifty finally moved out of three day trading zone, by moving above 4500 to close at 4528. Moves out of the trading range should be respected. The minimum target for the up move is 4590, but a more likely scenario can see the Nifty go to 4620 where it faced resistance earlier on.
Earlier, we were discussing a large trading range for the Nifty, between 3930 and 4730. Now, with new price bars coming in, it is apparent that 4350 has developed as strong support. The range, can now be defined as 4350 to 4730. A breakout from this range gives an upside target of 5110, a number that seems possible, given euphoric market conditions. The summary is to trade on the long side, until 4350 is broken, or new support levels develop.