Thursday, January 14, 2010

It's Magic

This is an excerpt from the newsletter sent to clients on wednesday evening (Jan 13):

It's Magic

Yesterday, we wrote to our subscribers:


Support for the Nifty comes around 5180 which is where it had encountered resistance many times earlier. If this area holds, then we should expect a period of stability, and, who knows - another up move that touches 5400 or nearby.


This information was also given to CNBC viewers. Today morning, (wednesday morning), I appeared for a brief tech call on CNBC which was probably broadcast around 8 AM. I said that buying is suggested if the Nifty dips to 5180 where significant support comes.

Today, the Nifty fell, touched the 5180 support zone, twice, then rallied to close strongly above this support, at 5233.95, gaining 0.45%.

Quite often, Support and Resistance levels act like MAGIC. This one did so.

The Nifty seems to have completed a period of correction, and is well poised for another round of gains. If this is a false signal, the first sign will come if the Index closes below 5176 - today's low. Until that happens, I feel the trend is UP and buying should be done.

The current decline looks like a Flag. A flag will normally come half way is a trend. Let us look at the move for the Nifty:

Top of the latest up move: 5310

Start of the up move: 4943

Net gain: 367

Flag breakout occurs around 5240, therefore, if this breakout actually takes place, we may be looking at a target of 5240 + 367 = 5607. Now, these are only probabilities, but the market can surprise us, which is also a probability.



Ravi said...

Dear Sudarshan,
There could be another quick upside on the nifty... but then again the mixed markets could restrict the index to a range again. Thanks for the heads up on the levels.
Hope the cold weather in Delhi is not too bitter... down here in Bangalore it's actually getting warmer. :)

men said...

Mr. Sudarshan, in Bangalore one can literally we are at the start of a summer, it is hot after 11, so v say global warming has started. LOL.

Deepak Pant said...

I am expecting another leg on the upside.important level for me is 5180-5200. For me, this leg would be liquidity driven. i wouldn't like to close my long positions until i see signs of distribution by FII's (as this is likely to precede actual interest rate hikes). Distribution by DII's wouldn't bother me.

Viral Rajnikant Dholakia said...

Dear Mr Sukhani,

My query revolves around signs of 'Exhaustion of Market upmove' as follows:

Before 10-15 days, Nifty faced Resistence around 5180 prior to break-out past 5200 levels. At that time, the narrow range was 5080-5180. It seemed as if cross-over of Nifty 5180 level, would propel another 5% rally without much hurdle.

But, than, we again face Resistance at 5280 currently, culminating into a narrow range of 5180-5280.

Does this constant witnessing of Resistance point toward signs of 'Market Exhaustion'?