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Rajat Kumar Bose, Research Analyst, SEBI Registration # INH300003074.
 

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Market Outlook   24 August 2016                some interesting links >




Nifty (8632.60, -3.45):
The index looks weak; it is showing a distribution pattern for more than a month. Its staying at higher levels has so far been supported by liquidity but any indication of the tap showing a reduction in flow shows the vulnerability of the index for an eventual fall from the current levels. Look at the statistics: since July 15, the Nifty had 16 down-days compared to 9 up-days in 25 trading sessions ending yesterday-this is nearly 2:1 in favour of the down-days indicating a possible distribution.

To add insult to the injury, in yesterday’s session we saw both FIIs and DIIs have sold. The former sold nearly Rs 6 billion worth of stock futures. We have seen earlier that a high figure of net stock future sales from the FIIs acts as an early indication of further weakness; we might try and delude ourselves buy euphemistically characterizing the current market as a stock specific one but just think in the worst of down-days in market history you will see certain stocks defied the trend and moved up. The short term uptrend that began on Aug 11 got terminated on Aug 22 when the Nifty fell below 8657; yesterday, it closed well below that. To reclaim that short term uptrendline, the index needs to move above 8703 today, not just the 8657-level.

The immediate resistance zone for the index is between 8633 and 8642-thus, unless you see the index taking 8642 in any decisive manner there would not be any sustained upswing in the day’s session. While that being the case for the upside cap, there is still a downside floor around 8580 - 8575 range-once this is taken out expect 8550 to also cave in and a fall below even the 8540 bottom on Aug 11 could also happen thereby completely negating the erstwhile short term uptrend.

Trade recommendation:
Sell any rally on the upside with a stop above 8705; even if it were to cross 8657 it is unlikely to stay at higher levels. Targets 8632, 8614, 8603, 8580 and 8563 and 8540. Now, if you see the index simply not taking out 8642 then also sell with a stop above 8660; targets are 8614, 8603, 8580 and 8563 and 8540.


BanK Nifty (19341.65, -11.40)
This index would turn weak once the range between 19255 and 19240 gets taken out; it would not be prudent take any aggressive stance on the sell side before that. It would really turn weak when you see 19080 -19020 range is broken on high volume selling and there is lot fresh position build-up in the derivative segment in the bank stocks.

Only if you see the index taking 19450 – 19500 range decisively on heavy buying then expect further tailwind but not before that. Downside support below the 19000-mark at the levels of 18906, 18838 and 18762.

Trade recommendation:
Sell any rally in the index if it were not to take out 19465, put a stop above 19560; targets 19250 – 19240, 19080 - 19020, 18906, 18838 and 18762.


Statutory Disclosure: The analyst and his associate have none of the above. Their respective families, too, do not hold any shares either jointly or separately in any of the stocks mentioned above..

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Note (1): Either on the long side or on the short side if at any moment a counter is not moving beyond an initial or interim target to the final target book profits. Once initial target is crossed, you can use that as your trailing stop-loss level.



Rajat K. Bose
Notes (2): (please read).
* All prices relate to the NSE, unless otherwise mentioned.
* The Outlook is based on the previous trading day's price activity
* The call is valid for the next trading session only unless otherwise mentioned.
*

Stop-loss levels are given so that there is a level below/above, which the market will tell us that the call has gone wrong. Stop-loss is an essential risk control mechanism; it should always be there.

*

Book, at least, part profits when the prices reach their targets; if you continue to hold on to positions then use trailing stops to lock in your profits.

*

Don't chase a stock, if you are unable to buy a stock because it hits circuit levels on successive days, don't buy that.

* The analyst and his clients may or may not have positions in the securities mentioned above.
Trading involves considerable risk. Trade at your own risk to the extent you are comfortable. The analyst shall not be responsible for any losses incurred for acting on these recommendations.
Rajat K Bose
 

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