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Market Outlook -
May 25,
2010 |
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The situation is grim and ominous: the Nifty is
likely to test its recent low of 4842 today. The
crucial level to watch out for would be 4892.
The range between 4898 and 4892 is a support
zone that has the maximum importance for here is
the 200-day exponential moving average is
located and also some significant other
technical support levels.
The point is that if this range is broken with a
gap down this morning, this will be the range
that would bring in fresh supplies if there were
to be any recovery attempt by the bulls. The SGX
May Nifty and the June Nifty are trading at 4865
and 4845 respectively with very high volume as
is customary near the settlement date. This
suggests a possible opening below the vital
support range between 4898 and 4892.
Below 4842, the Nifty levels to watch out for
would be 4824, 4780 and 4725. The last target
level of 4725 is very much a high probability
target for this derivative clearing ending on
May 27.
On the upside, now, unless the Nifty clears 4974
– 5012 we should not be expecting any kind of
sustainable recovery. Immediately above 4900,
the resistance level are 4915 and 4943.
We continue to think that all rallies should be
sold and pare your investment positions (unless
you are willing to hold the stocks for years and
you are ready bear a lot of pain) as well since
this correction may last much longer and could
well wreck much larger damage going forward. We
tend to think that the corrective bullish swing
from Mar 06, 2009 to Apr 07, 2010 is already
through and it is happening within the ambit of
the larger bear market that started from Jan 08,
2008 at the Nifty level of 6357.
Nomenclature and classifications aside, this
downswing has much greater potential to damage
your portfolio compared any of the previous
downswings in the recent past of one and a half
year. Take care!
Rajat K. Bose |
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| Notes: |
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All prices relate to the NSE, unless otherwise mentioned. |
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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. |
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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. |
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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. |
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The analyst and his clients may or may not have positions in the securities mentioned above. |
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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. |
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Rajat K Bose
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