This blog spot contains discussion and analysis of stocks and securities trading in NSE and BSE. All stocks are analysed on Technical charts and an effort has been made to predict the future movement of these stocks.
The markets started on a weak note today and had lost about 60 points on the Nifty within the first half an hour and then started making a slow recovery from 4920. It took almost two hours for the market to recover all its losses for the day and just when it managed to reach yesterday’s prices at 4983, the industrial production data was announced. According to the data India's industrial production growth sunk to 3 per cent in March 2008 from 14.8 per cent a year ago and Index of Industrial Production grew at 8.1 per cent in FY 2007-08, down from 11.6 per cent in 2006-07. It took all of ten minutes for the markets to lose everything that it had gained in the last two hours, and even more. This time it made a low of 4915 and started its recovery from there.
This time around support was found at 4915, between our support levels of 4910-4930. And this time the buying seen seemed genuine because the Nifty recovered 97 points from the lows of the day and closed almost 30 points in the green. What triggered the buying is unknown. Maybe it was the technical support (between 4910 and 4930), maybe it was value buying (seems unlikely), maybe it was bottom fishing or bargain hunting (again unlikely because one doesn’t bottom fish when the sentiment is weak), but it definitely wasn’t the sentiment that had changed. A few days ago, in this column, I had mentioned that “technical analysis does help, but sentiment holds the key”. Is it time to change the phrase to – “sentiment doesn’t matter, only technical analysis helps”?
The Nifty is currently standing at resistance at 5020 as shown by the downtrending line. If it were to remain/go above 5020 after 10:30AM then its next target would be close to 5150.
On the daily chart of DLF, we can see that it has made a series of three doji candles (candles where opening price and closing price are the same or very close to each other) and suggests that the short term down trend may be over in this stock and it should see a reversal from these levels. Another positive in this chart is that the RSI is still above 40 and if DLF reverses from here then the RSI will also reverse and a reversal from 40 for the RSI is a good sign. The only negative that can be seen is that the RSI reversed from 60 when the last high was made and that means that it is still not in an uptrend. So, this time we should be careful when the RSI reaches 60 and should maintain a long position in the stock if the RSI were to cross 60. For now, it seems to be a good buy above today’s high of 640 with a stop loss near 607 for a target between 720 and 750 (and more if the RSI were to cross 60). Do not buy if the price doesn’t cross 640.
HDFC Ltd. rose from 2300 to 2900 levels, a move of over 25%, in just a matter of 10 days and then went through a brief consolidation, which has already lasted 8 days. A move above 2750 should confirm that the consolidation is over and it can give a move of another Rs.450/- in a matter of two weeks. If you can see the three trendlines on the chart, you can notice that it looks like an ‘F’ or a Flag complete with the staff. Look to buy above 2750 with a stop loss of 2600 for a target near 3200.
IDBI, after a sudden downfall, went into a phase of consolidation for over 3 months and finally broke through the trendline, only to see a pullback back to the trendline. It has support at the trendline at 98 and today’s doji suggests that the support may have been found. Look to buy above today’s high of 102 with a stop below 95 for a target of 130.
The Nifty moved down in the first half of the day but in the second half it moved up to gain all that it had lost. This volatility may have been because of the F&O expiry today. There were a lot of short positions built up which had to closed/carried forward today. Maybe this upmove was because of that short covering. If it was only because of the short covering that the market went up then it may soon find resistance and come back. That will be known only after the event happens.
We have a very interesting pattern on the 30 minutes chart of the Nifty today. The pattern looks like an inverted head and shoulders pattern which is yet to be confirmed. A move above 4915 (ignoring the movement in the first 30 minutes) should confirm that the bulls are in control of the situation. Not only that, it will also confirm this inverted head and shoulders pattern (incidentally, this H&S pattern gets confirmed above 4900) and that will give us a target of 5350 on the Nifty. Talking of patterns, there are a number of occasions when the patterns fail too. This failure could be in terms of the pattern not getting confirmed, the pattern giving a false confirmation or a failure to reach the price target. The bearish H&S pattern in the RSI formed a few days ago turned out to be a failure.
But, it is quite clear by now that we are in a short term upmove. Signs of an intermediate term upmove will come when Nifty crosses 5370 and will be confirmed when 5550 is crossed. In a short term upmove when bullish patterns come, we should position ourselves on the long side. Well, if this pattern turns out to be a failure, we shall be stopped out. But not attempting an entry now is not advisable because to earn profits one has to take risks too. If you are not willing to risk a failure of the pattern, indirectly you are not willing to make profits. Remember, only those people are rewarded who have the heart to take risks. A strong support comes in at 4750. Below 4750 we may expect a retest of the earlier lows.
ABB has made a double bottom, more commonly known as the ‘W’ pattern and is now ready to move up. It may be worth buying it above 1190 for a target near 1300. One could maintain a stop loss of 1150 for this purpose.
BHEL has a chart exactly like Nifty. An unconfirmed head and shoulders pattern which should get confirmed above 2040. A buy above 2040 with a stop loss of 1920 should give a target of around 2270.
This is the 30 minutes chart of Divis Labs. It seems to have broken through its downtrending line with a slight increase in volumes. At current levels it seems to be a good buy with a stop loss of 1225 for a target of 1430.
On the 30 minute chart of HDFC Ltd. we have yet another similar pattern. As you must have noticed, in all these patterns, the first shoulder and the head are quite well defined whereas the second shoulder is very small, almost like a deformity. Yet the fact remains that it is a shoulder and a head and shoulders pattern has a target which, under normal circumstances, the stock should be able to achieve. Let us, for a moment, assume that we have made a mistake in calling it a head and shoulders pattern and the second shoulder that we are seeing just isn’t there. How do things change then? Well, even if the second shoulder is not there, the neckline will still be the same (even though it will then be called a trendline and not a neckline). And the target? That remains the same too. So, whether, or not, the second shoulder exists, things don’t change for us as long as the neckline (or trendline) is crossed. Consider buying above 2720 with a stop loss of 2600 for a target of 3250.
Till a couple of days back, Ranbaxy was looking like one of the strongest stocks in conditions prevailing at that time. This is a perfect example of how fast things can change. It was making a pattern of a symmetrical triangle, which, technically, can break out in either direction but is normally considered bearish. Once the price has broken out on the downside, things have become clearer and I am afraid, things are looking bad for Ranbaxy. A target of 400 is quite likely, at this point of time. Be careful at around 415. In good conditions, it might reverse from there too.
Fan lines are visible in this 30 minute chart of Reliance Industries. Like always, in the beginning, a stock finds resistance near a particular trendline. Once that trendline is crossed, it does not change its trend immediately but now starts finding resistance near another downtrending trendline. When this trendline is crossed, it yet again finds another trendline. These are called fan lines. In technical analysis, it is usually said that once a stock crosses the third fan line, it should get a good and a quick move. Maybe, Reliance is ready for just that. Consider buying above 2340 with a stop loss of 2240 for a target of 2510 (conservatively) and then 2600.
Apart from these stocks the cement sector is also looking good while the banks seem to be week.
Happy investing!!!
Update: This article was also published on the website of Chicago Sun-Times.
On the daily chart of DLF, we can see that it has made a series of three doji candles (candles where opening price and closing price are the same or very close to each other) and suggests that the short term down trend may be over in this stock and it should see a reversal from these levels. Another positive in this chart is that the RSI is still above 40 and if DLF reverses from here then the RSI will also reverse and a reversal from 40 for the RSI is a good sign. The only negative that can be seen is that the RSI reversed from 60 when the last high was made and that means that it is still not in an uptrend. So, this time we should be careful when the RSI reaches 60 and should maintain a long position in the stock if the RSI were to cross 60. For now, it seems to be a good buy above today’s high of 640 with a stop loss near 607 for a target between 720 and 750 (and more if the RSI were to cross 60). Do not buy if the price doesn’t cross 640. 
HDFC Ltd. rose from 2300 to 2900 levels, a move of over 25%, in just a matter of 10 days and then went through a brief consolidation, which has already lasted 8 days. A move above 2750 should confirm that the consolidation is over and it can give a move of another Rs.450/- in a matter of two weeks. If you can see the three trendlines on the chart, you can notice that it looks like an ‘F’ or a Flag complete with the staff. Look to buy above 2750 with a stop loss of 2600 for a target near 3200. 
IDBI, after a sudden downfall, went into a phase of consolidation for over 3 months and finally broke through the trendline, only to see a pullback back to the trendline. It has support at the trendline at 98 and today’s doji suggests that the support may have been found. Look to buy above today’s high of 102 with a stop below 95 for a target of 130.
