Sensex Technical View :
Sensex retreats back from 14k itself . Technically a pullback from the lows could have gone till 14300 odd levels which is the downward trendline , it seems the IIP nos and crude stopped it in between but as always the wait approach near resistances in pullbacks always works. As being mentioned in last 2 days the approach was to trail holdings ( which got hit ) and wait !
Technically gap at 13450 is filled and the next level to watch would actually be the bottom at 12800. In a bear phase every pullback is hit with a good force one needs to see whether the previous low is broken or not and if breaks one can look towards the next support zone. Classically till we dont see a higher top and higher bottom formation the phase will continue and traders have to short below important lows and buy on supports for pullbacks and such opportunities will be slow and steady .
Some statistical and technical observations before we try to infer from it ( Lot of this data is part of the technical analysis process we do so removing out time to exactly write it out coz putting charts into nos is a tedious task which cant be done daily) :
1 ) Major Falls currently
a) Fall from 21206 to 15332
27.7 %
b) 17737 to 12822
27.7 %
2) Recent pullbacks
a) 16546 to 17497 ( this was the last option to generate cash also earlier rise to 17500)
950 odd points
b) 14645 to 15789
1140 points
c) 12822 TO 14066
1240 points.
All the above pullbacks have lasted for 4-7 sessions exactly and 6 -12 % .
Recent cracks
a) 17497 to 14645
2850 points.
b) 15789 to 12822
2960 points.
The above cracks have been roughly 15-18 % and lasted for 10-18 sessions .
Inferences :
1) We have seen almost 27.7 % correction equivalent to the earlier major Jan crack ... So one can consider that markets over sold into the current downleg.
Considerations now are whether
a) The low would be closer to 50 % retracement ( my preferred view ) which is roughly 11800-12000 ( exact 50 % ) and 12700 for40-41% shave off ( DOw Jones comparison ) .
g) The low would be closer to 61.8% of the correction ( i would prefer it only if next 4 factors go unusual crude stays above 170, inflation 15% , Earnings growth arnd 12-15 % or lower, govt falls which seems difficult as per fundamental indicators ) . That retracement comes to around 9600-1000 level and would be the bext ever ever opportunity for next 3-5 yrs if it ever comes though ! .
So even if we have to consider markets going closer to 10k we are already down 27.7% in the current down leg which implies its oversold and for a bigger thrust to 10k we should see a good upmove of around 38 to 50 % retracement from the a possible low made around 12000-12800 level to top of 17737! .
2) In extreme short term one thing crucial to note is 12800 ! which is the most important deciding point as closer to 41 % shave off . If it has broken the time and price wise pattern suggests we could see another 15 % odd fall from 14066 level which could be 11800 -12100 zone from where we could see a minimum of 6-12 % or even a very high extent of 38-50 % retracement ( not absolute ) if we have to take the 10k or lower level .
But most important thing to note is even if we come up till 9800 the long term cycle of 8-13 yrs starting 2004 -2005 still remains in place and this is a corrective phase which should last 5-8 months where in an important low would be made by September + - 1 mth. We expect after this phase we should be stepping into the next round of the major cycle as shown in our Presentation Kal Aaj Aur Kal. So long term investors would get ample opportunities but will need patience too !!!
Strategy :
The above data and analysis suggests me that one of the most important deciding points is 12800. As suggested in last 2 sesions that approach should be to wait as most of the tgts done for the recent picks and wait for fresh picks or reactions. So ideally we need to wait again for stock specific opportunities alongwith a look whether Sensex breaks 12800 or not or how the next few sessions see support closer to 12800. Long term investors should look for stock specific picks as its not necessary all 2000 stocks will bottom out in the same week as Sensex does isnt it . And one will need patience for returns as we have never seen a 10 % freeze upper ckt on Sensex . We have been consistently using pullbacks for excellent stock specific returns and will again wait for opportunities . Title of the post suggests the strategy in simple words !
Stocks to watchout for :
All the trailing stops got hit in recent calls . And as the stock moves we take the stops closer to the buy levels so losses are minimal or squared at same price, reduce exposure and avoid leverage as part of discipline once we get closer to resistance levels.
In the last post it was suggested no picks for near term as lot would depend on intra day volatility and we are closer to resistance levels and a cautious approach saved the day. Now again would wait for specific opportunities alongwith the index moves so fresh picks may get triggered in the day .
Crude did not sustain below 138 for a few sessions and did not break 134 and we see a quick move and a new high which has been characteristic of the crude bull run. But technically its a rising triangle/wedge pattern which is generally seen near Major tops being formed . 148 -149 level is the very crucial level as per the line its following on upside.
TECHNICAL ANALYSIS SESSION MUMBAI
JULY 26-27
( the course doesnot need pre requisite knowledge of technicals or fundamentals or experience in markets. The technical analysis session we conduct is for people who are interested in understanding the process of analyzing technicals in a simple , quick and efficient manner and would like to get independent in analyzing and deciding for themselves throughout in the future.)
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Nooresh
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