Can November be a stable month….

Sensex Technical View :

The above chart is elaborative enough to see the price and time comparisons in the last few falls and counter bear rallies.

Only thing to note is as the fall was deeper in the current counter rally markets have already bounced back 34 % from the lows which is more then the 23-25 % dip. The fall was 50 % in quick time so the counter rally has deviated from the earlier falls in terms of price and what does markets have in store as per time .

This leads to a few questions and replies to them only in the form of technical analysis observations which can give a simpler view of medium term.

How much can the markets bounce back ??

As we see the markets have fallen more and already bounced more. So now we have to see the fibonacci retracements. In the previous two pullbacks retracements were around 50/61.8 % . In the current situation the similar would say 11650/12500.

Also 38.2 % level is placed around 10700 which is an intermediate resistance zone too.

How much time will this pullback stay for ?

The previous falls lasted for almost 45-52 sessions before bottoming out for short term. The counter bear rally has lasted for around 20-35 sessions roughly and given good weekly closings. So in a similar manner we can expect next 15-30 sessions to be stable and have an upside cap at 11650/12500.

Where will it stop or exhaust in extreme short term ?

Sensex has already made 3 gap ups . Such a situation leads to exhaustion in near term so sooner we could see the indices testing the gaps at 9900 , 9350 roughly . Then again a retest of recent high or a follow through move towards 11650/12500 cannot be ruled out till the lower levels of 8500-8800 hold up.

What should one do if bought at 12k and 3600 ?

Although in such a scenario different stocks would be at different positions but if index positions then hedging would be the right thing to do at 10500-10700 or 3050-3200 and book profits in buying done at lower levels. Hedging tool could be mini-nifty , nifty futures , 2700 puts or 3200 calls. The amount of hedging exposure should be considered to be loss so make provisions adequately.

Stocks to watchout for :
DLF , Reliance Infra , Idea gave strong bounce backs. Suzlon , Bajaj Hind , Renuka have some left.

From the previous list HCC and LIC completed the bounce backs of 20 % .

Glenmark and BOI had touched targets and booking advised. SBI has also neared the tgt zone.

Some short term levels for particular stocks:

HDFC Ltd is nearing resistance zones of 1950-2000 and can give a dip . Traders can go short with a stop of 2020.

Pantaloon Retail , Adlabs , IFCI could give bounce backs in coming weeks . Risky call as lower volumes then usual. So buy only on dips with a deeper stoploss.

Indian Bank and Tata Communications are the positive breakouts but have already moved a bit but can keep a watch only not necessary to trade.

Best Regards,

Nooresh Merani ,

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