Nifty Technical View – Bearish consensus is very high ? A good setup for a short term rally.

Have been pretty laid back with the updates over the last few weeks as there is no major momentum in the markets. The drop continues to be painful in midcaps/smallcaps and making them more attractive. Well the bias in lot of the stocks i have been recommending is fundamental so further drops will continue and one may need to digest it.

 

Over the last couple of weeks it seems --- Its fashionable to be BEARISH or thats the IN thing.

Not even a single person i speak to is bullish rather everyone is so sure.

Simple Statement ---- Nifty will come to 3800-4200.

Complex Statement – Nifty will come to 3800-4200 –Dont buy till then remain short at those levels create a long term portfolio and Nifty will go back to new highs. This is the last leg and it will be painful. Invest in FDs 🙂

 

Well there are too many such cliches and sayings which everyone on the street is using and mind you even the normal investor who does not know what is Sensex and the top analysts have the same view. I have never seen such a strong Bearish consensus in the last 6 yrs :). So what is my view ?

 

I really dont know where the market is headed and i will not make a bet at whether 4400/4200/3800 is the bottom as one can never pick the bottoms. But with such a strong consensus my short term Bearish view has changed !!! Also my medium term outlook needs some revision.

 

So i would rather be neutral and watch for market signals then to try predict 🙂 If at all this is the last leg then i cannot predict it that is what i am sure of:). Why do i say so ?

 

In 2008 we initiated an ext at 19k and 16k but started buying at 10-10.5k ( 50% ) added more at 8k and luckily got saved in a subsequent short term pullback. But at the same time went short at 9k saw 8k did not cover and got out on the way up.

But not going against the market came up with a strong BULLISH VIEW in MARCH-APRIL at 9.7k calling a move to 14k +.

 

So over the next 3 months i would keep a neutral stance and focus on quality stocks be ready to take a hit of 15-20% on the portfolio of fundamentally defensive stories in case of the SURE PANIC. Jump the gun on upside if we see a trend change.

 

 

Now let us look at some interesting angles on Nifty chart.

 

 

A falling wedge is a very positive signal. Two cases either we go towards 4400-4450 in panic. Keeping a stoploss of 4550-4580 to initiate that view. On the other side it can surprise on the way up to 4750/4900. ( this is the favored bet as advised quite a few longs and nominal cash)

 

Another interesting observation on Sensex Weekly RSI.

 

 

 

Few questions that come to mind is the pattern suggests this should come in next 2-3 months or say in first half of 2012.

1. Will it be like 2002 intermediate move ?
   Will it be a trend changer like 2003 and 2009 ?
   Not yet we nee to see another dip like 2008 ?

 

I will not take a call on either of the three options but STAY ON HIGH ALERT ? Although bias is shifting to bullish will let the Markets show the way. Also if one is not as SURE ABOUT PANIC like others on the street then one should start nibbling into quality stocks.

 

Start of A BULL Trend is always a Bear Rally 🙂

 

 

Disclosure  : We are pretty much invested at 4700-4500 levels and ready to see a dip to 4300-4400 so a bullish bias is there for sure. Also will be increasing cash levels on rise to 4750-4900 or add more positions on sharp panics. So please do your own research.

 

Above all people dont try to learn Technicals or believe in Fundamentals in such bad times:) So again a sincere request research and learn :). The best learning's come out of a Bear Market.

 

 

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