Monday, January 20, 2014

Sensex topping pattern by Ashish Kyal in Economic Times Section of Navbharat Times

Sensex looks to be forming a topping pattern!
Trading the results can be challenging: It can be challenging to trade only based on news or results. TCS results that were announced last week beats expectations with 50.3% jump in third quarter profit. However the very next day the stock was down by more than 4.5% even after results were above expectations. The possible reason analysts believe is the higher valuations. But one always has to understand the results that are announced are for the past performance whereas stock market is constantly discounting the future. So as soon as the IT numbers were out the market has started what the expectations are is coming quarters. Trading should also be done with risk and money management strategies. It is therefore necessary to use objective technical tools along with fundamentals to understand where stoploss can be placed along with upside targets to be expected.
Banking sector continues to be under pressure:
Since the start of 2014 itself Banking index has continued to remain under pressure. Even if major index Sensex and Nifty has been consolidating sideways Banking sector continued to move lower. It has been forming lower highs and lower lows. This is one of the simplest and easiest technical way to know the trend of any sector. As long as 11500 resistance is intact on upside Banking index can continue to remain under pressure.
RBI governor is having a challenging task at hand in deciding the monetary policy this time as the economy looks to be really suffering by RBI maintaining its anti-inflation stand. The focus should now slowly shift to getting economic growth back on trackbefore it gets too late.
Sensex long term correction since 2008:
After the high at 21200 made by Sensex in January 2008, the same level was taken out in November 2013. But even after the life time high was made after more than 5 years prices have constantly failed to sustain there and interest sensitive sectors which are back bone of any economy has remained under pressure.
January cycle: January has been weak month since 2008 onwards except 2011 where there was a reversal and trend was on upside. So far prices are still where it opened the month and there is no net progress. Unless and until we see a strong breakout above 21500 with momentum across the sectors our view will be of topping process as ongoing.Sideways action is also a type of correction which is no net progress during inflationary times.
Week Ahead: After the low at 17450 made in August 2013 Sensex trend has been getting smaller. This is a weak structure and so we think Indian markets are forming a topping pattern. In this week we can expect range bound movement between 21400 and 20650 and breakout from either of these levels will give clear trend ahead. Till then trade cautiously during the result season!
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1 comment:

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