Wednesday, April 23, 2014

Election impact: Why is DLF underperforming?

Election impact: Why is DLF underperforming?
Indian equity market already looks to be celebrating the election outcome and expecting NarendraModi to be the next PM.
It seems expectations are high and next 6 months will be extremely crucial to see if Modi Sarkar, given the opportunity, is able to deliver or not. In prior election Nifty and Sensex had a circuit up closing in expectation of UPA government to deliver and this time the pre – election rally has been strong enough so far in expectation of NDA government to deliver. Case in point is the emotions that are going to elect the prime ministerial candidate this time are similar to emotions that are driving the prices of stock market. The 6 long years of bear market since 2008 onwards are clearly reflecting the frustration and strong emotional sentiments prevailing among the masses. Post such long period of sideways correction people wants radical change and it can clearly be seen with the slogans ongoing across the street “ABKI BAAR MODI SARKAR” We are not promoting or endorsing our preferences here but simply highlighting shift in Emotions which is currently seen!
Coming back to Equity market, a stock that has clearly underperformed and gave away the gains of rally is DLF.
After touching the highs of 185 the stock has been moving lower and has now given away exact 61.8% of its prior gain. The reason why this stock has not participated is again related to the event – ELECTIONS OUTCOME. It is assumed or rather predicted by equity market victory by BJP. During such scenario DLF that is speculated to have links with Vadra, connected to an extent with existing ruling government, will be the major loser in real estate space. Now, trading based on news will not yield any return because it does not help with timing and who knows to what extentDLF will suffer that too if opposing party forms the government. There is lot of “IF” associated for someone speculating based on news.
Even during such times it is better to stick with charts that show how prices have been moving and the crucial support levels. Above 60 mins chart of DLF, clearly reflects that prices are moving in downward sloping red channel and as long as this simple channel is intact trend continues to be negative. Break above 160 will be first sign of reversal which will indicate that the traders are now giving up on the news based speculation. On other side break below 150 will extend the downtrend further as it will break the Fibonacci 61.8% level as well! This information should be used to trade objectively rather than speculating the many “IFs”
Trade objectively and systematically, technical analysis and Elliott wave might not be always give expect output but it atleast has the ability to give objectivity to the trading decision with crucial risk management and stop levels, If you are wrong be out with short losses and trust me when you get on the right side of trend it will pay off for your hard work and money. It is better to base your trading decision on objective techniques rather than speculating on mere news or event outcome! Subscribe “The Financial Waves short term update” and see yourself the crucial levels which will decide the trend ahead on Nifty and stocks! Contact US for more details.

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