Satyam - correction nearing completion!

Dear Friends,
On June 18th I had posted "Dollar Rupee and Sensex" and mentioned that "A BREAKOUT OF RS 43 in DOLLAR RUPEE MAY NOT BE GOOD SIGN FOR THE STOCK MARKETS"
Well, The break out has come today . The Dollar against the Rupee has touched a high of 43.13 and is currently quoting at 43.05.

While this may be negative news for the Sensex , it may well be a positive for the Technology stocks ( Have you noticed that technology stocks are actualy rising in this falling market?)

A few days back I had mentioned that you can buy Infosys near 1675-1700 levels .I think the chance was already given to you by the market.

Another stock which seems to be completing it's correction is Satyam Computers.



The chart suggests that the stock is nearing it's crucial 61.80% retracement and it touched a low of 431 today. You would have noted that the volumes during the correction is low compared to the volumes during the rise - which is the typical price - volume relation.

Expect a break out of Rs 455 to give you medium term targets (3-4 weeks) of 510-525. On break out , consider Rs 420 as the crucial support level for the whole structure.

Happy trading !

CA Rajiv D Khatlawala

CRUDE - burning world markets!!

Humpty Dumpty . . .We all fall down!!

The Nifty ended the week quite badly. And the culprit is Crude Oil.

The World markets fell more than 2-3% yesterday evening on the back of the rise in Crude. Infact , as I was watching the commodities market yesterday evening, Crude , bullion and metals were having an extremely bullish day. The party was being led by Crude and even as I write this , Crude is shooting beyond $141.25.

Stock market sentiment, which is weak even otherwise, is being further battered by the rising crude oil.



The above Chart of Crude Oil on MCX suggests that it is coming out of a trading range of about 5% and thus the minimum target on break out of this range should be about Rs 6300 (on MCX) and $147-148 in dollar terms.

Crucial support line is at Rs 5600 ( or $131) and till that is broken , Crude is bullish!

I presumed, since last December, that money seems to be shifting from world equity markets to commodities markets.

So the next time you want to know where stock markets are headed, look at commodity markets!

Happy observing!

CA Rajiv D Khatlawala

Nifty - targeting weekly Pivot . .

The Nifty again moved on more or less the positive side and closed at 4315 , very near to my earlier short term target of 4345 given day before yesterday.

The weekly pivot point for the Nifty is at 4454 and it is likely that now it may want to test this level.

This evaluation is strengthened by the intraday charts of Nifty (not shown here) which are suggesting short term reversal pattern of the recent 6 days down trend. The target as per this intraday pattern too is at 4445 !

Tomorrow, Nifty is likely to have resistance in intraday between 4350-4380...Consider very crucial support at 4225 below which the technical structure can break...

Enjoy the counter move . . . till it lasts !!

CA Rajiv D Khatlawala

SBI .. expect a corrective bounce !

The Nifty behaved more or less as expected. I had indicated that down moves must not be used to short sell. The Nifty opened lower based on the CRR hike by the RBI but later as expected bounced back to close higher at 4250.



One stock which has taken a lot of beating is SBI and today's price movement suggests a temporary halt to the down move (at least for 2-3 days). It has created what is called a 'hammer' pattern in Japanese Candlesticks.

Those trading with a two -three day's perspective may buy on break above 1220 and target a price move of Rs 125. Keep stop at 1170

As Nifty too is likely to touch my target of 4325-4350 , i presume SBI will at least get some 'market support'.

As the saying goes ....Make hay while the sun shines !

CA Rajiv D Khatlawala

NIFTY - Oversold temporarily !

The Nifty continued it's downward journey today too (June 24) and touched a low of 4156 before closing at 4190 (The above chart from icharts.in is not updated for today's price action)

On the daily charts it is oversold and prices are getting 'far off' from their short term moving averages. Prices have a tendency to 'rebound' to their short term moving averages in order to complete a correction and resume their move.

Accordingly, for those of you who take a 2-3 days view, I expect that a fall in Nifty may now not be a good short selling opportunity. Rather you may look for a short term rebound to 4345+ levels in the next couple of days. This also means that I expect down move from here to be unsustainable for a couple of days.

The Nifty , after correcting itself , may then tend to resume it's down journey.

So you can expect some relief from the 'red flashes' on your Terminals!

CA Rajiv D Khatlawala

"Kya Buy karu?" ....

KYA BUY KARU ISS MARKET MEIN?
This is perhaps the questions in most of my readers mind. May be this is preceded by the question "Iss level par buy Karu ya na karu??"

Well if you have read the last chapter of my book (Importance of Emotional Maturity) you would have by now realized that most investors (may be more than 90%) have what we may call a "BUYING BIAS".

Even when the trend is down, traders and investors spend most of their time searching for buy signals rather than sell signals. It's human psychology!

Well, there is something for all the perennial Bulls. Even in this down trending market, we do have stocks which are likely to rise , irrespective of the market direction.

One such 'defensive' stock is Infosys Tech. It is currently undergoing a 'correction' of its recent upmove - notice the negative divergence on the RSI.

I expect this correction to get completed around Rs 1675-1700 levels. This will correspond with the 50% retracement of the current upmove and the RSI going in oversold region. (Just recapitulate the characteristics of a divergence on RSI on page 110 of my book)

The overall Nifty has broken crucial supports as expected and has closed weak. Notwithstanding some corrective move on upsides, I expect it to go further downwards.

Happy Trading (and stock picking!)

CA Rajiv D Khatlawala

Is the Phase 3 of the Bear Market near ?

Marking the Bear Market Phases . . .



As per the Dow Theory (relating to Technical Analysis) Bull Markets and Bear markets have three phases. You will find a somewhat detailed discussion on this in the Indian context on Page no. 37 of my book.

Since July 2007 (a year back), while explaining the Dow Theory , I have been indicating to the participants of my workshops that , at that time, we were nearing the last phase of the Bull market characterized by extremely high retail participation.

More recently, after the Jan 08 crash, I was again suggesting to the participants that the first phase of the bear market seems to have started which should be followed in subsequent months by a deterioration of the fundamentals. In the ensuing months we did see economic and corporate fundamentals weaken- lower profits, slowdown, rising inflation, crude oil et al.

I presume we are currently in the second phase of the bear market which may still last some more weeks before the Phase 3 starts.

I have tried to mark the phases of the bear market on the Nifty chart – though it may not be too accurate in terms of time. I presume the ‘H & S’ pattern on the Nifty / Sensex and it’s subsequent violation of the neckline , is only further validating that we are about to enter the phase three in the coming weeks.

My belief that -‘Prices tell you more about the future than Annual reports’ is getting stronger!

All of you ….Fasten your seat belts !

CA Rajiv D Khatlawala

M&M .. 5% corrective rally likely

The broader Nifty and Sensex fell today in line with other world markets. The sentiment seems to continue on the negative side. The Nifty has today (Thursday) closed at it's weekly PIVOT level of 4505.

On Nifty rising above 4528 tomorrow , expect a corrective rise to 4570-75. In case of such a corrective rise, you may track a relative outperforming stock - M & M



Mahindra and Mahindra is one of the few selected stocks which went up today even as the Sensex fell by 300+ points.

A corrective rise to 615-620 levels is likely. - There is also the retracement level resistance and a falling trendline resistance at that level. Keep a stop near Rs 560.

Happy 'scalping'!!
(I presume one cannot aim for more than scalping in this sideway market!)

CA Rajiv D Khatlawala

Dollar-Rupee and Sensex !!

A BREAKOUT OF RS 43 in DOLLAR RUPEE MAY NOT BE GOOD SIGN FOR THE STOCK MARKETS

Many of the readers of my blog would have noted my bullishness on the Dollar vis a vis the Rupee since it was sub-Rs 40 levels.

Many of you would have 'heard / read ' that financial markets are linked. In this context, the link between Sensex and the Indian Rupee (Dollar-rupee) is worth noting.



Inherently a strong dollar-rupee rate is not a good sign for the stock markets as there is a negative correlation between the two. The Current 'pause' in the upmove of the Dollar-rupee is worrying.

I expect that a break above Rs 43 may be triggered by a further downmove in the Indian stock markets.

Moreover, the other major factor affecting the currency is the Crude Oil Prices which are refusing to go down (that is another instance of an inter-market linkage).

So, Stock market investors ...keep an eye on the Dollar-Rupee and Crude Oil prices !!
(Whoever said investing was an easy game???)

CA Rajiv D Khatlawala

MTNL - likely to ring !

{Readers of my blog would have noted that my target for BANK NIFTY was 6375-6450 and was indicated when it was at sub-6000 levels(on 12th June 08). Today's close for BANK NIFTY was 6418.
I hope readers were benefited}

While scanning PSU stocks on my selected technical parameters, I noticed MTNL which is showing signs of revival. After recently testing 92 levels, the scrip has made positive divergence on the MACD ( though it is yet to be 'confirmed' by the Swing confirmation method).



The price level of Rs 90/- seems to be a good support for MTNL and I expect that a break above Rs 98.50 should trigger further buying in the stock and over a medium term time frame of about 8-12 weeks, it should attempt to test Rs 130-140 levels.

Though this is not a 'traders' stock; medium term investors may give due attention !

Happy stock picking!

CA Rajiv D Khatlawala

Nagarjuna Fertilizer - a revisit

During the last week I had indicated a corrective rally in Banking stocks ( I analysed BANKEX) and also a corrective rise in the NIFTY to 4600-4630 levels. These events took place today.

Considering the ensuing monsoon season, there is active buying interest in fertilizer counters. And we today re-visit our earlier analysis on Nagarjuna Fertilizer


The 'correction' in the counter is nearing completion with the range bound movement of the stock between Rs 40 - Rs 50..

A break above Rs. 50/- should trigger further buying. Volumes too are picking up in recent days which is a positive. On break out - keep a stop at Rs 40 for a target at Rs 70/-

Happy monsoons !!

CA Rajiv D Khatlawala

CIPLA .. completing L/T correction ?

The Pharma sector , it seems, is coming out of hibernation (deep sleep)

The long term chart of CIPLA is suggesting that it may be near to completing a multi year side way correction.


The recent buying interest in Pharma sector can well act as the trigger for the stock to complete the correction and resume it's longer term upward movement.

I will wait for a close (preferably a weekly close) above Rs 225-230 to enter the stock - keeping a time frame of about 8-12 months ( Yes! I know that's very long!)

After Ranbaxy - is it Cipla's turn to outperform ? ? Time will tell!!

Till then, Happy investing !

CA Rajiv D Khatlawala

BANK NIFTY ... Oversold !!

Yesterday's news of RBI increasing the Repo-Rate by 25 basis points saw the Banking counters fall today in early trades. But they have recovered and many banking stocks closed with gains of 1-3%.



The BANK NIFTY - an index of banking stocks, is showing signs of getting oversold now and the possibility of a 'corrective' rise is high.

The BANKNIFTY touched the low of 5703 reached day-before-yesterday (double bottom on intraday charts) but rebounded to close at 6000 levels against yesterday's close of 5971.

I expect the BANKNIFTY to correct to 6375 - 6450 levels. This should lead to some short covering in counters like ICICI BANK / SBI / BANK OF BARODA etc.

Those of you who may be short in Banking counters can book profit for the time being.

Happy Trading !!

CA RAjiv D Khatlawala

BIOCON - Waiting for break out !

WHEN every one was scrambling to buy Reliance, SBI and Larsen , we suggested buying RANBAXY at Rs 450/- ... and no one wanted to touch it.
The prices were telling us that something was cooking as the medium / long term trend had changed upwards. This has proved true - A Japanese company has announced buying the promoters' stake at Rs 737/- !!

As I always say "Prices tell us more about the future than balance sheets!!"

Well this has prompted me to look in to the price behaviour of other Pharma companies.

BIOCON looks good on the charts.


You would observe that the scrip is consolidating a lot with major support being at Rs 440/-. I expect a break out above Rs 480 should lead to further buying in the stock. Keep a stop at Rs 440. Medium term investors can wait for Rs 600/-.

Happy trading !

CA Rajiv D Khatlawala

NIFTY - neckline broken - what now ?

I presume by now most of you would have realized that the 'supposed' neckline of the H&S pattern on the Nifty is broken; which I was expecting to happen since last four weeks.

Now the second test of the confirmation of the H & S pattern is a likely corrective rise to the neckline ; having once broken below it. In technical parlance, we call it a 'pullback'.

For the Nifty, this pullback should make it re-test the 4600-4630 levels in the next few days.

Intraday charts are showing signs of oversold position now (from today's move) and hence the pull back is a possibility.

Lets observe how the market behaves at these levels to get a further direction.

Happy observing

CA Rajiv D Khatlawala

Reliance - Heading to Rs 1700 ???

WHEW!! What a way to start the week - Sensex down 650pts and Nifty down 110 !!

And all the time for the past few days we all anticipated such a fall.. I am sure my readers could take advantage of this - either in short selling or at least exiting longs.

The market leader Reliance Industries has taken support at the previous low formed in Mar 08 at 2110/- but in the process has also broken an important support trendline.



This support trendline is actually a 'neckline' of the H&S formation visible more clearly on the weekly chart (not shown here). the break of this line must make the long term investors in this stock more than cautious.

Corrective price rises near 2250 can be used by investors to exit for the time being as the charts suggest that a close now below 2100 should give a minimum target of 1700!!!

Keep your fingers crossed!

CA Rajiv D Khatlawala

MARUTI --- on a rough road

Maruti Suzuki is one stock which has been in a consistent down trend for the past few months. Even before the Jan 08 crash, the stock was already underperforming after making a high in Oct 07.

The current price area is a crucial support - especially on the weekly charts- and a break below 725 on close should lead to further selling in the stock as the weekly charts would become negative.

Weekly charts suggest that on a close below 725, a down move to Rs 585 is possible in next few weeks.

Only a close now above Rs 850 can make the investor safe in holding the stock.

Investors in this stock may take note !

Happy trading

CA Rajiv D Khatlawala

Nifty - Piercing pattern !!

I presume those of you who read my blog on 26th May - Reliance waiting to fall - when the price was at 2480; would have booked profit at the indicated level of sub-2200. The scrip touched a low of 2175 today ...



Nifty today showed a good upmove in intraday and has formed on the daily charts what is known as a 'piercing pattern' (Japanese candlestick). It indicates a temporary halt to a down move.

Nifty's corrective rise is after a continuous fall for last 12 days...(today is the 13th day - - a fibonacci day!)

Consider 4635 as a crucial intraday support for tomorrow - Friday - and resistance at 4735 - 4775 levels ...

And yes - SBI's chart suggest a corrective rise to 1450-1475 levels !!

Happy Trading

CA Rajiv D Khatlawala

RPL . . .approaching next support Rs 150/-!

The Nifty is in a strong downmove and I had indicated a couple of days back that the Stochastic Oscillator is likely to remain in oversold zone. This was because oscillators have a tendency to remain oversold in trending down markets (This has been also explained in my book)

RPL . . .



I had analysed RPL some days back and indicated selling below Rs 197 to a down target upto Rs 183... The scrip has exceeded the down target and is , like Reliance Ind, forming a rounding pattern.

The Rounding pattern down target is near Rs 150 and I presume the scrip is approaching that level.

Consider Rs a close above Rs 184 only as a negation to this pattern. Till then the target remains!

Happy trading!

CA Rajiv D Khatlawala

Nifty - Tests indicated support . . .

Yesterday I had indicated that the Nifty is likely to take temporary support at 4625-4640 levels. The Nifty touched a low of 4634 and rebounded to close at 4715.

Consider intraday crucial support at 4695 and 4653 for tomorrow.

Upmoves are likely to get resistance at 4758 levels and a major resistance at 4800 ( remember earlier support of 4800 becomes resistance now)

Even on the weekly charts The today's low of near 4600 is crucial ( see my earlier blog "Pray we don't see 4600")

The fight between bulls and bears continues and it seems the bears are in overall control. Let's see how the controls shift in future!

Happy trading !!

CA Rajiv D Khatlawala

Nifty - breaks 4800 - What now ??

My regular readers will recollect that on May 26th I had suggested that 4800 is crucial and key support for the Nifty and that "a break below this will further aggravate the situation".

Moreover for the heavyweight and market sentiment mover Reliance Ind - I had indicated that a break below 2480 will be negative and it will try to touch 2200 price levels in coming days.

Both above 'events' have taken place and we now need to evaluate the future course of action!



Upmoves for the Nifty may be treated as corrective in nature as the medium term trend which was weak is weakening further.Upmoves are likely to face resistance at 4825 and 4875. (In fact if many of you have computed- 4875 was this week's Pivot! which got broken in intraday)

Consider a temporary halt at 4625-4640 levels. Overall medium term trend remains negative.

You may also rememeber that 4600 is also the neckline of the weekly Head and Shoulder formation !! Hence the importance of this level

Happy trading

CA Rajiv D Khatlawala