The markets closed 0.8 pc down to maintain the down trend from 5630.We are at a critical juncture right now and there are broadly 3 possibilities which can occur now. Let us try and examine them and see how we can leverage these for our benefit.
1. The markets bounce from here or around 4750. We then continue the 3rd and final leg of the up move from 4532. The reason 4750 is critical is that it is the 80 pc retracement of the up move from 4532 to 5629. We may go back and from a double top around 5629 or continue upwards at 5750-5800 region.
2. Second possibility is that we bounce from here and form a retracement to the down move from 5629 or 5342. In this case, we may bounce anywhere between 5100 and 5300.
3. The third possibility is that we continue to fall further and test the December 2011 lows. This would been that the downfall has begun giving us targets of 4300 and 3800.
So what does one do now?
One could buy a few stocks for trading and reduce the cost price by booking profits firstly at 5100-5200 levels and then at higher levels. If the markets fall, one could always average out at lower levels. For this strategy to be successful, one will have to focus on good quality dividend yield stocks.
For those interested in individual stock picks, Lakshmi and myself have identified a few stocks.
The Parliament session ends on May 22nd 2012. If the Government does not hike fuel prices within the next fortnight, it will never be able to do so. The Parliament is not in session for the next 2 months neither are any State level elections scheduled. This is the last chance for the government to usher in reforms.
The Greece crisis will play out only after June 17th when fresh elections are held. Greece may very well move out of the Euro.
Either ways, as I see it the next few weeks will usher in a few weeks of relief rally. The markets are testing the RSI level of around 28 around which historically there has been a bounce.Only in crisis like scenarios do the markets fall further.
The P/E of Nifty is now 16.85. The markets typically bounce from a P/E of 14-16 except in a crash like scenario where we may go down to 10-12 range. 14-16 means at current valuations Nifty should bounce from 4650 levels which is the fair valuation.
1. The markets bounce from here or around 4750. We then continue the 3rd and final leg of the up move from 4532. The reason 4750 is critical is that it is the 80 pc retracement of the up move from 4532 to 5629. We may go back and from a double top around 5629 or continue upwards at 5750-5800 region.
2. Second possibility is that we bounce from here and form a retracement to the down move from 5629 or 5342. In this case, we may bounce anywhere between 5100 and 5300.
3. The third possibility is that we continue to fall further and test the December 2011 lows. This would been that the downfall has begun giving us targets of 4300 and 3800.
So what does one do now?
One could buy a few stocks for trading and reduce the cost price by booking profits firstly at 5100-5200 levels and then at higher levels. If the markets fall, one could always average out at lower levels. For this strategy to be successful, one will have to focus on good quality dividend yield stocks.
For those interested in individual stock picks, Lakshmi and myself have identified a few stocks.
The Parliament session ends on May 22nd 2012. If the Government does not hike fuel prices within the next fortnight, it will never be able to do so. The Parliament is not in session for the next 2 months neither are any State level elections scheduled. This is the last chance for the government to usher in reforms.
The Greece crisis will play out only after June 17th when fresh elections are held. Greece may very well move out of the Euro.
Either ways, as I see it the next few weeks will usher in a few weeks of relief rally. The markets are testing the RSI level of around 28 around which historically there has been a bounce.Only in crisis like scenarios do the markets fall further.
The P/E of Nifty is now 16.85. The markets typically bounce from a P/E of 14-16 except in a crash like scenario where we may go down to 10-12 range. 14-16 means at current valuations Nifty should bounce from 4650 levels which is the fair valuation.
0 comments:
Post a Comment