State of the Market|Reading the Psychology of the market

How can market breakout? Valuations are stretched. There is divergence on the charts. RBI is going to raise rates. Astrologers are saying market will go down. Well - Market will do it has to do i.e. to move in the direction that will cause maximum pain to maximum people.

Market Observations

1. One should focus on what MARKET IS DOING and not on what market SHOULD BE DOING.
2. Unfortunately, most of the analysts in the market are focused on what market should be doing.
3. Emotions cause traders to see the market as they want, not as it actually exists.
4. The bulls pulled off a spectacular turnaround and it just proves one point - the trend can last much longer than one can imagine.
5. Nifty above 5400 - What next?. I have no idea. The direction is up.
6. Bears only hope - Technical structure of US market. S&P 500 continues to trade below 50 dma as well as 50 dma is trading below 200 dma.



7. The good news: China has done a U-turn by breaking out above 20 dma and is looking good for more.
8. Word of caution: Next week - there is F&O expiry and RBI next policy meeting. It means Nifty may not runaway from current levels but just consolidate above 5400.
9. Word of caution: Nifty has closed at new 52 week high BUT not DEFTY - Dollar denominated Nifty. The INR has to do lots of catch-up.
10. Sector on move: Metals. Tata Steel and JSW Steel have been on momentum move during last couple of days. Hindalco has also been on move. Surprise element: Sesa Goa has not participated.
11. One underowned sector that can surprise on the upside in coming days and weeks: Telecom. Bharti and Reliance Communications both look good on the chart
12. Bullish move - Adani Enterprises: I did cover the stock yesterday in my trading notes as moving average buy. The stock seems to be following the logic. Today it closed at 558



13. One stock that is testing patience right now: Indiabulls Financials. The setup is bullish but stock is not making any move
14. Is IRB sell near 200 dma? The stock closed at 265. Citigroup in its latest research report outlines that stock is priced to perfection and hence a sell. Hmm….do you buy this logic?


Source: ChartAlert.com
Technical logic says one should buy at 200 dma

15. Fundamental BUY: Lanco Infra. Citigroup has upped the target price to Rs. 80 on good execution progress, financial closure on its upcoming projects.
16. Bombay Dyeing after long consolidation around 200 dma has moved up sharply. The stock closed at 537 and now as long as stock holds 520 - expect more upside
17. One reason I love breakouts. Look at the chart of GAIL - it pulled back to breakout point of 440 and then rallied sharply. Today it closed at 474


Source: ChartAlert.com

18. Sun TV is at the breakout point of 440. Will it repeat the performance of GAIL? Look at the complete Price Breakout sheet.
19. What comes first: BUY REPORT; or BREAKOUT. yeh to wahi baat huee ki pehle murgi aayee ki anda



20. Since, the day Persistent has broken out - the reports are raining left right and center. The new target price 560+
21. Speaking of reports, today I saw couple of reports on PTC. If you have been following my notes - I did mention about trading noise around PTC. Ambit and Edelweiss has come out with price target of 135 on the stock.
22. Three mid-cap IT stocks that look good on charts: Hexaware; KPIT and Tulip Telecom
23. A rising market floats all boats, even the leakiest ones. In current market, even weak stocks cannot be shorted.
24. Simple definition of breakout: Breakouts are points of instability in price where there are likely to be collective overreactions or under-reactions caused by irrational traders and investors.

Please share your comments on what you think of market observations, market and trading in general

Disclaimer - The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers