Trading Notes (Refresh the page to get the latest page)

August 21 2008 

The bears will argue that the bulls are overly optimistic and that they are forgetting the fact that there are still major economic and financials hurdles. Bulls argue that bears are overly pessimistic and underestimate that  - the character of Global economy has transformed and is now much more resilient. The truth lies somewhere between

Confusing Times

Good morning.

Trading has never been as confusing as it stands today. There are as many opinions on the market as people. There is no clear trend and countless worries in the market. The big story of mid-July to mid-Aug has been = Sharp Sell off in Commodities. Commodity indices delivered the worst monthly returns in last 30 years. Global equities managed a sharp bounce of more than 10-12% as an adjustment to commodity sell off. But financial markets have become lack luster since then.

The financial worries are back with doomsday forecasts. US Housing continues to be on downward sloping path and Investors are betting that time is running out for Fannie Mae and Freddie Mac. There is intense speculation that even Lehman Brothers will go Bear Stearns way in this crisis. But markets are not falling off despite overwhelming negative fundamentals because of huge short interest.

That's not all - Geopolitical risk is once again raising its ugly head on Russia's misadventure. A conflict may mean once again Crude Oil prices can flare up. Despite commodity sell off, inflation still continues to be firm. Though now there is hope that falling commodity prices may help tackle this problem.

On Domestic front, there are not enough cues to work locally. Next couple of days, market would be interested to know what happens at NSG (Nuclear Suppliers Group). One factor that can swing market momentum = Administrative reforms like stake sale divestments. But on negative side, it seems Government's bandwidth is going to get consumed in J&K and Nuclear deal.

Technically, though market now has a +ve bias after yesterday's trading action, but things can turn overnight for worse. These are challenging and confusing times. It is not easy to make a call on the market. There are too many forces at work in different directions. Let me end the note by following quote -

A number of traders have mentioned to me how difficult they've found the trading over the last several months. It's almost as if each day has its own theme and pattern, with little follow through from one day to the next….Brett Steenbarger

View Nifty Chart

State of the Sector

Market Observations

• Money has a habit to go where it is expected to be best treated.

• HSBC View on Indian economy: The risk to corporate earnings growth remains in our view the biggest risk. A slowing economy (IIP release for June reinforces the view), high inflation and monetary tightening are likely to lead to disappointing earnings growth.

• Reading the market is more important that analyzing individual stocks. The cause of price movement in any given stock is predominantly a function of market and sector risk

• ONGC = After yesterday's selling, stock is now just below 200 dma of 1043. It is critical for Nifty that selling in ONGC should get arrested at current levels. Technically, ONGC is one of the strongest stocks in the index.

• Safest Investment in the market over long term = Buy Index ETFs

• Reliance Communications = Recovery to 50 dma on the cards. View Chart on Stock Notes

• Defensive Bias = Two stocks that formed 52 week high yesterday = Cipla and Sun Pharma.

• WWIL = A case of stock forming higher highs and higher lows. Technically, stock offers a good trading opportunity. View Chart on Stock Notes

• SELMCL = What can we learn from recent sell off? View Chart on Stock Notes

• Resistance = In active trading, there are certain levels that prevent traders from pushing the price of a stock higher. These levels are known as resistance, and they tend to act as a ceiling that prevents the bulls from taking control of a stock's direction.

• ITC = A case of STTR (Support turned to Resistance) View Chart on Stock Notes

• Fertilizer stocks = A sector is never a leader without strong/improving fundamentals. In 2008, most of the fertilizer stocks have been buzzing and not without reason. It all started with Agri Theme and now Government is giving it a push by announcing new Fertilizer policy and backing it up with complete cash subsidy.

• Three Fertilizer stocks which I like = Tata Chemicals, Coromandal Fertilizers and Chambal Fertilizers.

• Momentum nightmare = RNRL, IFCI and Ispat Industries.

• Three stocks that are flashing on momentum screen = Subex, Noida Toll and KS Oils

• GTL Infra = A stock is moving up on pick up in Volumes. Technically +ve sign. View Chart on Stock Notes

• As the Nuclear deal goes to NSG for approval, stocks like Areva T&D and NTPC may generate trading interest. View Chart on Stock Notes

• Citigroup is positive on Nagarjuna Constructions. (We now value core construction business at Rs 132 based on 14x Sept-09E vs. 15x earlier. We only value BOT subsidiaries where financial closure has taken place - at Rs 14 per share. We value international subsidiaries at Rs5 and real estate subsidiaries and land bank at Rs 24.)

• Bongaigaon Refinery = Case of Sudden Reversal.  View Chart on Stock Notes

• Nagarjuna Constructions = Is stock forming a bottom in place? View Chart on Stock Notes

• Vintage Cards = Stock or a Lottery Ticket = Yesterday, stock moved up more than 500% on a single day.

• The markets don't beat a player; they merely give the player a chance to beat himself

• One of the things I have always enjoyed, is sharing what I know with other...State of the Market website is a platform to share.

• I have no opinion on the market, as it doesn’t count. I only rely on what market tells me. The language I use is technical analysis to understand what market tries to communicate me.

• The best place where one can read top Indian blogs on Finance - blogsjam

• Please Support your favorite website by making voluntary donations.

• Have you rated today's trading notes?

• Please share your comments here  about trading notes - Good, Bad or Ugly.

• If you like trading notes - Please spread the word. Pass the link to your friends.

Trading Notes Archives

• No Trading Notes on Aug 20

• Trading Notes Aug 19 2008

• Trading Notes Aug 18 2008

• Visit Archives Page

Subscribe to this Trading Notes

If you want this newsletter to be delivered in your mailbox - Please subscribe Subscribe to State of the Market Email: Visit this group

Tell me WHAT YOU THINK

Your feedback is important to me :-). Send me an email at 2deepaksingh@gmail.com. I would love to hear what you have to say.

Please share your comments here  about trading notes - Good, Bad or Ugly.

Happy Trading

Cheers

Deepak Singh

Market Analyst, State of the Market

YAHOO IM - stateofthemarket

All Charts have been published with permission from www.chartalert.com

I use http://www.toondoo.com/ for making cartoons

Disclaimer - The trading notes is Deepak's perspective on the market. The stocks listed here have been selected based on recent performance, and have probability of success in near term. But remember, it's still a probability, and chances are that stock may still not perform as expected. The column is purely for educational purpose. Please use your own discretion in trading. Trading Futures and options involves significant risk. You must consult your own financial advisor before trading to determine if it is suitable for you. 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.