Range trading...

Dow Jones Industrial Average 11628 Negative <>

Last week’s developments have by and large vindicated our stand. The Dow remained under selling pressure & dipped to a low of 11290 before recovering smartly in the last trading session. Since mid July the Dow is locked into a trading range of 11.8-11.2k area. This week, the market, could be expected to re-attempt the hurdle area of 11.8-11.9 before taking a final call. In short, expect another week of range trading, may be between 11840 on the upside & 11400 on the lower side.

Corrective phase continues...

Bse Sensex 14401 Negative <> In the last week’s analysis, we had pointed out that the Sensex is likely to weaken further towards 14350-14150 area. This we have seen happening with a low of 14136 posted on Thursday & a recovery thereafter. On Friday, the trading was confined to a small range (after a big sell off) near to the lower end of the rising parallel channel. Therefore now a move over 14300 (min value of trend line) would lead to a positive efforts in the near term, within the overall negative trend. Expect a corrective up move towards 14.7k (min) to 15k (max), at least, in the next few trading sessions. Keep a stop of 14150 for the trading (long) positions.

Expect base formation near $180-$185

Dow AIG (Commodity) $192.86 Negative <>

We anticipated a weakness at $224 (recent top is $238.5). As against target of $180-$174 (ref review dated 11th Aug) the index achieved $185. Last week, we had seen some positive efforts, after breaking above the falling parallel channel, with a sharp trading bounce from $187-$185 area. However as anticipated, the rally fizzed out exactly near $198. After a sever damage, the index is likely to stabilise, here, within the $180-$185 range. So we could expect a range trading, in the near term, within the tight band, before making serious “recovery” attempts, once again, above $198-$200 area (critical area).

Base formation & moderate recovery is on cards...

Brazil Bovespa 55850 Positive > 52k(Corrective) The index lost over 29% since May 08. In the last review dated 27th July (57199) we stated ‘expect steady down move towards 52-53k in the next few weeks’. As against this, it created a low of 52345, exactly within the anticipated range, before recovery towards 56k. After shedding over 29% in short span, the index is likely to stabilise, here, near 52-53k, even though the macro level picture remains bearish. In the immediate near term, expect base building (consolidation) within 52-55k range, before attempting a more meaningful recovery (corrective rally) towards 60-62k in the next few weeks/month.

Bears in total control...

Hang Seng 21160 Negative < 21992, Stop 22253

Since Jan 08 lost over 35, however, no respite for the bulls, yet. See the inlaid weekly chart. Last few weeks, the index is moving in a tight range of 21k-23k. Now, the long term support line is being violated on the downside. We would therefore still expect the continuation of the down trend. Immediately a move below 21k & then 20.6k would seal the fate of the Index for the medium term. On the upside, firm close above 22k is what required, for the bulls, to regain control over the market, at least for the medium term.

Slipping into bears hand...?

Nikkei 12991 Negative < 13.3K.Stop 13.6K (cl) It was said (4th Aug) “expect a range trading in 12.8k-13.6k, before heading higher; stop 12.7k”. Since then, Nikkei remained stuck in the range of 12893-13468. In the meanwhile, lack of follow-through buying near 13.4-13.5k created weakening structure. The signs of some fatigue are however visible and we could see few days of battle within the ‘same’ rage before the decisive breakout in the either direction, mostly downward.

Target achieved....

Dow Jones Industrial Average 11659 Negative < 11840.Stop 11980(cl)

In the last week’s analysis, we had pointed out that the Dow was likely to head towards target objective of 11810-11980 if able to post close >11759, otherwise expect a range trading. On the very first day (of the week) it achieved our long standing target objective, with a high of 11867. The subsequent moves were confined to rage between stop loss & target area. Stop of 11490 remained protected, though it kissed 11450 but closed above the stop. Last week, after achieving the target area, Dow hesitated to move up, further. Now immediately under an 11.5k close, expect more weakness. In short, 11.5k-11.8k is a new pressure zone, expect ‘trending’ move on breakout in either side, mostly downward.

Sensex ...in the hands of bears...

Bse Sensex 14724 Negative < 15307, Stop 15.5k (cl) Last week we had contended that even though Sensex is positive (trades >15280) likely to come under severe pressure near 15.6k-15.7k zone due to suspected H&S pattern’s neckline & .618% Fibonacci resistance. We saw that happen, last week. After hitting a high of 15579, the Sensex buckled under waves of selling; eventually dipped below 15280; & also broken the stop of 14.8, confirming short term “top” at 15.5k. The failure in the week under the H&S formation (neckline) is testimony to the persistence of the “negative sentiment”. The weak trend will prevail as long as Sensex trades below 15.3-15.4k; on the downside, slide upto 14150-14350 looks for sure.

Negative < $198...

DOW AIG (Commodity Index) $189.3 Anticipated weakness near $224 (15th July). Since then fallen over 15% in just 18 trading sessions. See the inlaid daily chart. The current down move is within perfect falling parallel channel from the absolute top at $238.5. As long as confined to this channel move, it may fall to $180-$174, or even below in the next few trading sessions. On the upside, to break the channel upward & halt the downtrend, at least for the time being, it needs a close > $198, a difficult task, as of now.

Negative < 2800.Stop 2875(cl)...

SSEC (Shanghai) 2605

SSEC once again failed to clear the major hurdle at 2955 (ref review dated 24th June) & got punished with a sever bear hammering in the last week. The inlaid weekly chart clearly suggests a continuation in the down trend, till the falling parallel channel breaks upward; this week’s value of the upper trend line is near 2.8k.On the downside fall towards at least 2566, i.e. recent low looks imminent.

Positive > 11520.Stop 11490(cl)..

Dow Jones Industrial Average 11734

Anticipated near term move towards 11810-11980, but so far achieved 11759. Failure to post immediate “close” above 11759, i.e. last week’s high, will halt the rally & we may witness a sideways trading (with positive bias) before taking a next directional view, else a move towards target objective. On the downside, only a close below 11430 will weaken the structure further & in that case it can retest of 11.2k. In short, if failed to head higher (>11759) expect a range trading between 11.7k-11,2k within the overall corrective structure (uptrend).

Positive > 15280, Stop(r) 14.8k (cl)

Bse Sensex 15167

In the last week’s analysis, we had pointed out that the Sensex was likely to head higher after failure of “Island” reversal pattern. This we have seen happening with bounce towards 15.4k as against target objective of 15259-15390. However, we need to mention here that, it is likely to come under severe pressure near the 15.6-15.7k zone, due to “neckline” resistance (see inlaid weekly chart –published on 1st July 08) on possible H&S reversal marked on weekly chart; & .618% Fib resistance near 15748. Breaking below the rising trend line (daily chart) will be the first sign of waning interest of the bulls & the anticipated down move will be confirmed only with a move below 14.8k, revised stop. In short, expect “deceptive” trading environment even while upward targets placed near to 15.7k or even 16k.

Positive > 12.8k.Stop 12.7k (cl)

Nikkei 13094 It was said “Nikkei may consolidate in the range of 13.2k to 13.6k before moving up”. During the week, it indeed moved in a narrow range of 13468-13018, slightly moved below lower range. Even so, the medium term bullish outlook remains intact above 12.7k, the level from Nikkei bounced to 13.6k (16th -24th July). In the near term, expect a range trading in 12.8k- 13.6k, before heading higher. Strict stop at 12.7k (cl).

Positive > 11125.Stop 11.1k (cl)

Dow Jones Industrial Average 11326 Anticipated range trading between 11.1k-11.5k. Actual price move for the past week was almost the same. Past 2 weeks volatile range of 11698-11125, prima facie, is nothing but a ‘shakeout’ process to keep “weaker” hands out. The bulls are likely to defend 11.1k, in the near to medium term. Before that, 11250-11300 is a strong base for the bulls to push the index higher. Expect a steady up move towards 11810 & then .50% fib level of 11980 in the next few trading sessions

Positive > 14025. Stop 13.9k (cl)

Bse Sensex 14656

Anticipated (at 12.8k) corrective rally is (still) in force. The recent down move was halted at 13.7k, as against perceived support at 13.5k-13.8k. And the subsequent rise, past “island” gap area of 14484-14608, has negated the bearish implication of “Island” reversal, all together. Expect a continuation in the uptrend, unless seen a dip below 14150(cl), towards near term price (min) objective of 15259-15390 i.e. previous ‘unfilled’ gap down area. Being a corrective (to a fall from 17735-12514), the rally will be a complex affair rather than straight up move. Strategies based on individual stocks will be more rewarding rather than “wholesale” index based approach.

Long ABB & IDFC

ABB BSE Rs.802 Positive>Rs.770.Stop Rs.745(cl) Shed over 36% since April 08 (recent past consolidation) & over 54% since Jan 08. Subsequent to steep fall, in July 08, stock has witnessed good consolidated in Rs.750-Rs.940 range. We are near to the lower range, once again. Continuation of the bearish trend, immediately, looks less likely- due to sharp cut of over 50% in barely 6 months & consolidation in the last 22 trading sessions. Trade long, on a decline, for a range, with stop at Rs.745 (cl). IDFC BSE Rs.97.5 Positive>Rs.87.Stop Rs.84 (cl) From a high of Rs.235 (Jan 08) stock has dipped to a recent low of Rs.87.85 (16th July), over 62% cut. Since then consolidated in range & now ready for a bounce, provided trades above recent low of Rs.88. Once can Trade long with an initial range of Rs.90 to Rs.115/117. Stop few ticks below the recent low. More positive (only) if trades above Rs.115.