Opportunity to invest in New Technologies

US Tech fund, a unique concept of investing only into the new age disruptive businesses. Technologies that are nascent and have very high growth potential. Stocks like Google, which has so many developed products that have become lifelines of the world, which most of them are not yet into generating revenue. Once they begin generating revenue the scope for growth in Alphabet stock is huge. Similar kind of businesses that form the new technology businesses, all of them nestled in the US in the universe of this fund’s investment.

US market itself is non-correlated to India’s market, which will help have a nice diversification to the portfolio. Having US tech will bring an even greater co=-relation along with big growth. One can think of having a 10% exposure to this fund, leave it to grow, only reap the returns that it will keep generating.

Market losing direction

Corona virus was causing the markets directionless was the thoughts that were spreading in the media. While it seems to be not so, when there is a steep fall and a strong recovery, it confuses traders.

When the market goes deep down, traders are prepared for shorting the market when it comes up a little. This is called a rally in bear market and gives a good shorting opportunity. When the rally happens & at the place where a trade in the direction of main trend gets whipsawed (Whipsaw is a trade that goes opposite to its intended direction). First the losing trade in a strong trend brings confusion to the traders. Then, when the market goes in the opposite side of the prevailing trend to reverse it, it adds to even more confusion.

This is what has happened in our markets now. After budget day fall, we had straight recovery for the next 5 days. As the recovery reached its top, steam of the uptrend was getting exhausted. It began losing momentum or strength to move up further. By then all the traders who were prepared for shorting the markets lost hope. Now, confused they are staying away, which has caused the market to stay directionless.

Nifty on the daily chart has gone non-trending. Bank Nifty is kind of holding on at the moment, one are 2 more days of tightness, even bank nifty will go directionless.

When the major indices are off trading, there will be only few stocks that will push the markets into a new direction. In that manner we had Reliance, Hindalco & Vedanta leading the bear pressure. Reliance short trade which had a target at 1392, fell short of its target by a larger margin and has reversed. Even with such a move Reliance has given a 25 points winning trade, which closed today.

Corona virus was causing the markets directionless was the thoughts that were spreading in the media. While it seems to be not so, when there is a steep fall and a strong recovery, it confuses traders.

When the market goes deep down, traders are prepared for shorting the market when it comes up a little. This is called a rally in bear market and gives a good shorting opportunity. When the rally happens & at the place where a trade in the direction of main trend gets whipsawed (Whipsaw is a trade that goes opposite to its intended direction). First the losing trade in a strong trend brings confusion to the traders. Then, when the market goes in the opposite side of the prevailing trend to reverse it, it adds to even more confusion.

This is what has happened in our markets now. After budget day fall, we had straight recovery for the next 5 days. As the recovery reached its top, steam of the uptrend was getting exhausted. It began losing momentum or strength to move up further. By then all the traders who were prepared for shorting the markets lost hope. Now, confused they are staying away, which has caused the market to stay directionless.

Nifty on the daily chart has gone non-trending. Bank Nifty is kind of holding on at the moment, one are 2 more days of tightness, even bank nifty will go directionless.

When the major indices are off trading, there will be only few stocks that will push the markets into a new direction. In that manner we had Reliance, Hindalco & Vedanta leading the bear pressure. Reliance short trade which had a target at 1392, fell short of its target by a larger margin and has reversed. Even with such a move Reliance has given a 25 points winning trade, which closed today.

4% gain over the week

After getting beaten last week, markets went up on all the days this week. Over reaction to budget announcement created a mess in the markets, only to recover back in the next 5 days. While, the damage is done for some more time.

When such big drops happen, it shatters confidence of traders. They will shy away from taking positions for some time. This will dry up volumes and bring a lot of losing trades in the market.

As the markets have been moving up, in the last 2 days we are not seeing big run up in price, it shows that, weakness is setting in.

Among the charts we had discussed yesterday, Reliance has played out well on the short side. Hindalco had a few whipsaws & is getting ready for a fall. So is Vedanta. We have positions in Reliance, will share the experience once the trade is completed.

For Monday on the intraday, all the 3 stocks Reliance, Hindalco & Vedanta holds good for short. There are no long trade possibilities. This is also another indication that the markets are likely to go down in the next week. How much? We cannot gauge it. It can be a small drop, for a support and turn up. Or can have a slide, then get ready for a bigger bounty.

It is always good to re-test bottom and then go up. It gives more space as well as more participation. Instead, if the run up comes without forming a base, it will remain a short stint.

Potential Daily trades:

Stocks to look for trades this week. We have 3 stocks from the total NSE 200 list that qualify for a potential trade this week. All of them are for short. When most of the expected trades are in one direction, that gives an indication of what the market is likely to do in the coming days.

As per the data we have, market is expected to be down in the coming week. And this is obvious with the straight upside we had in the last week.

Nifty and Bank Nifty are likely to trade sideways for some time. When the indices go sideways, it gives an indication that there are likely chances of whipsaws in trades. Whipsaws are losing trades in a system.

Stocks that are candidates for potential short trades are HAVELLS, Hindustan Petroleum & Balkrishna Industries. Balkrishna is getting weak after a good rally while Havells and Hind Petro are already weak & are reaching value zone for further shorting.

Let’s examine Balkrishna in detail

 

This is the weekly chart of Balrishna Ind, 2 green arrows at the bottom is where we had trend reversals in this stock. First one failed while second one developed into a strong trend. This happened in September 2019. The time when the whole markets bottomed out.

Trend entry came at 852 & today the stock is trading at 1150 levels. Those who are holding a trending position in this stock can continue to hold as the trend is getting strong.

Then how do we talk about a short in Balkrisind? At the right edge 2nd week of Feb, price made a new high, while the bar is still Blue, it did not change to Green. The colour coding of bars is to indicate if the EMA and the histogram are in sync. That is, when Price goes up, EMA will go up because it is the average of price movement. Along with that, if the MACD Histogram also goes up, bar will get coloured Green.

Bar gets blue colour when either one of the indicators, EMA or Histogram going up. IN this case, Histogram did not go up. It is an indication that the stock is losing strength. In trading we trade the dominant side of the stock’s strength. We call this colour coding of price bars as ‘Impulse’.

Price can go in 2 directions, up or down. It can go sideways, that is, stay where it is with very small movement both up and down. This happens when the stock is in non trending. Here Balkrishna is trending bullish.

How to know if the stock is trending? On the chart we have Green & Red bars at the top. That gives indication of whether the stock is trending, if yes, in what direction. At the right edge we have Green Bar, which indicates that, the  stock is trending bullish.

Now, Balkrisind is in bullish trend and it is losing strength on the upside. So, next direction is, down. As weekly gives direction for a short trade, we need to look at the daily chart to find if it supports and take the trade there. For Balkrisind, Daily chart is still to clear the trade because as of last Friday, it still holds green impulse.

Daily chart of Balkrishna Ind.

At the right edge of the chart, price is reaching for a higher high, histogram is below zero, no bullish strength shown on the indicator. At the same time, impulse of the price bar is Green. Till it turns blue, going short on the stock will not work.

When will the bar change to Blue?

As of the last bar on the chart, if the next price close is below 1101.23, bar will change to Blue and allow short. It can come in the next session. Let’s track.

RBI policy, market up for 4th day

RBI policy kept rates unchanged, market was a little jittery with expectations that, there can be negative surprise. As nothing changed, interest rates kept at 5.15. It was joy for the markets which moved up for the 4th straight day after the budget day fall.

After a steep drop, getting to big rally is creating confusion in the minds of traders.

 

 

 

 

 

 

 

 

 

 

 

Nifty Daily chart

When there is a big drop and steep recovery, it brings confusion. Histogram on the chart has a deep bottom & now price has moved above the EMA. Price says market is bullish, indicator says there is strength on the bear side. And the chart is trending bearish (red lines on the top – indicate bearish trend)

This confusion should lead the markets to go nowhere. For few days it will hover around the range, find resistance at 12292 levels reached on 24th Jan. From here, going long will be a trade that has very less steam left in it. For a short we need price to close below the EMA, which again will be a trade that is half way through.

So, no trades for few days in Nifty. Even Bank Nifty is the same. If both indices are in confused state, in a market that is having strong bullish strength, where can a trade come through.

In a market that has made a good rally, best trades can come from the shorts. One can find stocks that are showing weakness at the top and short them.

Reliance, Hindalco & VEDL have potential shorts – 

 

 

 

 

 

 

 

 

 

 

 

All three charts having similar pattern. Price is in the zone between 2 EMA’s. Histogram has good depth & chart is trending bearish. Also all 3 have reached value zone( area between both EMA) in 3 to 4 days from their bottom.

Within 5 day’s from the peak or bottom is considered to be hot and more likely to reach back to the bottom.

These are for intra day trades.

Coming to trades for the next day, that is Friday 07-02-2020.

Balakrishna Ind – Stock is getting weak at the top, can have a short trade once the daily histogram ticks down. There was a false break out yesterday, which also adds to bearish strength.

Havells, is getting closer to its weekly value zone. A tick down on the daily will give a short signal. Target can be at 576.

Mindtree had a high rejected & ready for short below 898.