BPCL , HPCL are firming up on charts and could be bought on dips or as and when crude dips below 90 could see a run up .
Educomp below 3050 if sustains could give a dip to 2800 or lower and can be used for a quick trade.

For more search nooresh on google......

Lupin yet again is trying to give a breakout above 780 but vols are low . Difficult stock to trade though but a move above 780 could tgt 850 + .
Punj lloyd if breaks 260 go short for a tgt of 240 in short term with a stop of 269

For more search Nooresh on google...
...

ITC is following a rough band of 180-200. Buy around 185-187 with 181 stop for a tgt of 195-199. Or go short around 197-199 with 201 stop. if breaks below either 180 or above 200 could give a quick 5 % too.

for more search Nooresh on google......

Sensex Technical View :


Some time back had put up charts on Sensex time and price analysis . In the price analysis we had an upside tgt of 15400-15500 which was almost done and booking/exit was advised. Although on the time analysis we expected a dip to start around last week of September it started a week or more earlier. Time analysis is always the most difficult thing to do and can only give us a rough range.




Now again looking at the price analysis pattern , every major downleg has been to the extent of 27.7 % in absolute terms comes to 11270 levels. Sensex fell from 21k to 15,3k and 17.7k to 14.7 k in similar 27.7 and 27.7/29.4% absolute dips. At some point of time this pattern needs to be broken to confirm an important bottom . This could happen only if markets bounce back from a level higher then 27.7% dip and dont break it for 3-6 mths and crossover above 14-15k on weekly closing basis.




So in the short term 12100-12300 and 3730-3750 on Nifty are important levels in the week which if breaks could see 11900/11500/11200. 11900 is the 50 % retracement level of 3k to 21k run and is an important zone. As we see the channel support comes in close to 11500 mark. For the Nifty similar levels are 3500-3600 on lower side which is important support range....

Continued.....
3) Time Period.
This is the most difficult part of analysis and nothing can be termed to be accurate. But Classical and Elliot wave analysis do prefer a correction span of 8/13/21/34 months.

Now for Sensex there are mainly two camps which believe either the correction span ends in October 8 months or February/March 09 or the other one being the correction span goes well into Oct 09 or Nov 2010.

If 11k/12.5k is supposed to be a bottom then end of 2009 could see the new rally commence. This theory lays mainly a comparison to 1987, 1992 bear phase.

If 9500 or lower has to come in Sensex then yes the focus may shift to a correction span of 21 /34 months and the new rally to commence in 2011. This theory lays mainly a comparison to the 2000-2003 bear phase.

Although it is very difficult to give a time analysis for markets and economies but this is an attempt which many of the theories may point out too.

I personally would prefer and give a very high probability to the 1st theory of 11k/12.5k and 2009 mid to end to be start of the next rally as this has been the standard view since last few months about an economic peak and market bottom close to Sept/Oct 2008 which I have been repeating since 18-16k levels few months back.

The major turning point for the theorists would be Jan-March 09 or roundabouts where a different viewpoint me emerge either in favor of 2009 mid to end or end of 2010 or start of 2011.

Chart put up some time back comparing current bear market-

4) Price Targets.

Yet again we get into two camps out here.One which prefers 11900/3600 or a bottom very close to it as this would be a retracement of 50 % of the entire rally from 3k to 21k or 850 to 6350.

The other one prefers a correction to 9700/2950 or a bottom very close to it as this would be a retracement of 61 % of the entire rally from 3k to 21k or 850 to 6350.

Classically markets would tend to correct to 50/61 % levels before commencing for the new rally. Also for Sensex the multi-year flag pattern breakout and channel has a support line close to 9500 till then the long-term multi year run continues to remain in place but a comparison with Dow Jones suggests that markets may not touch the support line at 9500 but can marginally dip below the 50 % level of 11900 before gaining strength for the next bull run which should be bigger then the previous one in time and magnitude.

Now other calculations in Elliot wave counting says either in the short run we are in C3 sub wave or C5 sub wave of the final leg of C wave correction. The counts may different with different analyst and different index be it Sensex /Nifty. Also I am not that adept with Elliot but there are not many counts which people have made on the super cycle of 1979 to 2008 but majority of the counts done are for 2000 to 2008 so maybe there could be different counts or views in both cases. But as per my calculations even if C5 goes to 9700 or roundabouts there is the major super-cycle which may continue well towards newer, newer highs in this decade or next 3-5 years as Sensex has broken out of a 13 year consolidation period from 1992 to 2005. This 2nd phase of the Bull Run should last for much longer time and much bigger targets which may be in times from the lows made!

In either cases one would expect a minimum target of 1.618 times the downmove in coming months/years which may depend on the bottom.

1) Miscellanous Observations.
One of the most important consideration is Sensex has broken out of a 13 year channel which is very similar to the Dow Jones breakout in 1980s. And the 1987 crash bought the Dow Jones index by 41 % and 57 % retracement. But it did not touch the lower end of the channel. For Sensex the lower end of the channel comes to 9500-10k on log charts. So ideally Sensex can worst come down to 9500-10k but generally in a multi-year flag breakout doesn’t come down to test the flag but retraces from much above the line.

The charts have been attached for the same comparison.
Flag Charts -
Dow Jones Flag

Dow Jones targets
Sensex flag
Sensex targets

1) Observations and Conclusions

After a brief analysis of both camps there is one thing common which prevails is that even if there is a bigger leg coming towards 9700 we should see a 20 % bounce back from the lows near 11200/11500/11900 which will give good returns.

Also for the time period of the bear market the two camps consider it to be either 8-13 months or 21/34 months. So the most crucial time would be around Feb/March or till May when analysts and market may come to a consensus. So starting 3-5 months of 2009 would be a clear decider for investors/traders to take a more comfortable call.

It still doesn’t seem there is a consensus on a 9700/11900 or 3600/2950 price target and the bear market phase time period. But one thing that remains for sure is that majority of theorists on both the camps tend to agree on the next bull Search Nooresh ...

The above levels are the biggest debate between all types of technical analysts be it Elliot, Classical, Wave or whatever.


Although I am mainly stock specific so prefer to go with the Classical patterns but do tend to have a look into various theories for index calculations.


Now let’s see the points of debate based on primary assumptions of technical analysis.


1) Bullish or Bearish in the long term.
2) Historical Comparisons.
3) Time Period.
4) Price Target.
5) Miscellaneous Observations
6) Observations and Conclusions.


1) Bullish or Bearish

There is hardly any technical analysis theory or analyst who would give a 6k Sensex and 2k Nifty target and consider the indices to be in a major bear trend and we may not go above 21k in the coming decade and continue to be in a range of 6k-21k as we did in 1990-2000.

Majority of the technical theories and analysts continue to maintain that Sensex is in a long term bull market and may knock new highs in the next decade or say 3-5 years.


2) Historical Comparisons.

Let’s start with bear markets in India.

Although there is no hard and fast rule about what could be termed a bear markets. I would consider any fall of 20-50 % from peak in absolute terms and spans for more then 5 months to 2-3 years.

I have still not understood why every analyst thinks it was only 2000 to 2003 was the only bear market but that could be because all have been tracking Nifty only which started in 1994.

Sensex corrected 40 % in 1986 -1988, 1991, 1992-1993. The important one would be 1986-1988 and 1992-1993 as they lasted for more then 8-13 months and can be used for the comparisons.

Although if one is looking at a structural bull market then the most important one to be considered would be the 1986-1988 bear phase. As this goes well with the multi-year breakout which happened in 2005.

Comparing current bear market phase to 1992-1993 and 2000-2003 Sensex has one concern that during the period of 1990-2003 Sensex continued to range between 2k-6k. And all through after a bull run market ended up touching the lower side range of 2k. So in such a comparison it would imply a testing of the breakout of 6k in 2005 for current index and then make a new range of 6k-21k which may last for another decade ??? !.So definitely there are questions on both sides whether to consider 1992-1993 , 2000-2003 or consider the 1986-1988 corrections.


Charts for reference:

Sensex 1986-1988 correction

Sensex 1992-1993 correction

Sensex 2000-2003 correction.


USA – Dow Jones


This is the oldest available index in the world and also the biggest economy so it makes sense to compare a highly mature market for any part of technical analysis.

Here again the structural bull runs were seen in 1930s and 1980s. So 1937-1942 and 1987 would be important ones to watch for comparison as these corrections led to the major bull rallies. I have been comparing the US economic scenario of 1980s to India of 2000s. And the pattern of multi-year breakout seems to be very similar on both cases. Have extensively included the same in our come look into the future presentation.

Also one more observation is that October is a Bear Killer month for Dow Jones. According to the Stock Traders Almanac (which is the authority on seasonal trends), October crashes took place during 1929 and 1987. October downturns also took place in 1978, 1979, 1989, and 1997. October, however, is also known as a "bear killer". Bear markets ended during October in 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, and 2002. Charts 2, 3, and 4 show October bottoms in 1987, 1998, and 2002. October also saw big gains after bad Septembers in the five years from 1999-2003. We have to consider October month importantly as US backed recession is leading to financial crisis all over the world.

for more search Nooresh on google.......

Historically every major bull market run sees a lot of stocks or a particular sector which become multi-multi baggers and become a market fancy. Such a bull run leads to lot of excesses in the system which get totally cleaned of in the following bear phase. The over-optimism , market fancy, lofty valuations etc etc and many other reasons. Even the strongest of the companies may see a shave-off of 80-95 % from peak and may remain at lower levels for quite some time. But the strongest of the lot may come back and achieve similar highs in the next bull run and also give super returns in a span of 2-3 yrs but may remain highly sideways after the wreckage.

Lets have a few examples :

Please note all the prices used are adjusted to bonuses/splits till date and the extent of drop and run is more important.

2000 IT Boom

Infosys corrected from 1726 in 2000 to 269 in 2001 which is a correction of 84 % erosion !.
It recovered to 1700 again by 2006 .

Satyam corrected from 723 to 55 a correction of 92 % . Could only reach to 445 levels by 2006.

Wipro corrected from 1633 to 135 a correction of 88 % . Could only reach to 600 by 2006.

These were the top 3 stocks from the IT sector which could notch back comfortably in the next 5 years.

But the other small ones which caught market fancy and went to highly over-valued levels donot follow the same pattern. Although these companies may still be functioning well now but the bubble levels may never come !

GTL corrected from 2560 to 35 levels which is an erosion of 98 % . The stock could only cross 100 + levels by 2006.

ZEE corrected from 750 to 40 which is an erosion of 95 % . The stock touched 180 by 2006.

HFCL 2550 to 30 came down to almost 1 % of high. The stock is still in 2 digits till now. Pentamedia Group was another which came down to 1 % and r still in 2 digits or lower.

Investors stuck at the top of the rally lost 80-90 % of the money !!! coz of getting in late! and sticking to the mistake. And in some bad ones the total value got eroded.

Smart long term investors bought the biggies in 2001-2003 at the end of bear cycle got almost 5-10 times in next 3-5 years in strong companies with good visibility.

This was 2000-2003 now lets have a look in the excesses of the 2003-2008 bull run. The sector which saw a bubble can be termed to be real estate related stocks.

Lets have a look at the few strong ones.

DLF 1225 to 330 . Erosion of 73% .

Unitech 545 t0 98 . Erosion of 82 %

HDIL 1113 to 150. Erosion of 86 % .

These three are the stocks with high market cap compared to the rest of the gamut like orbit,ansal,parsvanath,omaxe etc etc and many more in the small cap segment. All these stocks have lost almost 80-95 % from the peak levels. I had been critical and made a specific avoid on these stocks in the last few months as one may not know where these stocks could stop although they may be good companies and may continue to function well but history says to avoid.

So what next , Ideally the calcualtions which i have seen over the data in lot of bubble stocks says that the lowest risk is to buy such stocks at 8-15 % from the peak and keep on hold for next 2 years. Although the major consideration is to make a thorough check of fundamentals and prefer to stick to companies with high visibility, earnings projection and may stay well in the business for next 3-5 years.

So in that scenario the low risk bets would be DLF , Unitech and HDIL if available at 85 % or lower and be bought in small lots in the next 3-6 mths closer to 80-90 % from peak if it comes to those levels but the holding period would be a minimum of 2 years. Accordingly one can tae only 25 % of quantity in Unitech at 90-100, HDIL at 150-165 and keep provisions to add further dips in small lots. Although this may be a risky bet now but 2 years down the line could be a different thing. Investors need to do adequate research and will have enough time as these stocks may remain sideways or down in the near term. This is just a stastistical viewpoint....

better q.of this mth yes ...

Dear Nooresh, You touched one very important point. Let me make an attempt to add to it one more thing. This year\\`s higher inflation forms a base for next year. So if there is no significant difference in the price rises from now onwards, inflation figures will be lower. But is has nothing to do with the NPM of the companies, as the input costs are still higher than the previous higher( quite often, people get confused that lesser inflation means a decline in prices!). Let me make an attempt to see it from Individual and industry perspective. 1)Individual- For individuals, it( lower inflation) doesnt make any differnece unless their net incomes raise more than the raise in inflation, taking the previous year as base. 2)Industry- For companies, unless they pass on the higher input costs to customers, it( lower inflation) doesnt really make any difference. In fact there are many misconceptions about inflation. regards...

Amazing sir, I never knew that the base is of the previous year, i always thought it was of the previous week. Same goes for growth figures. ...

Good post Nooresh. I too was thinking of the base effect and how misleading it could really be. To compare inflation on a continual basis (past week to current week etc.) one should either look at the actual values (index) or use a common base for calculations. The problem here would be to determine what that base should be. One idea would be to use the previous week's index as base. Here if it is a positive number then inflation is rising or if it is a negative number inflation is going down. Of course the values themselves would be much smaller (about a percent or so). Regards OT ...

Hi Nooresh. inflation is down... how much rally we can expect in banking counter? you have any target for BOB and SBI? Thanks, Shyam...

Nooresh, whats your take on Torrent Power? It was your fav stock earlier....