Wednesday, December 16, 2009

Market Mantra: Valuation By Time Parameter

"Old Time, that greatest and longest established spinner of all!.... his factory is a secret place, his work is noiseless, and his hands are mutes." ~ Charles Dickens

In this post, we'll see how the ticking time gradually killed the valuations of some of the renowned stocks based on some negative impact which led to under-performance of these stocks on the bourses, even as the over-all market valuations are quite near to those witnessed at the peak of the bull run last time. Read on...


The Adventurous Journey

A year back when equity markets the world over were at the helm of extreme pessimism, who would have imagined that the benchmark index Nifty, which witnessed a trough of 2500, would be at 5000 plus levels as early as December 2009. But, that's how stock markets work, contrary to imagination of most of the market participants. The recover in itself is not surprising but the 'pace' of its journey has certainly stumped most of them including the ones involved in the forecasting job- the Analyst community.

Market's Collective Wisdom

In this post, the discussion will revolve around how markets have valued some of the prominent stocks from various different sectors and industries, spanning the journey from previous bull market to the recently witnessed great recession and from there back to current spate of revival and recovery on the equity bourses. What are the aspects that the markets have taken a prior notice of, before giving the right kind of valuation fit for respective individual companies discussed below.

Factors Determining the Valuations

While deciding the kind of valuation that each of these individual companies deserve, markets have taken into account as to how these listed companies have fared all through it's journey from optimistic bullish times to pessimistic slowing times of global recession. How has these companies managed their all-important 'Cash' reserves? How has these companies fared in the process of cost-cutting and rationalization during the slow-down times? What is the impact on their 'Order Book' due to slowing global demand?

How has some of these companies managed their 'Leveraged Buy-outs' which were executed during the times when liquidity was flush in the system? Have these companies entered into M&A deals which did not warrant high valuations? How capable are these companies in servicing their debt taken to fund their expansion plans? Are they in position to bring down their borrowing costs?

Some other factors that goes into valuing the companies during the journey from bullish to bearish times and back to bullish times are the test that the 'Management' of the company goes through in passing slow-down phases. That's not all, markets also take note of the change in fundamentals of the industry in which the individual companies may be operating in. Say, for example, the Telecom sector - the prospects for the individual companies have worsened after cluttering of new entrants in the space leading to 'Price Wars'.


Now, we shall directly deal with selected few individual companies and see what math has been worked out by the markets in determining the valuation for these companies on the Indian bourses:

1) Suzlon Energy: This much touted stock from the renewable energy space got a rude treatment from the markets based on its performance. The company, which is involved in wind power generation, had taken a huge debt to fund the buy-out of firms like Hansen Transmission and REpower.


The woes continued for the company with the instances of blade cracks on more than one occasion during the operation of the wind turbines. The company had to provide for blade retrofit & replacement compensation to the clients. The markets clearly gave a thumbs-down to this inefficient management and repetitive product accessory-related woes experienced by the company all this while. This stock, whose all-time highs lays some where between Rs.400 to 500 levels, is currently quoting around Rs.80 on the bourses way below its all-time highs.

2) Punj Lloyd: This company which is one of the biggest Engineering & Construction player after L&T, and specializes in laying pipes and building oil and gas storage tanks and terminals, got no better treatment from the bourses. The stock corrected from its all-time high of Rs.600 to a trough level of Rs.70 when Nifty bottomed out at 2500. However, during the rise of the benchmark index from 2500 to 5000, this fast-growing mid-cap engineering stock could merely double with currently quoting at Rs.200 on the bourses, as against its all-time highs of Rs.600. The company's results got negatively impacted due to litigation between its UK based subsidiary Simon Carves and SABIC Petrochemicals.

While comparing the stock with L&T, the markets have given thumbs-down to Punj Lloyd with respect to the fact that most of the L&T operations are domestic oriented. So, during the global recession, it is but quite obvious that Punj Lloyd was largely impacted with it's wide presence across the slow-down infected globe. Also, during the ongoing recovery, India has shown sharp recovery (and hence better recovery in stock price of L&T) as compared to other developed and developing markets where Punj loyd has more prominence. Thus markets have tagged a few genuine reasons for the under-performance of stock price of Punj Lloyd vis-a-vis L&T; like slow global recovery than in India, decline in oil consumption & consequently its capex requirement due to low real demand for oil and gas, among others.

3) Alok Industries: This company is a leading textile manufacturer whose order book is full and providing good revenue visibility. The company has also witnessed a sustained growth in its revenues and profits. This stock had witnessed an all-time high of around Rs.100-105 during the peak of the bull run at Nifty 6000 levels. However, currently the stock is quoting at around Rs.20 since quite a long time. A sharp run-down in the stock price as compared to it's all-time highs.

The stock has everything positive about it; right from catering to major retailer like Wal-Mart and having domestic presence in form of H&A stores in the retail segment. However, the major aspect that is going contrary for the company's stock valuation is it's High Debt-Equity Ratio. Though, with the recent Right issue by the company, the high debt ratio is likely to moderate to some extent. Most of the company's interest liabilities for its long-term debt is subsidized under textile promotion scheme. But, certainly, markets have clearly given a thumbs-down to a good business model of alok Industries due to its High Debt-Equity Ratio.

4) Aban Offshore: Oil services firm Aban Offshore which lets out oil rigs for hire bought Norway's Sinvest three years ago in 2006. The company has about Rs.16000 crore of debt on its books with exorbitant high debt-equity ratio. The markets have given an extreme thumbs down to this company when compared to its all time highs of Rs.5000 to 6000 during the bull run as against Rs.1200 quoting currently.

Apart from this, the global slowdown & collapse in crude oil prices led to fall in capex towards oil exploration activities leading to slump in letting-out rigs to oil companies. This slump in demand for its services along with high interest rates payable towards acquisition of Sinvest led to fall in income for the company.

5) Tata Steel: On acquiring Corus, Tata Steel went on to be the world's 6th largest Steel maker. The Indian steel maker had acquired Corus for about a whooping $13 billion two years back in a bid to have a global presence. However, the subsequently following global crisis led to demand destruction for steel in reduced demand in sectors like automobiles and construction, particularly adversely affecting Corus performance & operations. Tata Steel incurred a consolidated net loss of Rs.2710 crore in the quarter ended September 2009. The stock made an all-time high of Rs.900-1000 during the peak of the bull run & is now quoting around Rs.550, indicating a steep discount to the peak prices then.

6) Bharti Airtel & Reliance Comm: Bharti Airtel, along with Reliance Communications, are the stocks from the Telecom sector which are under-performing big time on the bourses due to the intense 'Price Wars' among the telecom operators. During the previous bull run, when these stocks were distinct out-performers the record subscriber additions & rising ARPU's were the major attraction.

However, as time passed the Tier 1 cities have almost turned 100% wireless by now, more so leaving the scope of expansion only in the rural India & somewhat Tier 2 and 3 cities. Not to mention the upcoming Mobile Number Portability which will intensify the competition. This all reflects well in the current low valuations even in rising markets. Reliance Communications whose all-time highs lay around Rs.800 is quoting at a fraction of its peaks at Rs.180 currently.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Wednesday, October 14, 2009

Market Outlook & Diwali Wishes

Mr Faisal Humayun has posted a query in the Comments Section, on my suggestion regarding prevailing Nifty Trend and Technicals. He was of the view of expecting some correction around Nifty 5000 levels which seems to be getting delayed. His Comment was as follows:

Hi Viral,
It would be great if you can provide some insights on the markets at present. I personally expected correction at 4950-5000 levels. But that does not seem to be happening.What do Nifty technicals suggest?

Charts Courtesy:
www.icharts.in


Nifty Outlook & View

From what I can pick-up from the Nifty charts attached above, the markets seems to be in a broad tapering range which is slowly but steadily closing out as markets move forward. This tapering range is marked by Pink-coloured trend lines 1 and 2 in the above charts.

At some stage, I presume that these trend lines which are tapering in nature will eventually close-out and markets will make a decisive and an expanded move from the current levels. The up side could be as high as 5250-5450, a rally which could be fuelled on the back of Panic Buying among investors. At that point of time, the Analyst fraternity could well be predicting about Nifty 6000 level to be on cards. This could be the time of excesses, if such a situation gets played out. At such times of euphoric rallies, if all the remaining laggard stocks and sectors which have not yet participated in the rally by substantial means, starts rallying; it could be a warning of sorts that we're getting nearer to have topped-out over medium term horizon.

However, the above is based on the assumption that the up side break out could be the order of the day in the times to come. But, it is not necessary that market will oblige this view of mine. The break out could as well be on the downside. In that case, my first levels to fall-0n for support would be Nifty 4900 levels where the markets has sought support for 3-4 times in last 20-25 sessions. Below Nifty 4900, the next big support lies around 4780-4800 zone, which is also coincided by its 50 EMA support zone. As of now, as the trend remains up, traders should remain long until initial support of Nifty 4900 stays-on. Investors on the sidelines will have to go through a painful waiting period. If they lose patience, a trap could be well-laid in 5250-5450 zone, which will act as Panic buying zone with tons of optimism.

The recent downward move from Nifty 5080 to 4920 & finding a support over there is ample evidence that markets have again sought a support at its Lower trend line (Pink trend Line 1). This trend line will slowly move higher with time as market advances in upward direction.


Mr Vikas has posted a query on Diwali Shopping List

To start with, for Diwali shopping list, I would happily recommend sweets, crackers and new costumes as of now rather than stocks from equity markets. Markets has more than doubled from the trough levels witnessed before 7 months. However, the fact that markets have doubled is not a concern, but the compressed time horizon in which this sharp rally has occurred is concerning and hair-raising fact.

Anyways, to address to your specific query, I have a small list of stocks for readers who wish to truly invest during this Diwali based on fundamentals and valuations in specific stocks. However, they should remember that if markets meltdown to some extent or shifts into an intermediate downtrend, these stocks could be further dragged down by some more bit in sync with the downward market momentum. The readers need to be aware that the valuations are sound to buy the below mentioned stocks even at this point, but it comes with the risk that they're indulging in it at peak market levels. The list is as follows:

1) Bharti Airtel
2) Alok Industries
3) Kalindee Rail
4) Time Technoplast
5) Everest Kanto
6) Praj Industries
7) ONGC


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.


Friday, October 9, 2009

United Phosphorus: Trend Under Cloud Cover !!

Just few days back on October 05, 2009 I had posted my stock view on United Phosphorus. The stock charts then had showed an emergence of a bullish reversal indicator in a Morning Doji Star pattern. The expectation was that the near term bearish trend prevailing from mid September has come to a halt & a likely trend reversal would set in after witnessing a unique Morning Doji Star Pattern on the charts. The stock did show signs of strength post such signals and witnessed higher levels of about Rs.176-178 in the follow-up session.

Charts Courtesy: www.icharts.in


However, on October 7 and 8 we witnessed yet another reversal pattern in a Dark-Cloud Cover format, this one being the bearish signalling pattern. Today (October 9), the follow-up session of spotting this bearish trend reversal patter in dark-cloud cover, a long red candle stick occurred which pierced the low of the dark-cloud cover pattern, confirming that there is some sort of reversal in the stock's trend.


Dark-Cloud Cover

A Dark-cloud Cover is a Bearish reversal pattern witnessed after an uptrend. First day of this pattern is characterized by a long white candle in the direction of the uptrend. The second day typically opens gap-up above the close of the first day only to end (close) lower, piercing right below the middle of the first day's real body.

The greater the degree of penetration of the closing on the second day into the real body of first day, the more effective could be the bearish signal as may be given by the pattern. A better confirmation of this bearish pattern can be received on the next follow-up session which leads to the stock price to close below the standing position of the two decisive days of the dark-cloud cover pattern as shown in the above chart. It reaffirms the fact that no uptrend has ceased to exist. The highs established during the two days of emergence of dark-cloud cover pattern acts as a Resistance zone over a future period.


United Phosphorus (Short-term Trend)

The stock has developed a crucial resistance around Rs.176-178 with a top with dark-cloud cover pattern on October 7 and 8. A support exists at Rs.154-156 levels near the bottom of recently witnessed Morning Doji Star pattern. A break below this support zone could open the flood gates for bears to further dragging down the stock at lower levels. Traders should observe thorough due-diligence to trade within the Rs.155-180 zone, as there is lack of clear trend with crucial support & resistance placed at the extremes of this range.

United Phosphorus (Medium-term Trend)

Indeed, if this Dark-cloud cover pattern were to effectively materialize over a period of time, there could be more down side to the stock in the coming times. If the stock breaks crucial Rs.154-156 support, a down side risk towards Rs.135-145 can not be ruled out over a Medium-term horizon in next few months. However, the trend may again turn positive if the stock manages to close above Rs.180 resistance zone.

Tweezers Top Resistance

In a classical Dark-cloud cover pattern, usually the second day opens above the highs of the first day. But in this specific instance of United Phosphorus there is a slight variation in the pattern where the second day simply opens above the first day's close (not highs), and could not surpass the highs established on first day but simply managed to match it. Some Analysts may prefer to call this pattern as 'Tweezers Top & Dark-cloud Cover' as the highs of both the sessions are almost matching. Unless the highs of this tweezer tops are not crossed-over, the momentum in the counter may remain negative until some new trend reversal pattern emerges. The highs of the tweezer top could act as significant Resistance in future.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Thursday, October 8, 2009

Zandu Pharma: Fluttering with the Flag?

The stock price of Zandu Pharmaceutical Works Ltd. has spurted at 10% up circuit to close at Rs.10925 on the bourses today. The stock made a low of Rs.9921 during the day. Zandu Pharma is a Small-cap company with market capital of approximately Rs.800 to Rs.900 crore which is usually traded at low volumes. On the Daily charts of Zandu Pharma, a 'likely' Flag pattern is visible which is a short-term Continuation indicator marked by a small consolidation & declining volumes in between the over-all journey.

(Please refer to the Risk factors associated while trading in this stock, at the end of this post)


Charts Courtesy: www.icharts.in


Flag Pattern

Investopedia.com defines 'Flag' as, "A technical charting pattern that looks like a flag with a mast on either side. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes."

1) A Flag pattern is a Continuation pattern characterized by an up trend followed by consolidation with declining volumes. The pattern witnesses a breakout from the consolidation pattern leading to a spurt in prices in the same direction as prior established trend.

2) Usually a Flag pattern, as a whole, is preceded by a series of dull and low volume sessions packed with in a tight range, though this is not a universal rule. Later a break in stagnant price action occurs leading to almost a vertical spurt in prices with strong up trending momentum. This zone of price spurt which is characterized by high volume is known as a 'Flag Pole'.

3) After the storm of sharp up move, comes the consolidation period which is characterized by small downside pressure with in a tight narrow range as show in chart attached above. This consolidation phase is driven on the back of declining volumes. Next stage is breakout on the upside as continuation of the prior trend.

4) The last stage is a breakout from the consolidation zone as continuation on the trend established prior to consolidation. Even this last stage can be as furious and fast as the breakout witnessed during the formation of the prior Flag pole marked before consolidation. The length and 'likely targets' for the 2nd Flag pole could be as big as the price movement witnessed during the 1st Flag pole.


Zandu with a Flag

From the above mentioned evidences, I have posted this blog entry assuming that Zandu Pharma stock is in the last stage of formation of 2nd Flag pole. The stock spurted up at 10% Up circuit as I am writing this, which can be construed as a breakout from the consolidation zone of Rs.12500 on the up side to Rs.10000 on the downside. With today's spurt in price action, the consolidation phase can be assumed as being completed before the prior established up trend resumes its up surge.

The usual way of calculating the price target for up move during the 2nd Flag pole could be equal to the length of the price action witnessed during the preceded flag pole at the start of the up trend. In Zandu Pharma, the 1st Flag pole is of a height of Rs.6000, formed during an up move from Rs.7000 to Rs.13000. Assuming that the formation of the 2nd Flag pole has commenced from this date, we can presume that the up move has started from the day's low of Rs.9900, giving us a probable target of Rs.16000 approximately (6000 points added to Rs.9900). The target can deviate by one or two thousand rupees. However, this is just my view and thought on the stock and the pattern that is visibly developing on the chart and it should not be construed as sure shot achievable targets, nor is it a Buy/Sell Recommendation.

Risks Factors

1) Zandu Pharma is Small-cap stock.
2) It is a Low Volume stock and often trades under Circuit filters which may not allow trader a much desirable entry/exit opportunity at the right time.
3) The views about formation of the Flag pattern in this stock is simply my assumption based on my knowledge and signals I am receiving from the charts. There is no surety of any kind that the stock price will move in up ward direction only from here.


Note: The above view on the stock is for Short-term horizon and not an investment/fundamental report. The above views are for educational purpose and should not be construed as a Buy/Sell Recommendation of any kind/nature whatsoever.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Monday, October 5, 2009

United Phosphorus: Is Short-Term Bottom in Place?


I would like to assure all the readers who have provided affirmative comments regarding the issue of trading ideas on the blog, that I am not going to stop posting stock specific views based on act of particular readers. But, there would definitely be a small change in the format of my postings which will be more in the form of 'Trading Views' rather than formal 'Trading Calls or Recommendations'.

However, in short, trading views with supportive chart patterns will continue to flow as always. But, the decision of trading call based on specific signals like Entry, Exit, Stop loss , etc. will have to be determined by the traders themselves at their own peril.

This may also mean that, I may post multiple trading views generated based on supportive chart signals, at the best of my knowledge. But, traders need to FILTER these views based on their due-diligence or understanding on the matter and act only when they feel that the specific stock view is good enough to take a call for themselves. A number of trading views will keep flowing from my side, you have to choose (filter) as to which few would serve you best as per your profile.


United Phosphorus

Previous week saw an emergence of a bullish reversal indicator in United Phosphorus- 'The Morning Doji Star' Pattern. This pattern consists of determination of the trend based on performance of three candle sticks patterns which indicates that the prevailing down trend has ended and a gradual process of new up trend could be in the offing.

Charts Courtesy: www.icharts.in



The Morning Doji Star

This pattern characterizes the reversal pattern in the prevailing down trend in the counter. The 1st day of the morning star pattern signifies a long red candle indicating the last downside move preceded by several down trending days. The 2nd day is a doji which opens gap-down & closes somewhere near the very same open- indicating a tussle between bulls and the bears in search of a decisive trend. The 3rd day is the bullish confirmation day with a big white candle piercing above the mid-point of the real body of 1st day of the pattern.

In short, we have a stock in a down trend since quite some while and we get a star doji indicating that bears were in control of the downtrend but was duly followed by bulls taking some charge of the situations- meaning bears are losing capacity to drive down the stock further from here. The confirmation of this comes on the 3rd day of the pattern when bulls seems to be in full control of the situation and betting of the reversal in the stock fortunes. However, traders who want further confirmation of this reversal pattern can latch on to clues from the another 2-3 days of trading sentiment in the counter.


Supports & Resistances

Coming back to United Phosphorus and the bullish reversal pattern in this counter, we have witnessed a Morning Doji Star pattern (as marked by Blue Rectangle on above Chart) around September 24, 2009. With the positive stock performance in the following 4-5 sessions of witnessing this pattern, we can conclude that the stock could have indeed bottomed out around 154-156 zone in the near term horizon.

The stock has minor support around 163-164 zone followed by 154-156 at deeper levels. Presuming that this stock view on United Phosphorus has indeed sought a bullish reversal pattern with determination of Morning Doji Star pattern during the last week, we can come to conclusion that the stock has a strong support at 154-156 where the stock could have bottomed out in near term.

The stock has a resistance at 174-175 zone. So, a real bullish confirmation comes above 174-175 levels where traders can bet with conviction. However, the entry and exit strategy to be used for trading in this counter may vary from trader to trader depending upon their risk profile & to some extent market conditions as well. Traders are requested not to take trading calls on each and every stock view presented by me on this blog. Consider all the above views as guide posts with thoughts on the stock and its trend, rather than as a recommendation to Buy/Sell.

Note: The term ‘Trend Reversal’ could have number of implications. One of them being- the prior trend would cease to exist, not necessarily being reversed instantly. Also, a trend reversal is a slow and a gradual process which develops over a period of time with change in sentiment.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Saturday, October 3, 2009

Trading View: JP Hydro & Nifty


Thanks to an eye-opening Comment by a reader in my previous posting related to IDFC, that I realize that posting free calls on a blog is a thankless job. I wonder, as commented by that particular reader, as to whether Technical Analysis is just as good as you want the data to be interpreted. I kept wondering- aren't charts a reflection of the demand-supply scenario in the market? Well, I am not here to discuss about all this as of now. But, one must remember, trading is like a coin. It has two sides- Stop loss and Targets. It is impossible that all trading calls will click.

But, I have come to a conclusion that I will not post calls on this blog. But I shall keep posting my views on the stock or index. I shall present chart view from my side & leave the decision of trading call on the readers themselves who track this blog. The crucial entry, exit, stop loss and trailing stop loss points will have to be determined by the readers themselves. I would be more involved in providing stock ideas and material which could be more of educational in nature & not recommendation to Buy or Sell whatsoever.


Traders are free to trade whenever they feel fit and take their own due-diligent decision to trade depending upon their intellectual to judge the viability of my views.
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Trading View on Jaiprakash Hydro-Power

In the prevailing positive momentum for the markets, have markets given a miss to one of their trading favourite among the momentum stocks i.e., JP Hydro ??


Pennant is a short-term continuation pattern which is characterized by (triangular) consolidation & resumption of the move in the previous trending direction. This pattern also features a sharp decline in volume during the consolidation phase. There are signs that this particular pattern could be emerging on the counter of JP Hydro.

Charts Courtesy: www.icharts.in



Investopedia.com defines Pennant as, "A continuation pattern in technical analysis formed when there is a large movement in a stock, the flagpole, followed by a consolidation period with converging trend lines, the pennant, followed by a breakout movement in the same direction as the initial large movement, the second half of the flagpole."


Without going much into detail regarding the working of the Pennant pattern, as can be seen on the above chart of JP Hydro- the stock has witnessed an up move during the month of July from Rs.65 to Rs.85. However, since then the stock has gone into a long consolidation for the following 2-3 months hinting towards formation of a Pennant pattern.

The consolidation zone typically reflects features of range bound movement with in the converging trend lines backed by declining volumes. The breakout from this long consolidating pattern could herald a rally up to Rs.100-110 in short duration of time. Note: Traders should be cautious if the stock breaks substantially downward below Rs.78 mark.

Traders can use various trading techniques which best suits their risk appetite or judgement profile. One option is to trade once the stock breaks past the upper trend line of the triangle for further confirmation of the emergence of the Pennant pattern in the counter. Second option could be to build long positions around current price with Stop loss at the lower trend line defining downside support.
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Nifty View



In Nifty, as we can see from the above chart that the market is steadily moving up but in a narrow range. I have highlighted two trend lines (blue lines) which is acting as support and resistance for the market on either sides. My view is that if markets were to break past the upper trend line, than we could witness a steeper rally up to Nifty 5250-5450 levels in times to come over shorter duration.

However, currently Nifty is resting very near to the upper trend line of the range which could be a reason to be cautious until we get a thorough breakout from the range. There is a downside support around Nifty 4930-4950 zone. So, vaguely, we can consider nifty with in narrow range of 4930-5125. A bigger market move needs a break past this range with a weekly closing.


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Saturday, September 19, 2009

Trading Review: Reiterate Buy on IDFC at Close Above Rs.147/- Mark


Short-term Trading Call: A Buy Call on IDFC is Reiterated if it manages to Close above Rs.147/- mark. A bullish Mat Hold indicator & an Ascending Triangle Pattern emerging on the IDFC Daily charts point towards a Bullish breakout once the stock settles above Rs.147 on Closing basis.

Charts Courtesy: www.icharts.in



Reference: IDFC Buy Call on this blog on September 14, 2009

The stock has Consolidated for about 5 days since a Trading Buy call was initiated on this blog on Sept 14. However, during this consolidation phase of last 5 days, a unique pattern of bullish Mat Hold indicator seems to have emerged on the Daily charts of IDFC.


Mat Hold Indicator: (Refer Blue Rectangle in Above Chart)


Investopedia.com defines Mat Hold Pattern as, "A pattern found in the technical analysis of stocks that ultimately indicates the stock will continue its previous directional trend (bullish or bearish). The pattern is initially indicated by a significant trading day in one direction or another, followed by three small opposite trending days. The fifth day then continues the first day's trend, pushing higher or lower, in the same direction as the first day's movement."


The Mat Hold Pattern of Candle stick charts is characterized by 5 day pattern with Signs of Consoldiation & then a Reversal, which can be described as below:


Day 1: The First day is marked by a long white candle (Up day) where the Closing of the day is way above the opening of the day, in effect, creating a long Real Body (with or without shadows).

Day 2: The Second day is characterized by a gap-up opening. However, the second day closes below the Opening price, in effect, creating a Red candle (as shown in above charts) with relatively small Real body as compared to that of the First day.

Day 3 and 4: Similarly, the 3rd and the 4th days are characterized by closes that are slightly below their respective opening for the day, in effect, creating another 2 Red candles with small Real body as compared to that of the First day. However, a common typical feature that reflects on Day 3 and 4 signifies a brief period of down trend but within the range of the stock price movement which is recorded on Day1.

Day 5: The Fifth day is characterized by a bullish formation of long white candle either engulfing the coverage of price movement of last 3 days or a Close above the closing levels recorded on the 1st Day of long white candle.

Apart from bullish Mat hold Pattern, an Ascending Triangle Pattern is also visible as pointed out by two trend lines on the chart attached above. The Resistance line of the ascending triangle is placed around Rs.147 mark.


CONCLUSION

With Reference to the above mentioned chart patterns for IDFC viz., Mat hold indicator & Ascending triangle pattern, it is advisable to track both chart indicators in sync with each other. Meaning to say, that the ascending triangle pattern has a resistance of Rs.147 & a bullish confirmation of the Mat hold pattern can be gauged with one more positive white candle stick which closes above Rs.147 mark. Tracking above evidences of bullish formation, a Buy call is Reiterated once the stock closes above Rs.147 resistance level.


Option for Traders

Traders who Already Bought IDFC based on Sept 14 Buy Call
Traders who have already invested money @Rs.142-145 zone based on the Buy call dated Sept 14, can add-on to to their investments as & when a bullish confirmation comes above Rs.147 mark. Traders with Low risk appetite can remain invested in the stock if they do not wish to add-on. The Stop loss for the trade remains at Rs.136/- on Closing basis.

Traders who have still not Bought IDFC based on Sept 14 Buy Call
Traders who did not buy the stock based on Sept 14 call, can jump-in to this counter, only on the cross-over & close above Rs.147 where we get a bullish confirmation. However, they can avoid/skip this Trading Call until the stock crosses crucial resistance zone of Rs.147.

Note: The above views on IDFC are simply based on visibility of 'Likely' patterns on charts to the best of my knowledge. The grounds on which the patterns are predicted may go wrong or haywire depending upon the market movement or actual demand-supply scenario prevailing in the counter. Traders should act on the above calls solely based on their own Responsibility & confirmation of the above views from their trust-worthy sources. The above views are only for educational & guidance purposes.

Status Of Past Trading Calls:

1) Ranbaxy Call Full Target Achieved
2) Orchid Chemicals Both Targets Achieved
3) Aban Offshore Stop Loss Triggered

(High Risk Traders can again Buy Aban Offshore below Rs.1600 with SL of Rs.1496, a Bullish Engulfing pattern followed by positive confirmation during next two sessions, affirms the positive uptrend in the counter)


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Monday, September 14, 2009

Trading Idea: Buy IDFC with SL of 136/-


Short Term Trading Call

Charts Courtesy: www.icharts.in



Buy: IDFC (Closing Price- Rs.144)
Accumulation Zone: Rs.142-145
Stop Loss (SL): Rs.136/-
Targets: T1 155, T2 170


Stock View: IDFC has been consolidating in a Narrow range of Rs.128 to Rs.135 zone from August 15 to Sept 04 for a period of about 20 days. The stock jumped out of the range at the onset of 2nd week of September only to consolidate lower in the follow up trading sessions until yesterday. However, today the stock seems to have sought an important support around Rs.136 and the stock bounced back from there giving initial signs of stability. The stock also has an important Support at Rs.136 marked by its 50 EMA Trend line.

However, traders should keep in mind that the stock has a minor resistance at Rs.150 mark which is a resistance zone for the stock for past 4 months. On cross over & sustenance above Rs.150 mark backed by strong volumes, this stock seems set for a ride up to Rs.170-180 over next few months.



Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Saturday, September 12, 2009

Swinging with RSI Momentum Indicator

Often Technical indicators are used as a guide or to predict the future course of action of equity markets, especially short-term market movement. Usually the use of technical indicators over a short term period involves studying demand-supply indicators irrespective of fundamental aspects of the market or a stock. Though it is not advisable to predict markets based on any particular technical indicators but a combination of indicators to arrive at any type of concrete decision of the market's next price direction.
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Short Term Momentum with RSI

However, in this post we shall try to focus on predicting the very near-term (next 5-15 sessions)market movement for the markets in general. For this purpose, we will use one of the most widely tracked technical momentum indicator for determining the relative strength of the market - the Relative Strength Indicator (RSI).

RSI as defined by
Investopedia.com is, "A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset."

It further elaborates on the working of RSI as, "The RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued. "



Charts Courtesy: www.icharts.in



From the above attached Daily Nifty Charts with range of last 3 months, I have used RSI 5 to determine over-bought & over-sold position of markets for next 5-15 sessions.

1) RSI below 30 around July: As can be seen from the charts, the benchmark index Nifty got over sold during the 10 days prior to and post July 2009, leading to short-term revival in the index immediately for next few sessions.

2) RSI above 70 in July End: During the last 2 weeks of the July 2009, Nifty went into over-bought territory. However, Nifty did not witness any sharp correction but went for small-time consolidation at lower levels for 2 times only to bounce back in the over-bought territory.

3) RSI support at 30 in August: However, the correction of over-bought phenomenon in the latter half of July was inevitable which was witnessed in first half of August 2009. Nifty took strong support at 4400 levels in the first half of August.

4) RSI above 70 in Sept: Again markets have bounced back in the over-bought territory in the September first half.

Based on the above evidences from history of short-term price movements, we can conclude that sooner or later Nifty has to consolidate or correct in order to ensure in line movement with a 'likely' retract in RSI at lower levels in future.


Future Possibilities:

(A) Stretched-Out Pattern: RSI stays above 70 for some more time and Nifty remains over-bought for few more sessions. This possibility could see Nifty testing higher grounds like 4900-4950. On RSI indicator, this would reflect as 'stretching zone' for markets above RSI 70 mark. But, after a certain point, Nifty has to retract to lower range of 4780-4840 levels for consolidation or may be even deeper for correction up to 4680-4740.

(B) Zig-Zag Pattern: The other possibility could be Nifty immediately takes a small 'U' Turn for consolidation below RSI 70 for a week or so. The support area could be 4680-4740 mark for Nifty at such times. But, later, Nifty could again bounce back above RSI 70 mark to head towards higher levels (like the RSI pattern witnessed in last half of July 2009).

(C) Pronounced Correction: Third possibility for Nifty could be that the RSI opts to retract back to 50 mark where it may find Support. This move back for the RSI to 50 could drag Nifty substantially lower at around 4570-4640 range over a period of 10-20 days. Nifty 4570 is a strong support zone for Nifty.

Caution: RSI is 'not' the only technical indicator that determines the movement in any asset class. It is just one of the few indicators which can be more fruitfully utilised in integration with other technical momentum indicators. So, do not build your wholesome judgement or decision based exclusively on above thoughts related with market momentum based on RSI swings.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Monday, September 7, 2009

High Risk Buy: Aban Offshore & Ind.Bull.Real Estate

Charts Courtesy: www.icharts.in



Aban Offshore- Deployment of Jack up Rigs led by Increased Spending from Oil explorers on Higher Crude Prices
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Oil exploration services provider Aban Offshore witnessed a huge 25-30% up move during last week on the back of positive announcement of deployment of three newly build jack up rigs in the Middle East for a contract worth Rs.2925 crore spanning 3 years duration. Apart from that the company has also entered into a deal for deployment of a rig in Latin America.
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What Next after a Huge Surge Last Week??
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Coming to technical views on Aban Offshore, as has been pointed out in the chart, the stock has sought crucial support at lower levels around Rs.1520 mark after a huge surge in its stock price on announcement of deployment of its jack up rigs. The stock seemed extremely over-bought over the past few sessions and hence consolidating in Rs.1500-1650 range for the time being.

Usually, after such a big surge it is unlikely that the stock gets dragged down atleast over a period of short-term horizon. In fact, the stock is expected to register incremental gains over a period of time once the consolidation phase is over. High Risk traders can initiate long position in the counter at current levels with a stop loss of Rs.1520 and target as mentioned below:

Aban Offshore: High Risk Short-term Trade
Accumulation Zone: Rs.1560-1590
Stop Loss (SL): Rs.1520/-
Targets: T1 1670, T2 1785

Note: This trading call has been tagged as 'High Risk' Trading call not due to its sharply surged stock price in recent past, but due to the reason that the Support and Stop loss levels for this stock are placed quite near to the current market levels. Looking at the highly volatile fluctuation in the stock price of Aban Offshore after a huge surge, a fluctuation of 3-4% in the stock price on either side can't be ruled out during a volatile market session.
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Indiabulls Real Estate: High Risk Short Term Trade
Accumulation Range: 255-260
Stop Loss (SL): Rs.247
Targets: T1 Rs.270, T2 Rs.285
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Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Friday, September 4, 2009

Market Review: Nifty Analysis


Markets Nearing Trend Deciding Zone

Chart Courtesy: www.icharts.in



Sturdy 4570 levels

Nifty closes the week at 4680 on a positive note aided by revival in Chinese markets during the last session of this trading week. Currently, Nifty seems to be in a narrow trading range of 4570 to 4750 levels. It is significant to mention over here that the Nifty took support at 4570 level for 4 times during last 10 sessions, clearly confirming the view that these are the levels to be watched out for the downside support for short term traders.

Crucial 4350-4400 Zone

Over medium term basis, Nifty could be broadly trading in 4350 to 4750 range. The significance of Nifty 4350 to 4400 comes from the fact that markets took downside support for 8 times during mid August 2009. This forms as a crucial levels to be watched out for bulls, below which it would be advisable to play safe and exit or book partial profits. Below 4350 levels, bears are expected to take control of the situation for some time to come once the levels are taken out on the downside.

Resistant 4750 Zone

Nifty 4730-4750 continues to act as a strong Resistance for the markets to cross over. Above 4750, a quick burst to 4800-4850 can't be ruled out. If global markets stay sound & steady with upward bias for some more time, it wont be much before we see bulls crossing this crucial indicator at 4750 mark.

Summary
1) Below 4570:
Short term Traders be Cautious on Long Positions
2) Below 4350: Book Partial Profits / Exit Partial Longs
3) Above 4750: Hold Trading / Investment Positions

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Trading Idea: Buy Ranbaxy Laboratories


Short Term Trading Call

Charts Courtesy: http://www.icharts.in/












BUY:Ranbaxy Laboratories (Closing Price: 321)
Accumulation Zone: Rs.318-322
Stop Loss: Rs.312
Target: Rs.340



Trading Updates during the Week:

1) Videocon Indsutries
Aug 27: Buy Call initiated
Aug 28: 1st Target Achieved (30% Gains Booked)
SL trailed from 210 to 222
Sept 01: SL trailed from 222 to 232

2) HDIL
Aug 25: Buy Call initiated
Aug 29: 1st Target Achieved (40% Gains Booked)
SL Trailed from 280 to 290
Sept 01: SL trailed from 290 to 305
Sept 02: Trailing SL trigerred at 305 (Buying Price 295)
Trailing SL Strategy ensured No losses. Call Wrapped Up.

3) Tata Communication
Aug 25: Buy Call initiated
Aug 29: SL Trigerred at 500 & loss booked.

4) Orchid Chemicals
Aug 26: Buy Call initiated
Aug 28: 1st Target Achieved (60% Gains Booked)
Sept 01: SL trailed from 105 to 108
Sept 04: Trail SL from 108 to 117

Stock Going Strong towards our T2

5) United Phosphorus
Aug 28: Buy Call initiated
Sept 01: 1st Target Achieved (40% Gains Booked)
SL trailed from 158 to 162, Support at 162


Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Saturday, August 29, 2009

Investment Review: Hold Videocon Industries


Past Recommendation: I had recommended a Buy Call on Videocon Industries Ltd on May 15, 2009- Click here to refer my old Blog post. The stock was recommended to buy in the range of Rs.95-125. Read Further Review on the Stock:


Significance of Trend Line Support

Charts Courtesy: www.icharts.in



Alas !! A Breakout from Range Bound Movement:

1) Broadly Range Bound: In Rs.140-210 zone since mid-May 2009.
2) Narrowly Range Bound: In Rs.180-210 zone since mid-July 2009.
3) The stock has sought support for 3 times at the six month trend line during the month of March, Mid-May and Mid-July 2009.
4) Current Market Price: Rs.240/-


1) Starting the Journey: Whenever the stock has moved farther from the trend line by a substantial margin, sooner or later the stock has reverted back closer to the trend line to seek a support for any further upmove in future. The stock commenced its upmove during mid-March 2009 from its trough lows of Rs.75, the place from where the trend line's starting point can be tracked.

2) The Rising Baby: Since mid-March the stock rallied from Rs.75 to Rs.130 in about a month's time- a whooping range expansion from lows. This steep rally saw a consolidation pattern in the range of Rs.110-125. This consolidation was nothing but the stock reverting back to seek support near to its trend line's existence.

3) The Galloping Horse: Once seeking a support near to its trend line at Rs.110-125 zone during mid-May, the stock seemed ready for yet another bounce- this time even vigourous. This time the stock settled for nothing less than Rs.200 - another range expansion from Rs.125 to Rs.200. Not to mention over here that yet another round of consolidation was due and the stock reverted back to seek a trend line support at Rs.140/-.















Baby's Day Out:

If you must have closely observed, every range expansion is more vigourous than the last one. Once the stock reverted back to the trned line for support, the stock has moved to higher horizons with increased vigour. However, whatever be the extent of range expansion, the stock keeps coming back to trend line for support over a medium term horizon. Its like a child which goes out to play during the day, but has to come back at home during night hours to seek shelter at the end of the day.


What Next??

Since the stock has reverted back to trend line to seek support around Rs.140 zone during mid-July, the stock still seems to be reasonably near the trend line. However, closely analysing, the stock is neither near to the trend line nor too far away. I mean to say, the much sought after 'Range Expansion' may be still not complete on the stock's chart in whole- which could have been half done and still some more to come.


Conclusion: Hold Videocon with SL of Rs.190

My personal view is that we could see the stock reaching higher levels like Rs.260-280 zone during the ongoing momentum (even Rs.300 cant be ruled out), before we actually see the stock making effort to consolidate & seek its conventional support near to the trend line. This time the much needed trend line support zone could be perched in Rs.190-220 zone. But before that a likely range expansion could be in the row for this consumer durable stock.

Points to Note: As the stock moves up, its trend line support gradually shifts up in a slanting fashion. The trend line support mentioned in the charts around Rs.190 levels stands the test of time over medium term horizon. Later the levels can change depending upon the stock movement in future.

One another possibility that remains is- if markets correct sharply, the trend line could be breached on downside temporarily or even permanantly- which could be determined only with passage of time. The trend line supports could as well prove out to an illusion, if markets goes in a deep intermediate correction. Long term Investors can observe Rs.190 levels as Stop Loss for their investment in this stock based on the above mentioned explanation of trend line indicators as technical support for Videocon Industries.

Special Notes:

1)Readers should not mix-up Trading & Investment Call on Videocon Industries, both of which are recommended by me on this blog. This particular post is directed at Long term Investors & not Traders.

2) The views contained in this post are from the view of Technical Charts of the stock. So, readers who believe in Investments from Fundamental perspective can ignore this post. The fundamentals of Videocon remains sound from long term perspective.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Friday, August 28, 2009

Trading Idea: Buy United Phosphorus


SHORT TERM TRADING CALL
Charts Courtesy: www.icharts.in



BUY: United Phosphorus (Closing Price 168)
Accumulation Zone: Rs.165-170
Stop Loss: Rs.158
Targets: T1 Rs.175, T2 Rs.185


Updation of Past Calls:

1) Tata Communication Buy call got active above Rs.520 today.
Stop Loss for the same to be Rs.500, unless any changes intimated.
2) Trail Stop Loss in HDIL Buy call from Rs.280 given earlier to Rs.290.
3) Stop Loss in Orchid Chemicals Buy Call remains unchanged.
4) Trail Stop Loss in Videocon from Rs.210 given earlier to Rs.222.


Note: First Target in both Videocon & Orchid Buy calls got achieved. It was recommended on the blog to Book 30% gains in Videocon & 60% gains in Orchid at levels of first targets.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.