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.

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.

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.

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.

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.