Ab ki baar 40 Hajaaar.... What's next? BEWARE Bulls? Yes....

Hi All,

From the What to Expect from Stock Markets post yesterday, the first scenario played out

1. NDA count more than 300-310, or BJP on its own gets close to 300 levels, markets may shoot up initially, but would cool down and have an aggressive profit booking, taking indices much lower than the high level, (Higher levels might be in the range of 12000-12200, supports, after that, can be ascertained later)

With NDA allies leading on close to 345 seats, which suggests that they would win somewhere near 330-350 seats at least, and it's almost certain that we have Modi 2.O in making, comfortably.

And as expected, Nifty rallied till 12000 mark, created a high 12041.15, and the analogy of Buy the Rumour, Sell the Fact, kicked in, as usual...

Nifty closed the day, down by 80 points (almost 400 points lower from the high) at 10650 levels.... ending up with a huge Red candle giving us Bearish Engulf pattern....

Now the big question is, What's next?

Since, Technical Analysis believes in History repeating itself, let us draw some comparison between 2014 and 2019...

In 2014, the result day, almost had the same movement, where markets gapped up after the exit polls, rallied on the counting day, and sold off badly after the final result.

Post that, Nifty traded sideways for almost 2-3 weeks, and finally broke above the high of verdict day....

Now, in 2019, markets almost behaved in the same fashion, a gap up after the exit polls and rally followed by sell of on the verdict day, however, importantly, the fall of verdict day is much more ..

Moreover, the bigger difference lies in the weekly context. Though today is Thursday and week is not yet over, the weekly candle, looks like a Gravestone Doji, which is a bearish sign

So....

I feel, tomorrow's price action would be very crucial to decide the further trend of short / mid term... firstly it should break today's low....

However, the levels of 11400-11600 would be very key supports for short term, whereas 11100-11000 would be a mid term support... On the higher side, any upside is possible, only and only if Nifty sustains above the 12041-50 mark.

If, Nifty fails to cross 12040-50 mark tomorrow and in next week, breaks today's low near 10610-20, that would be a serious sign of concern for bulls....

The plan of action now to be, Sell on Rise with stop loss above the ultimate resistance of the new life high...

We need to also keep in mind, domestic challenges such as slow earning pick up, need sustainability for lower valuation, slow consumption growth, lower liquidity due to recent NBFC crisis,etc and global issues like US - China trade war, US - Iran war, etc.

In a nutshell, keeping aside any Positive / Negative surprises by RBI in the first week of June 2019 ...I feel, Nifty to be trading with a negative bias for a month or so, untill the next big domestic trigger, i.e. the Union Budget, which would be announced in June end or July 2019.

Cheers....

What to expect from #StockMarkets on the D-Day?

Hi All,

I have already discussed various scenarios of what can happen in the earlier post, Prelims cracked...

However, my personal view is....

1. NDA count more than 300-310, or BJP on its own gets close to 300 levels, markets may shoot up initially, but would cool down and have an aggressive profit booking, taking indices much lower than the high level, (Higher levels might be in the range of 12000-12200, supports, after that, can be ascertained later)

2. If the actual numbers are below exit poll expectations, but NDA in comfortable majority, a small spike in the markets, that too may not be more than 12000 for Nifty, but based on Buy the Rumour Sell the fact analogy, there will be a SHARP correction...

3. Numbers less than expectations, and NDA short of 272 (up to 200-250), more than the knee jerk reaction, markets can be in corrective mode, and the ultimatum would be the government formation, which might take few days...

4. NDA seats less than 200, we can even expect a blood bath, and like 2004, one can not rule out a fall worth 5 - 10% or even more....

5. Also, importantly, unlike the quarterly results / budget session, which lasts for few minutes to may be an hour or so, this event might last longer for around 2 to 4 hours, i.e. till 1.00 PM, or even more than that, hence a huge volatility can be expected during the trading sessions, hence an at most cautiousness by traders is advised

Needless to say that, for any of the scenario, I strongly feel, a sharp fall either during or post the event is very likely....

Let's Wait and Watch  ! ! !

#MarketUpdate - Bang on Target ! ! !

Hi All,

Markets are down by more than  100 basis points today, and as mentioned in the yesterday's blog, yet again, Buy the Rumour, sell the Fact analogy, proven right.

After kissing the Life time high of 11856-57, Nifty plummeted sharply and currently trades near 10700, down by almost 180 points from today's high near 10880.

The IV, measure for volatility, though had cooled off yesterday by more than 15%, is up again by 8% today. Needless to say, a huge volatility would be expected, till the final verdict.

Remember as per the scenarios explained yesterday, any negative surprises from the expectations of Exit poll, would not augur well for markets, and hence I advised to have a Portfolio Insurance buy buying puts worth less than 5k.

Nifty is having an immediate support near 10650, a Supertrend level on hourly charts and is kind of making a bearish pattern on daily charts, Dark cloud cover, and this is, surely is the worry. However, there will be a strong support for Nifty at the upward gap of yesterday between, 11400-20 to 11580-600, and if markets sustain below these levels, it might be horrifying for bulls.

As we are approaching the final verdict, my advise would be stay out of the markets or trade with strict stops and money management (If anyone was short as per my the advise given yesterday, can book partial profits and trail stops, however due to higher volatility the original stop of 11860-70 was kind of triggered with a small margin :(

Cheers ! ! !

#MarketUpdate- Prelims cracked, Merit Class, BUT ! ! !

Hi All,

Bang on.... The age old Dow Theory Principal, Proven right, yet again....

Price discounts everything

As discussed in the earlier post of Friday, markets gaped up by more than 2%  and seems to have, to an extent, factored in a probable outcome of the verdict on 23 May, which is ideally expected to be close to the Exit Polls announced yesterday. Good part is indices are sustaining the upward leap and trading up by close to 4% now and trading a hit away from the life high.

I feel, following scenarios to unfold in the near future -

1. Markets have factored in the NDA's majority and return to power with close to 5 -6% gains on Friday and today
2. Any further leap by NDA above the tally of exit polls (Close to or above 300 seats) would mean another reason to cheer for markets and we can expect a fresh northward move on 23 or 24 May which might breach the life high for Nifty of 11760
3. Moreover, a clear single handed majority for BJP on its own, would be very much welcome by bulls and enough to take Nifty near 12k mark or even higher
4. Remotely probable scenario, (buy can't be ruled out, especially after lat week's Australian exit polls and another cases like 2004 elections exit pools went completely wrong Read : exit polls going completely or partially wrong) of exit polls getting it wrong completely (like 2004 elections) and BJP gets less than 170-180 seats and hence NDA may not be in a position to form the government and UPA with other MGM allies forms government, this would be a severe shock to the markets and we can expect a huge sell off, something even closer or similar to that of 2004 where markets plummeted by approx 20% in days after the verdict. In this scenario 10500-10000-9500 becomes visible, but predicting the actual damage may be next impossible. 
5. Less probable  outcome where the final tally is lesser than exit polls expectation numbers but BJP and NDA manages to somehow maintain the majority, where BJP gets somewhere between 200-220 seats and other allies gets required seats (and with a bit of horse trading), markets might give up some of the gains of these 2 days, and might settle above 11k mark

All said and done, in past 2 sessions, markets yet again proved that it discounts everything, there is also one other, equally meaningful principal, which says 

Buy the Rumour sell the Fact....

Basis this, I personally feel, even if the verdict is close enough to the exit polls and BJP wins with a thumping majority, this rally might not sustain, and before the markets decide the next course of action, there should be a serious and aggressive  profit booking post the event. 

Not only that, after the exit poll resulsts, there might be a chance that the Nifty might kiss the all time high, but even for tomorrow / day after (before the verdict and post the exit poll) it may not hold on to today's gains and might trade sideways between 11500-11900

For trading, a simple rule can be, since markets are trading near a resistance zone of life high, the risk reward favors a short position, if someone dares (and one should dare too) should be with a stop loss above the life high but Traders are advised to trade with caution...

Investors, should really not worry as the exit polls are not indicating any price shocks after the verdict, but if the scenario 4 or 5, gets played out, they should definitely protect their portfolios at negligible costs. Please read - Portfolio Insurance

Portfolio Insurance, a must read for an Investor ! ! !

Hi All,

This might be one of my longest blogs, but trust me, would be very useful for Long term investors. Also, this  post, speaks a lot about a very interesting market segment of Derivatives / FNO, which is a bit tricky at first to understand, please feel free to get back to me for any doubts.