Technicals Sensex 09 Jun 2009
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black swan consultancy services
The SeNSeX STrip TeaSe www.blackswan.co.in Analyst: Jay Thakkar Email:[email protected] 08 June 2009 Phone No: +91 9967994615
BSE SENSEX CMP: 14952 LONG-TERM TARGET (4 year): 42,000 SHORT-TERM TARGET: 12300 - 11500 1 2 3
Resistances 15200 15550 16500
Supports 14600 14400 13500
This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. The intent of this document is not in recommendary nature Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors Black Swan Consultancy Services has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval Black Swan Consultancy Services, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Black Swan Consultancy Services. The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
Mail us at: [email protected]
www.blackswan.co.in
RSI Indicators Relative Strength Index (76.5252)
80
Sensex has broken above a downtrend line which is similar to a pattern in 2004 that led to a strong rally. There were five wave declines in most Asia Pacific Indices by March 2009 and India also looked for a fifth wave decline in Sensex below its October low but it failed to materialize.
75
70
65
60
55
50
45
40
35
30
This Failure returns to an earlier wave count i.e 3 waves declining pattern. This opens a possibility of a Bull market in India and when this is compared to the pattern in 2004 the previous Bear market bottom, it clearly opens the gates for Cycle wave 3 in Indian Stock Markets.
25
20
June
July
August
September
October
November
December
2009
February
March
April
May
June
MACD MACD (874.075)
June
July
August
September
October
Novem ber
Decem ber
1000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 -200 -250 -300 -350 -400 -450 -500 -550 -600 -650 -700 -750 -800 -850 -900 -950 -1000 -1050 -1100 -1150 -1200 -1250 2009
February
March
April
May
In 2009, like 2004 prices had broken down from a triangle and then moved upwards and broke out above the downtrend line. So as long as prices do not fall below the downtrend line we can assume a new Bull market in India. Even if the declines from their all time high turn out to be only the first leg of correction of a larger correction, the 3 wave pattern if it holds should lead to a significant rally in intermediate term. The same applies to Korea where we think this is the start of a new Bull market. Taiwan is definitely in a Bull market which will be confirmed when it breaks its triangle on the upper side.
June
Chande Momentum Oscilators Chande Momentum Oscillator (54.0405)
80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20
So, apart from these three indexes in the Asia Pacific region we think rest are in a Bear market rally which is just wave 1 down. The current rally is wave 2 up and the third should draw back the prices below the October 2008 lows. The reason for this is all the indexes apart from India, Korea and Taiwan have shown a 5 wave declining pattern so you need to be overweight in these 3 Indices compared to major Asian Indexes such as China, Hong-Kong and Japan.
-25 -30 -35 -40 -45 -50 -55 -60 -65 -70 June
July
August
September
October
November
December
2009
February
March
April
May
June
In the short term, wave structures in all the Indexes indicate that rally from March low is in its final leg and this can possibly last only for 2 more weeks as Sensex has already rallied for 32 weeks from its low. It can still rally 2 more weeks but it is already rallied for 8 months from its low so these Fibonacci figures also signals a red flag head.
SENSEX (15,040.00, 15,257.00, 14,994.00, 15,103.00, +95.0000)
23000 22000
100.0%
21000 20000
B
19000
(X)
2
18000 17000
ii 1
61.8%
iv
(ii)
C
(i) or iii
c a
iii
A 50.0%
i
B
v (i)
(W)
(iv)
(iii)
38.2%
(v) 3
16000 15000
2
4 c a
v
iii
14000 b
(ii)
iv
b 5
1
A
(i)
13000
gap
gap (iv)
12000
support line
1 4
23.6%
b
11000
(x) (b) c
(iii) (v) a
3
10000
a i 9000
b ii (a)
(w) c 0.0%
(Y) November December2008
February March
April
May
June
July
Augus t
September
8000
(c) (y) 2
C5
November
2009
February March
April
May
June
There are already 4 gaps on Sensex daily chart and 2 gaps on weekly charts; so, these gaps at least on weekly charts will be filled sooner or later as markets abhor any vacuum. Sensex is in its Intermediate waves of Primary wave 3 of Cycle wave 3 so this is third of third wave which is always associated with high volatility, gaps, extensions, high volume and sharp moves. If the high made on 06/05/2009 i.e. 5th June then it’s the end of Intermediate wave 1 and Intermediate wave 2 should draw back the prices at least to fill the gaps on weekly charts but if this is just a minor wave iii of Intermediate wave 1 then Sensex still has a leg on upper side which will face resistance at 16000-16100, the Fibonacci 61.8% retracement level. So, a close below 13480 should confirm that Intermediate wave 1 is over and ongoing correction is Intermediate wave 2 correction. An alternative to this Bullish stance is that the rise from October lows to 5th November is wave A and the low made on 6th March is wave B and ongoing rally is wave C. At the most it can stretch is up to 16550 which is 2.618 times of wave 1(which signifies that this is a Bear market rally) following which there will be a wave Z correction. The possibility of wave Z is very low but should not be ruled out if 9400 levels on Sensex are broken on downside. So, short term traders, Investors are advised to maintain a strict stop loss of 13400 on Sensex for any longs and the best strategy would be avoid over leveraged positions on longs as mostly all the indicators such as Bollinger Bands, KST, RSI, ROC, MACD are showing weakness and are favoring Bears. We advise to start building up your portfolio from 12300 levels on Sensex with a stop of 9400 and a long term target of 42000.
The SeNSeX STrip TeaSe www.blackswan.co.in Analyst: Jay Thakkar Email:[email protected] 08 June 2009 Phone No: +91 9967994615
BSE SENSEX CMP: 14952 LONG-TERM TARGET (4 year): 42,000 SHORT-TERM TARGET: 12300 - 11500 1 2 3
Resistances 15200 15550 16500
Supports 14600 14400 13500
This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. The intent of this document is not in recommendary nature Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors Black Swan Consultancy Services has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval Black Swan Consultancy Services, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Black Swan Consultancy Services. The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
Mail us at: [email protected]
www.blackswan.co.in
RSI Indicators Relative Strength Index (76.5252)
80
Sensex has broken above a downtrend line which is similar to a pattern in 2004 that led to a strong rally. There were five wave declines in most Asia Pacific Indices by March 2009 and India also looked for a fifth wave decline in Sensex below its October low but it failed to materialize.
75
70
65
60
55
50
45
40
35
30
This Failure returns to an earlier wave count i.e 3 waves declining pattern. This opens a possibility of a Bull market in India and when this is compared to the pattern in 2004 the previous Bear market bottom, it clearly opens the gates for Cycle wave 3 in Indian Stock Markets.
25
20
June
July
August
September
October
November
December
2009
February
March
April
May
June
MACD MACD (874.075)
June
July
August
September
October
Novem ber
Decem ber
1000 950 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 -200 -250 -300 -350 -400 -450 -500 -550 -600 -650 -700 -750 -800 -850 -900 -950 -1000 -1050 -1100 -1150 -1200 -1250 2009
February
March
April
May
In 2009, like 2004 prices had broken down from a triangle and then moved upwards and broke out above the downtrend line. So as long as prices do not fall below the downtrend line we can assume a new Bull market in India. Even if the declines from their all time high turn out to be only the first leg of correction of a larger correction, the 3 wave pattern if it holds should lead to a significant rally in intermediate term. The same applies to Korea where we think this is the start of a new Bull market. Taiwan is definitely in a Bull market which will be confirmed when it breaks its triangle on the upper side.
June
Chande Momentum Oscilators Chande Momentum Oscillator (54.0405)
80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 -20
So, apart from these three indexes in the Asia Pacific region we think rest are in a Bear market rally which is just wave 1 down. The current rally is wave 2 up and the third should draw back the prices below the October 2008 lows. The reason for this is all the indexes apart from India, Korea and Taiwan have shown a 5 wave declining pattern so you need to be overweight in these 3 Indices compared to major Asian Indexes such as China, Hong-Kong and Japan.
-25 -30 -35 -40 -45 -50 -55 -60 -65 -70 June
July
August
September
October
November
December
2009
February
March
April
May
June
In the short term, wave structures in all the Indexes indicate that rally from March low is in its final leg and this can possibly last only for 2 more weeks as Sensex has already rallied for 32 weeks from its low. It can still rally 2 more weeks but it is already rallied for 8 months from its low so these Fibonacci figures also signals a red flag head.
SENSEX (15,040.00, 15,257.00, 14,994.00, 15,103.00, +95.0000)
23000 22000
100.0%
21000 20000
B
19000
(X)
2
18000 17000
ii 1
61.8%
iv
(ii)
C
(i) or iii
c a
iii
A 50.0%
i
B
v (i)
(W)
(iv)
(iii)
38.2%
(v) 3
16000 15000
2
4 c a
v
iii
14000 b
(ii)
iv
b 5
1
A
(i)
13000
gap
gap (iv)
12000
support line
1 4
23.6%
b
11000
(x) (b) c
(iii) (v) a
3
10000
a i 9000
b ii (a)
(w) c 0.0%
(Y) November December2008
February March
April
May
June
July
Augus t
September
8000
(c) (y) 2
C5
November
2009
February March
April
May
June
There are already 4 gaps on Sensex daily chart and 2 gaps on weekly charts; so, these gaps at least on weekly charts will be filled sooner or later as markets abhor any vacuum. Sensex is in its Intermediate waves of Primary wave 3 of Cycle wave 3 so this is third of third wave which is always associated with high volatility, gaps, extensions, high volume and sharp moves. If the high made on 06/05/2009 i.e. 5th June then it’s the end of Intermediate wave 1 and Intermediate wave 2 should draw back the prices at least to fill the gaps on weekly charts but if this is just a minor wave iii of Intermediate wave 1 then Sensex still has a leg on upper side which will face resistance at 16000-16100, the Fibonacci 61.8% retracement level. So, a close below 13480 should confirm that Intermediate wave 1 is over and ongoing correction is Intermediate wave 2 correction. An alternative to this Bullish stance is that the rise from October lows to 5th November is wave A and the low made on 6th March is wave B and ongoing rally is wave C. At the most it can stretch is up to 16550 which is 2.618 times of wave 1(which signifies that this is a Bear market rally) following which there will be a wave Z correction. The possibility of wave Z is very low but should not be ruled out if 9400 levels on Sensex are broken on downside. So, short term traders, Investors are advised to maintain a strict stop loss of 13400 on Sensex for any longs and the best strategy would be avoid over leveraged positions on longs as mostly all the indicators such as Bollinger Bands, KST, RSI, ROC, MACD are showing weakness and are favoring Bears. We advise to start building up your portfolio from 12300 levels on Sensex with a stop of 9400 and a long term target of 42000.
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