Nifty [4997.05] opened 1% above its previous close yesterday and and was thrown back from the earlier upward sloping trendline (which now has acted as resistance level). I am not positive on Nifty and do not expect it go above 5054 next week. Would prefer to liquidate all short term positions (I consider short term as position which I would not want / prefer to hold over 2-3 months) now and re-enter market when I am more comfortable that bulls are ready for a move again.
We had mentioned in our October 13 blog that we would be seeing a Classic Class A Divergence which has materialized.
Where to now ? I fear the markets should go down by 100-200 points even if the same does not happen immediately. In the meanwhile the markets may make an effort to pull back to the trendline just broken. However, the market can get support at a point where 14day RSI meets the long term trendline. At that time, its movement may depend on global cues also.
I am therefore liquidating scrips mentioned above. Let me admit IFCI was a misconceived strategy. Well we all learn by mistakes. Gitanjali Gems, Reliance Industries and IDFC have good potential over time. Still I am disposing the same from our paper portfolio in sympathy with breaking of upward trendline.
Our portfolio now stands as follows -
A lot of our good work has gone for good behind two bad decisions – IFCI Options and RCOM. It happens. Options are very risky as a class of instruments if not used for hedging. RCOM could have been sold even after it showed the first big drop on 6th October. However, its too late now. We would now wait for a better exit opportunity, though it may take a long time. Nifty [5118.20] should move by another 1 – 1.5% before it hits major resistance zone. Our blog portfolio value now is Rs. 11.33 lakhs.
Nifty rebounded with strength from the trendline yesterday. This is a good sign for bulls. This bounce may be able to take Nifty to 5300 levels. However, this bounce should not be used for entering into long term positions. Investors should get better entry points later. I expect to see a classic Class A (3 points of which 2 points are already plotted as on date) Divergence where the prices reach newer heights while corresponding indicator is not able to break earlier highs. This would break the market badly when bears gain control. The bears can gain control due to bull tiredness or some adverse news. I don’t expect 14day RSI to break the downward sloping trendline.
However, this does not mean that we should not take advantage of the upmove. We shall therefore buy two scrips today – Reliance Capital and Mercator LInes. Note, our entire portfolio including scrips being added today may be very short term. We are now looking at a maximum 10% gain from here. We may quit our long positions before achieving that target also.
Reliance Capital [Rs. 950.60] chart is as follows -
Mercator Lines [Rs.65.10] chart is as follows -
Our blog portfolio is now as follows -
Our portfolio has hit a lean patch. Gitanjali Gems is crawling along its upward trendline but any sporadic sharp movement has met with selling pressure. Lets wait and see. I was quite positive on REI Agro. But it is a negative performer as on date. Does not make sense selling it now. It’s fundamental are strong and it should give us good exit opportunities sometime in future. As on date the market has downward re-rated telecom sector without giving any decent exit opportunity. Considering that Reliance Infratel issue would hit the market in a few months, RCOM investors should be able to get a decent exit opportunity. Reliance Industries (RIL) stock price is very near its upward trendline (just as Nifty also) and in case of a confirmed breakdown below the trendline (for Nifty, RIL and many others), things can get very serious. Aban Offshore too is just above its trendline. In case Nifty closes below 4920 tomorrow, it can mean a strong fall in the offing. This may also mean that all bulls including little ones like us may have to run for cover and book losses if it comes to that. In case the market goes up tomorrow, I think it would be an opportunities to us to exit long positions as soon as possible.
For an understanding of the risk which I am referring to now, please find Nifty chart below -
Our blog portfolio as on date is as follows -
Skumars Nationwide has broker medium term trendline which makes us liquidate this scrip.
Alok Industries looks very weak on charts and its support is way below its current price. Though the market showed very smart recovery, the same did not reflect in scrips price today. I therefore plan to liquidate the scrip today.
Our portfolio now stands at Rs. 11.45 lakhs today.
Today our blog portfolio got badly hit. From Friday’s blog portfolio value of Rs. 12.09 lakhs to Rs. 11.65 lakhs today, it has suffered a hit of 3.64% against Nifty fall of 1.58%. Though our blog portfolio has outperformed Nifty as on date, today’s hit signifies that some modifications would have to be made soon. Overall I am positive on markets though we need to be very cautious.
RCOM movement today has taken me by surprise, though I believe it should be a good opportunity to enter for medium term investors.
The markets may move up starting tomorrow or may take one or two more days to muster strength. I would prefer to take any further investment decision in blog porfolio after end of trading day tomorrow.
Our blog portfolio value stands today at Rs. 1,208,770 against an investment of Rs. 1,000,000 on 17th Aug, 2009. Though I have all the three stocks in our blog portfolio, I continue to remain quite positive on Aban, IDFC, RCOM.
Though, we have cash available, I do not propose to utilize the same for any fresh investment for Monday.
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