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Don’t buy aggressively till market crosses 4,300: K&A Sec

Posted by Yogesh on Friday, 19 September, 2008

Sushil Kedia, Market Analyst, K&A Securities suggests his clients not to get aggressive on buying unless the market crosses 4,300. He said that he can see potential short-term trading reversal at 4600 but eventually, it will be broken with the pullback going to 100-150 points lower from there.

Here is a verbatim transcript of the interview with Sushil Kedia on CNBC TV18. Also see the accompanying video.

Q: How much of a gap-up do you reckon we get and what would you do if the market did get to that 4,200-4,250 level?

A: The 4,250 area is where I think SGX-Nifty is right now. Around 4,250-4,300 is where the market had left a gap on its way down. That was also a number from where market had reversed during its rise from the last 3,761 all the way to more than 4,600 area, there was as support coming in at that number as well. These two combined together make this indeed a crucial point and a large gap-up where hardly anybody has in general been able to buy in last two days.

Potential short-term trading reversal can be seen here but I think eventually after hanging in there as a resistance for a day or two and with the pullback going to 100-150 points lower from there, I think eventually this is getting broken. So to summarize for this morning until 4,300 is clearly crossed, I would not advice my clients to get aggressive on buying now. We were aggressive on suggesting buying last two days and if it requires maybe we will do some partial profit taking also.

Q: Beyond 4,200-4,300 the Nifty is indeed going to pierce that over the next week you think, where could it carry it, back to the earlier levels of 4,500-4,600?

A: More than 4,500-4,600 is where I am looking at. The pattern that emerged from 3,760 Nifty going up to more than 4,600 does not seem to be complete. This retraces back to 3,800 area which looks cursorily like a double bottom and indeed is one. It is just part one and two of this rise from 3,760. I think the next leg of the rise, not just on Nifty, but on S&P, on Hang Seng and on almost every key equity index in the world, is having structurally very similar pattern with differences in their amplitudes based on underlying economies in macros.

Where in the next leg of the rise eventually should go on the Nifty to a few hundred points higher than the last time we saw around 4,800-4,820 area, 5,000 still is not ruled out but the most likely number 75-80% chances is 4,820. Similarly on S&P, 1,360 is as much as it can go to because on the downside its amplitude was as much stronger. So this days call of a large up-gap opening being carefully watched for is more in terms of creating your entries suitably such that you do not get thrown out with any small downside pushes. For the day, I would say even if it does not cross past 4,300 in one day today, 4,100 will remain a very strong support.

Q: What is restraining the Nifty you think because it’s a bit surprising that we haven’t even cleared 4,200 in the gap?

A: The kind of large up gap which is there if we would not find some large amount of buying to come in here, and markets have to trade by buying and selling. So a move from 3,800 to 4,200 nearly 10% in just a matter of five-six hours, yesterday it opened at about 3,800. So 10% move in five hours why shouldn’t somebody be taking profit here as a trader and I think, that’s what is going on.

Q: A lot of global technical analysts are playing for a bigger bounce across markets; on that premise would you accumulate even at these levels on the Nifty?

A: Each person will have to decide differently based on the kind of timeframe or return objectives they have. If one is a very short-term day trader, one has opened the day with taking profits on what longs existed, if one is trading on a two-three days timeframe sometimes during the day on this pullback, I think there should be buying. But if most of us are looking at markets not less than 8-12 days kind of timeframe then definitely a very large number of stocks-nearly 75-80% of the top-200 value traded stocks are having buy signals between yesterday and today; across the board entire steel pack, banks even the IT stocks.

I doubt if I can find a stock here which has a technical merit in selling or shorting here; over the next seven-eight days also all of them have come to a point and pattern from where 20-25% bounce across the sectors and stocks is existing. So with that in mind and a 10-15 days view in mind and a likely chance of 4,800 Nifty and across other global markets, I think pullbacks with stops are places to buy over a next couple of days.

Q: If we do get a meaningful bounce from here to the levels that you are talking about, would there still be another leg down waiting after that, is this just a temporary relief like we saw last time from 3,800-4,600?

A: Highly likely it seems this is what is going to be true. The rise that one is anticipating from now is not with any assumptions that the worst is over, that a roaring bull market is coming back but we are quite late also into this so called bear market if a lot of people like to describe it as or if you are also calling this move of 2008 as a disruption in the long-term bull market. This pattern of January 2008 till now is quite likely 70-75% complete as in there maybe still another three-four months before which a cyclical bullish move is likely to resume. Within that the fall from 6,300 to 4,200 was part A, the bounce back to 5,300 was just a connecting move; the fall back to 3,700 was very similar in nature to the fall from 6,300 to 4,200.

The move thereafter from 3,760 all the way to 4,600 plus not being still complete and current rise from today on will likely complete this next connecting leg very similar to the mid-year bounce and after which 70-80% chance remains that Nifty could fall to as low as 3,200 also, though not forecasting it yet and focused right now on 4,800 and perhaps after that a cyclical bull market of two-three years duration should resume again.

Disclosures:

It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed. Source Moneycontrol

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