Technical Analysis of Indian Equities by Nooresh

Crude cools , Sensex new low…. Be patient

Sensex Technical View :
Yet again the short term cycle of pullbacks and cracks continues. As seen through earlier stats markets pulled back for 4-7 sessions to lose it all quickly and statistically the next level to watch is 12300 and 11800 where again we can do value buying for pullback gains. Sensex has been continuing the classic bearish down channel since it broke 16500. It was a prudent step taken at 17500 + to generate cash and then at 16800/16100 and was repeated all throughout which has helped all our readers to now slowly invest on dips 14700-15300/13500/12800 in staggered manner and pulling out on the pullbacks seen from the support levels. Till we dont see a change in the pattern of 4-7 day pullback or a higher top and higher bottom we will continue the wait for dips to buy and sell on pullback.

Another thing to note is in the current correction the brutal onslaught has been directed towards a section of stocks and sectors. For example i just checked out lot of stocks which we are looking for long term investments have been much more stable in the fall from 14700 to 12700. SBI has been the only pick in Banks and small PSUs now.
index was at 14700 and now at 12600 ! SBI was 1300 and now is 1150 . RCAP 1050-1080 is now 980 etc. ICICI Bank 750 and now 530 there are many such examples !!!! . So although indices are down quite a lot 14-15k but what u pick would be more important and thats why i emphasize on being stock specific !!! as whenever indices pullback by 5 % certain stocks will pull up 30 % ! . So be focussed!

Stocks and sectors discussed to be avoided Pvt Banks, Real estate , Capital goods engg etc have taken the major toll so had an investor been buying staggered in stocks discussed he would still be waiting for more dips rather !!! then being punished.

Crude has taken yet another big beating from the top but yet again is not able to break important levels of 134-136. Chart updated in post below. Below the crucial 134-136 technically a big collapse is possible . Only a price below 130 should ease out sentiments it seems.

Some Review and thoughts :

Technically i was expecting a best case scenario correction of 14100 ( 38 % ) and below that 12700 ( Dow Jones comparison ) and technical possibilities 11800-12000 and 9800 ( 61.8 % which i still dont prefer ) . Problem with combining technical analysis with fundamentals creates a basic problem that inflation nos , crude can change but fibonacci retracements m looking at dont change . So going purely technical i would consider 14100 ( was assuming inflation, crude etc to be lil better then now ) and 12000 as ideal retracements and to an outer extent 10000 is a possibility but the over all long term cycle we are looking at suggests its a major bull cycle of 8-13 yrs so 1st major phase should ideally not correct much below 50 % ! .So my preferred view would be 12k-12800 .

One interesting point to note is in current situation hell lot of analyst who were bullish at 17500 have termed the market to going into a dead end suddenly at 13k ! . All over you read people will tell u statistics in 1992 market corrected 55 % in 2000 it corrected 58% so with a similar view now its END . but all the above markets ended with a SCAM which came out of the bag much before it lost 40 % value. Statistically previous two 8 yr cycles were bubbles created by a scam ! and not global boom and doom. Till i dont see a headline saying its a scam which i dont expect ! i would consider this to be a correction similar to the sentiment crash in Dow Jones 1987 or a correction in the long term 8-13 yr cycle which can retrace 50 % that suggests 12000-12800 could be the bottom roughly.

MOST interesting statistic which nobody seems to put !!!!!!!!!! :
At this point of time i would like to stick my neck out and say that EQUITIES WILL BE THE BEST INVESTMENT OPTION 1-3 yrs from NOW ( 12k-13k) as per the same statistics which ppl r dubbing to say its a dead end.

1992 Harshad Mehta Scam :

fall from 4546 to 1980 ( 55-57 % shaved off !!!!! ) ------SCARY
April 1992 to April 1993. ( 12 mths

RISE from 1980 to 4300 ( 100 % move whoaaaaa!!! ) ------ TEMPTING
April /MAy 1993 to Feb 1994 . ( 10 mths )

Fall from 6150 to 2600 ( 55-58 % cleaned !! ) --------SCARY
FEB 2000 to Sept 2001 ( 19 mths )

RISE from 2600 to 6250 ( 120 % upmove !!! ) --------TEMPTING
OCT 2001 to JAN 2004 ( 26-30 mths ) but the main move frm 3000 to 6000 frm May 2003 to Jan 2004 was just less then 8 mths !

So even if one is ultra bearish the stance is 10k -11k right ! which is another 10-20 % from current levels and how much of the ultra bearish ppl r certain or confident of 10k is a big doubt . But statistics says the growth possible from the lows ( which i expect in 3 mths to settle ) is 100 % in next 1-3 yrs . If one has followed our discipline u have digested the major part of the crash and now time is to focus hard on stock specific value.

I would like to end this with a SMS i got today .

Pessimist - Glass Half Empty
Optimist - Glass Half Full
Realist - ADDS WHISKY DRINKS IT !!! ( drinkers tell me its bitter at the start ! )
Maybe this fits our case or not but i liked the SMS 🙂

Stocks to watchout for :

Chamble Fert support arnd 55 can see a pullback from those levels.

Tata Chemicals looks good for investment at 250-270 for long term .

TATA steel good to buy part at 625 and later at 575-600 for medium term .

RPL crucial support at 157-159 if breaks and sustains below could see 140-145 which is a good level to buy some .

Best Regards,



Article by Nooresh Merani

Nooresh has written 2774 articles.

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