The Professional Ticker Reader

These are stocks that we expect to out-perform the markets. Cash and derivative strategies are advised thereon. Please stay online to enable loading of graphics from our servers. Please also read the trading tips section at the end of the newsletter.

Infosys - This software bellweather is at an important threshold level of it's 200 day SMA, where the trend is likely to be determined. The important trigger for the scrip is the ex-bonus date which will see a hectic short covering as well as bull unwinding in the near future. The weekend development of the states of Kansas & Tennessee ( USA ) enacting laws banning outsourcing of software contracts is likely to be negative for the industry. Should the scrip fall below the 4850 mark on a closing basis, short selling in small quantities is advisable. Going long is advocated only above the 5200 levels.

Mah & Mah - this tractors / CV / passenger vehicles manufacturer is showing signs of strength on the charts as the weekly closing has been higher than the opening. The RBI credit policy hints at correcting the imbalance between finance rates for cars ( 8 % ) and tractors ( 12 % ) to boost rural income. The tractor sales of this company along with allied farming equipment will rally as a result. The outlook appears positive as long as the 430 - 435 floor level is not violated.

Maruti - This passenger car maker is on the fast growth track and a strong market out-performer. We have been recommending this scrip repeatedly with good results and the stock remains a buy as per our projections.

ONGC - this oil and gas major is showing signs of revival after slipping below it's 200 day SMA and the issue price of it's recent IPO. The major trigger for the stock price will be the petro price hike in the coming days. Should the hike be substantial ( Rs 3 or more per litre of petrol & diesel ), expect this counter to flare up significantly. Currently, the company is selling oil at prices lower than it's import parity levels due to political / election compulsions.

Tisco - This steel major is now trading in a downward sloping channel and also below it's 200 day SMA. The company recently announced it's earnings and also a bonus issue of shares. The ratio remains unknown and will determine the trend in the stock price. The international data available on commodities seems to suggest that steel prices are set to soften in the coming months and therefore we advocate offloading positions at higher levels.

BSE Sensex - the index had fallen below it's bearish channel and has crawled higher into that channel. However, the index continues to trade below it's 200 day SMA and the shorter term averages too. The oscillators are pointing towards a corrective upmove which will see selling at higher levels. Only if the Sensex manages to close above the 5210 mark consistently, will the outlook improve substantially. On the lower side, the index may re-test the 4500 - 4600 in case it fails to rally past the 200 SMA.

Your call of action - Since the Sensex futures are not very liquid, we suggest trading the Nifty 50 instead.

Nifty 50 - The Nifty is making similar chart patterns as compared to the Sensex and the 200 day SMA will be the immediate threshold for the trend determination. Should the Nifty surpass the 1660 levels in the coming week, the outlook will improve tremendously, otherwise the weakness is likely to continue and lower levels of 1400 are possible all over again.

Your call of action - We advocate fresh trades on the Nifty only in the options segment that too by writing options. The strategy this week would be to initiate short combinations by selling the June 1780 calls at Rs 18 - 20 and the June 1370 puts at Rs 40 and above. The risk to your capital is beyond the 1840 on the upsides and 1310 on the downsides. The margins involved will be Rs 58,000 and returns on capital employed equals 8 % per month !!

Dow Jones Industrial Average - the Dow seems to be settling below the 10,000 mark which is a sign of weakness. The 9850 is a crucial support to watch out for and should that be violated, expect the 9565 to become a reality in the near term.

Dow Jones - Weekly chart

Your call of action - Since Indian investors are not allowed to trade in overseas markets, this is a pure academic study.

Nasdaq - this index is at a critical threshold as it attempts to rally after taking support at the 52 week average which is at the 1890 levels. As long as the scrip stays above this level, the trend is sideways. Upsides may see 1975 and the lower support if the 1890 is broken is likely to be at the 1795.

Nasdaq - Weekly chart

Your call of action - Since Indian investors are not allowed to trade in overseas markets, this is a pure academic study.

FTSE - This index is relatively out-performing the US indices. However, the trend on this benchmark also appears lower. Watch the 4325 support and the 4600 levels for resistance.

FTSE - Weekly chart

Your call of action - Since Indian investors are not allowed to trade in overseas markets, this is a pure academic study.

Trading tips for the week

The put / call ratio is positive and is currently at the 0.21 : 1 levels and the outstanding positions in the derivatives segment have shown a qualitative deteteoration. The FII investments are continuing to remain negative.
There is offloading at higher levels in stock futures. That indicates a cautious approach as long positions in individual stocks is being hedged by Nifty shorts.
The current week is crucial for the markets as the announcement of Chidambaram as the FM is expected to boost sentiments. Should the markets rally, the worst maybe over. Failing that, the markets may see further falls.
The index heavy-weights are showing weakness again. This in turn will bind the indices and cause a truncated trading range.
The impeding expiry of the May series will see offloading and higher volatility in the near term.
Trades must be executed in very small volumes due to the higher volatility expected. Trade fewer counters and conserve cash for future opportunities.
Standby for fresh recommendations via SMS on a real - time basis.

The author is a Mumbai based investment consultant and invites feedback at Vijay@BSPLindia.com and ( 022 ) 23438482 / 23400345.

SEBI disclosure :- The author has no positions in any securities mentioned above.