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.

Bata India - this footwear major is showing signs of revival after a 36 month period of sideways movement. The noticeable aspect of this chart is the saucer formation on the price graph, oscillators signalling a buy and the volumes showing an accumulation in progress. Fundamental factors are pointing towards re-structuring of the operations and the same is reflecting on the priceline. We advocate a buy for the patient portfolio investor.

Bharat Forge - This auto ancillary scrip has been repeatedly recommended by us since it was quoting at Rs 300. The stock has returned decent profits and is riding the boom in the automobile sector. The counter is showing signs of tremendous relative strength and has run up significantly. Therefore we recommend a by on declines for the patient delivery investor.

Hind Lever - Our investors will recollect our frequent sell recommendations on this counter as it is a market under-performer since the last 3 years. We have been giving a combination of strategies including sale of out of money calls, all of which have been highly profitable. The stock is losing it's fancy with investors / traders and is unlikely to rally significantly, especially in the light of the sector itself being under a cloud. We recommend writing calls at the highest available strikes. The 168 levels are a watershed for this scrip and any fall below this level will see a fresh bout of weakness for this counter.

MTNL - This counter is another repeated recommendation on the sell side. The counter has made a head and shoulder pattern and has slid below the 200 day SMA on the intraday charts. An closing below the 200 day SMA for 2 sessions or more and the outlook becomes even more bearish. The fundamental story is weak as the private sector players grab market share from this company and offer cutting edge services. A sell is recommended on declines.

Tata Power - This power company is on a roll and is consistently making new highs as the market re-rates the sector rapidly. We foresee a defensive buying into the sector as the markets turn turbulent and a good support base at the 235 - 240 levels, should the markets come down that low. We recommend a buy on declines.

BSE Sensex - The retracement pattern of the Sensex shows a support at the 4740 levels which is where the Sensex has closed on Friday. This is the 38 % fall from the absolute top of 5135. Should the 4740 levels not be violated, the markets are still in a bullish trend and a close above the 4880 levels will probably see an end of the downward correction. Expect very high volatility in the markets in the coming week due to the derivatives expiry.

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

Nifty 50 - Last week, we had advocated that the Nifty was expected to to encounter support at the 1507 levels, which has been proven accurate. Retracement pattern shows a 38 % fall being achieved as a bull market correction at the 1500 levels. As long as the Nifty remains above this mark, expect the upmove to remain intact. Any closing above the 1562 mark will further confirm the strength. The coming week will be very volatile due to the derivatives expiry ahead.

Your call of action - We advocate fresh trades on the Nifty on the long side only on declines that too in an indirect fashion by selling puts. Once the Nifty shows signs of bottoming out, fresh purchases can be made in the December series in the futures. Fixed income players can sell the December 1470 puts at a suggested premium of Rs 15. Traded volumes need to be curtailed as the markets are likely to be slightly nervous.

Dow Jones Industrial Average - This old economy benchmark index measures the outlook on the New York stock exchange. The outlook for the index is weak on account of flight of resources from equity to bullion, terrorism fears and profit taking at higher levels. Should this index violate the 9,400 mark, expect an accelerated fall.

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 new economy benchmark index measures the outlook on the Nasdaq exchange. This index has made a new 22 month high and has been advocated by us as making a saucer formation. The relative strength of this index is significantly higher than that of the Dow and currently, even the Nasdaq is falling in tandem with the Dow. The 1875 levels will be a short term support for the markets, below which the a fresh slide to the 1820 levels is possible. On the upsides, expect resistance at the 1945 levels.

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 measures the outlook on the London stock exchange. As we have been forecasting a 4400 level resistance, this index is unable to surpass that point on a closing basis and show any short term strength. The upsides will see strong selling at the 4460 levels and support at the 4200 levels. Our outlook is weak for this index.

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 at the 0.21 : 1 levels and the outstanding positions in the derivatives segment have shrunk considerably. However, this is a routine pre-expiry phenomena and review can be done in the fist week of December.
The news of Indiana state ( USA ) cancelling TCS outsourcing contract is a worrisome factor and may see selling on technology stocks. That will drag the broader markets lower.
The index heavy-weights are now exhibiting signs of profit taking and only when Reliance, Hind Lever, Infosys, Telco, Tisco and ITC remain firm, expect the broader indices to move in tandem. Watch these counters for guidance.
Trade cautiously as compared to the previous week as the outlook is guarded. The undertone is nervous and worries exist on slowing down of FII inflows due to christmas holidays. We have been pointing out this fact since 3 weeks.
The NSE imposing higher margins and cutting overall exposure levels is likely to keep the markets under pressure in the near term. Therefore abundant caution is advised.
We suggest an even exposure between the equity route and the steady returns for the coming week due to impeding expiry of the F&O contracts in four sessions. Trades must be initiated with minimal volumes.
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 the stocks mentioned above.