NIFTY indicates bearish reversal : Three Black Crows

I have been enjoying recent market volatilities as they provide me good opportunities to buy stocks at lower valuation , and such volatility makes interesting chart patterns which I enjoy studying and analyzing. So, please dont take my views too seriously.

NIFTY , has been closing on lower side for last three trading sessions and on the candle stick chart it has appeared as Three Black Crows. Three black Crows is considered as the bearish reversal particular when the price has been in continuous uptrend, which is the case with NIFTY.Ordinarily one black candle indicate the interference in bullish trend , second black candle confirm bearish mood, perhaps by the way of profit booking and third consecutive black candle make the reversal obvious.

Recognition Criteria for Three Black Crows:

1. Market is characterized by uptrend.
2. Three consecutive long black candlesticks appear.
3. Each day closes at a new low.
4. Each day opens within the body of the previous day.
5. Each day closes near or at its lows

Therefore, in short term market move to lower levels. However, large selling pressure is not expected as there no negative news. Perhaps  traders may want  wait till new bullish signal appears on the chart.

More readings on Three Black Crows.

• http://www.fxwords.com/b/bearish-three-black-crows-candlestick
• http://www.leavittbrothers.com/education/candlestick_patterns/bear/three_black_crows_bearish.cfm
• http://www.candlesticker.com/Cs74.asp
• http://www.optionsoutlet.com/stock_ebooks/candlesticks/bullish_3blackcrows.html

Bharat Bijlee (BBL) : Consolidating

Bharat Bijlee (BBL) has been consolidating for last 3 weeks between narrow range of 2100 to 2200. Last three sessions were showing some  uptrend with slight rise in price.  It is making very interesting chart pattern for break out. However, it is not necessary that consolidation is always cause breakout towards upside. The direction of the break out is decided by the the quality of future news/result or circumstances.

BBL also shows two spikes in the chart where volume have jumped much greater than average daily trading with  , which perhaps can be assigned to inside trading, as the results date is approaching near.  MACD and RSI indicators also show clear and consistent upward trend, one can expect a good break up in the price with  good jump in the price.

Tata Tele (TTML) waiting to jump

On 15-04-2008 TTML started making strides from 28-00 and went upto 37-00 (about 33%) in 6 trading sessions with good amount of volume. Thereafter it has been resting ,because of profit booking, between 37 to 35.60 nicely. Perhaps , it will make another stride from here to somewhere above 40.

Whether Indian stock market is showing bullish signs?

Everyone is toying with the question. The market seems to have arrived at cross road and most experts are hopelessly divided about the direction where the market will head, and I am not expert at any technical analysis but I too have my opinion

I recall reading somewhere (do not recall the source, please share if some knows) that historically is is seen that once market corrects it takes 91 days to begin recovery phase.

Around 10-04-2008 Nifty showed first fall and continued, with 2-3 bounce back. Intermediate bounce backs lasted for 2-3 trading days but the trend was downwards. Around 09-04-2008 recovery started which continued for 7 session, then two insignificant days of profit booking and then the trend continued upward. Perhaps, this can be sign of beginning of recovery phase and the market has swing up after showing the bottom. The market was not fettered by any negative news during while making continuous uptrend which is good sign.

If one compares the chart of previous fall of 11-05-2006, which also showed recovery around 09-08-2006 (approximate 91 days) and then the trend was continued.

RSI (Relative Strength Index) of both the charts are strikingly similar going towards 70 , and should remain around that level (in the recovery of August 2006, RSI constantly remained around 70 till first week of December’06).

MACD (Moving Average Convergence/Divergence (MACD) in both the charts are moving above 0 (turning positive) with the positive histogram. After August-2006 correction MACD line remained consistently near 65 till 08-12-06.

Only CMF (Chaikin Money Flow) indicator shows some worrying sign. During May-August’06 recovery, CMF showed consistent accumulation during previous two months (July-Aug’06) of the recovery phase. However presently CMF is not conclusive at all and indicator is withered showing confusion among the market players.

Technical analysis , however, does not consider any external factors and merely base the analysis on the chart patterns. Thus the chart pattern shows bullish sign, but one has to wait for confirmation of bull market.

However, in US according Dow theory, the market has confirmed bullish signal as both the index (Dow Jones and Transportation) have arrived at confirming the bull signals around 18-04-2008 (Read following articles for Dow bullish signal).

http://www.internetnews.com/bus-news/article.php/3741971
http://www.fool.com/investing/general/2008/04/21/thanks-a-lot-dow-theory.aspx
http://www.forbes.com/personalfinance/2008/05/01/allocation-diversification-…

Warren Buffet’s letter to his shareholders (2007)

As usual the letter of Warren Buffet to his shareholders carries wisdoms , straight advises and humor. (PDF File)

His company , Berkshire Co. Ltd., has given 21.1 % of compounded annual gain,in the absolute term it is whopping 40,0863 % during the year 1965 to 2007.

Following are few quotes from the 21 pages long letter :

You may recall a 2003 Silicon Valley bumper sticker that implored, “Please, God, Just One More Bubble.” Unfortunately, this wish was promptly granted, as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief. As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.

Our country’s weakening currency is not the fault of OPEC, China, etc. Other developed countries rely on imported oil and compete against Chinese imports just as we do. In developing a sensible trade policy, the U.S. should not single out countries to punish or industries to protect. Nor should we take actions likely to evoke retaliatory behavior that will reduce America’s exports, true trade that benefits both our country and the rest of the world

I should mention that people who expect to earn 10% annually from equities during this century – envisioning that 2% of that will come from dividends and 8% from price appreciation – are implicitly forecasting a level of about 24,000,000 on the Dow by 2100. If your adviser talks to you about doubledigit returns from equities, explain this math to him – not that it will faze him. Many helpers are apparently direct descendants of the queen in Alice in Wonderland, who said: “Why, sometimes I’ve believed as many as six impossible things before breakfast.” Beware the glib helper who fills your head with fantasies while he fills his pockets with fees.

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Reliance Power Bonus : Wow ?!?

Reliance Power has remained in controversies at every stage, even before it was conceived and even after the public issue. Certainly enough, the public issue was not a reason to the recent damp in the market, but unfortunately Reliance Power became scapegoat for the crash.

Many guesses were made about the listing price , and one of guess was that if Anil Ambani could keep the price of Reliance Power above 900-00 , he would be richest person. Thus before the IPO premium was nearly 400-00+ but soon after the market crash all the premium and high hopes for listing above 900-00 were vanished.

After the listing Reliance Power has been available below the issue price of 450-00 and the investors are cursing the management for it, as if the company could really tackle the pricing in the market.

Now, the management has come up with a novel and generous idea of issuing bonus shares, only to public, and not to the promoters, to cover the short term losses of the investors .

This generous gesture of the company has made me say , wow!! Reliance Power has been really amazing company in every respect. The company collects 44 times more premium on its face value, which has no business, no assets at the moment going to public, earliest project will commence after nealry 4 years, still IPO is oversubscribed 70 times or more, finds its place in Future and Option segament from the first day , traded below issue price, and then bonus issue from nowhere.

To me, the move of issuing bonus share is perhaps simply to encourage price hikes. More particularly, as the management is issuing bonus to only to public which is wise move, other wise a bonus issue to all the shareholders, increase share capital and dilute earnings.

So, one can expect good price move in Reliance Power in short term. Which will give opprtunity to exit from the scrip.

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Doomsday for Indian Share Market

The market has been sliding since 8th January, and today it was the biggest slide of the In the history of Indian share markets.

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Here are the 10 biggest falls in the Indian stock market history:(rediff.com)Jan 21, 2008: The Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day’s low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of the US recession.

May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. The Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points.

December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 - down 856 points from the day’s open. The Sensex finally ended with a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271 points.

October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into negative zone. The intensity of selling increased towards the closing bell, and the index tumbled all the way to a low of 17,771 - down 1,428 points from the day’s high. The Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208 points to close at 5,351.

January 18, 2008: Unabated selling in the last one hour of trade saw the index tumble to a low of 18,930 - down 786 points from the day’s high. The Sensex finally ended with a hefty loss of 687 points (3.5%) at 19,014. The index thus shed 8.7% (1,813 points) during the week. The NSE Nifty plunged 3.5% (208 points) to 5,705.

November 21, 2007: Mirroring weakness in other Asian markets, the Sensex saw relentless selling. The index tumbled to a low of 18,515 - down 766 points from the previous close. The Sensex finally ended with a loss of 678 points at 18,603. The Nifty lost 220 points to close at 5,561.

August 16, 2007: The Sensex, after languishing over 500 points lower for most of the trading sesion, slipped again towards the close to a low of 14,345. The index finally ended with a hefty loss of 643 points at 14,358.

April 02, 2007: The Sensex opened with a huge negative gap of 260 points at 12,812 following the Reserve Bank of India decision to hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455.

August 01, 2007: The Sensex opened with a negative gap of 207 points at 15,344 amid weak trends in the global market and slipped deeper into the red. Unabated selling across-the-board saw the index tumble to a low of 14,911. The Sensex finally ended with a hefty loss of 615 points at 14,936. The NSE Nifty ended at 4,346, down 183 points. This is the third biggest loss in absolute terms for the index.

April 28, 1992: The Sensex registered a fall of 570 points (12.77 per cent) to close at 3,870, following the coming to light of the Harshad Mehta securities scam.
***

Perhaps, this can be good buying opportunity. But , then again nobody knows where this market will end up. I have been buying scrips in small quantity but prices are falling like brick.

Ambani brothers seemed to suffered most in the single day. Today, Reliance Natural (RNRL) came down with landslide of 23% at 157. Reliance Petro (RPL) also slided 17% ending at 171. Reliance Capital also lost 20% and closed at 1884. Reliance Communication lost 12% and closed at 613. Reliance Industry (RIL), the flagship of Mukesh Ambani group, also lost 9% closed at 2540.

Many liquid shares have lost more than 25% in one week. Essar Oil lost 31% in single day. TTML has lost 40 % in 10 days , from highs of 65 now it is sitting at 40. Mercator Lines (MLL) touched 186 10 days ago and today it closed at 120 and that too because of restricted lower circuit of 5%.

Analysts and experts are also shocked as such nasty fall was unexpected, and there are many reasons to ponder why this market fall. They also expect to market fall further 10-15 % but also not pessimistic about the bull run in long term.

Log har mode pe ruk ruk ke sambhalte kyun hain,
itna darate hain to phir ghar se niklate kyon hain

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Reliance Natural Resources (RNRL) : Investment ideas

I am publishing this post in the answer of Sudha’s query about the price target of RNRL, which I have been occasionally asked.

About RNRL I am as clueless as most of people , about the business of the company. The business profile on the official website (as on 24-11-2007) of the company remains silent about the business .

What general public knows about the it is that the company become demerged during the dispute between the Ambani brothers resolved and shares of of RNRL having face value of Rs.5-00, were issued to the share holders of at the premium of Rs.35-00.

While the demerger RNRL entered into agreement with RIL for supply certain quantity at certain price for a certain period. However, there is prolonged dispute between the brothers about the terms of the agreement and it is pending in the court. (See news 1 2 3 ) So, unlike RPL , RNRL has no fundamental footing to work on.

If you check the financial of the company you will find RNRL as one of the most expensive stock in the front line stocks. Against the huge share capital of Rs.736 Crore , quarterly turnover is 63 crore and net profit is 19 crore. Therefore, at given EPS of 00-27 paisa, price earning ratio is whopping 585 at the market price of Rs.158-00.

After initial listing in March’ 2006 RNRL was ranging between 22 to 30 till May’07. (check turnover figures at NSE)

In June’07 it clearly breached the level of 30 and moved up smartly without any downside till mid September. On 21-09-2007, it gave a unprecedented single day price hike in the history of Indian stock market from moving 56 to 76 and on next trading day on 24-09-07 it closed on 93.

Such sudden price hike drew attention of many investors and thereafter RNRL was on dream. People was expecting hikes of Rs.10-20 everyday and speculating price of 300 soon. But after hitting life time high 198-00 (203-00 on BSE) it followed the law of gravity and fall down but not significantly. Following chart will help you to under the price movements graphically.

It is very exciting to see the price movement of RNRL on screen, but there is nothing fundamentally to justify all these price hikes.

It is difficult to set any price target for this script as it is already hyper-overrvalued, and therefore it is strongly adviseable not to invest at this price unless you have long time horizon and some risk appetite.

If you are already invested at high price you will definately see your purchase price looking to the recent reversal up trend. However, every upward movement will be faced with profit booking and it may take some time to cross the life time high.

Disclaimer here, I have invested some good amount in RNRL at average of Rs.22-00 and I have become greedy as I am getting thundering 700% return and I have very deep (highly unlikely) stop loss and I am staying invested. Probably sell 10% stake at 220-00 take back the original invested amount.

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Other Related posts :
Investment in Reliance Petroleum (RPL)
Reliance Petro(RPL) : High returns
Accumulating Tata Teleservices (Mahrahstra) Ltd. (TTML)

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Market takes a breath

After the marathon of 15 days no one was surprised to see the today’s halt. Today only trigger was expected from Reliance Industry about split or bonus (quite far fetched expectation, of course) and got none except making RIL as first MNC of India. Rupee keep appreciated making the IT pack duller. So there was profit booking everywhere. The Finance Minister was also worried about the speedy rise of the market.

However, FII do not appear to be worried by the Indian politics but appear to be interested to hold and invest more in Indian markets largely in infrastructure , telecom as there is huge potentials are still untapped and banking sector as it is very less involved and less effected to sub-prime exposure.

I sense that market will open on positive note on Monday and will recoup the loss made today.

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Accumulating Tata Teleservices (Mahrahstra) Ltd. (TTML)

I have been tipped about Tata Teleservices (Maharshtra) Ltd., (TTML) a year back when it was ranging between Rs.17 to 20. The major reason for such low price of a Tata share was that the company was consistently in loss. Therefore, I did not take much interest in the script.

However, with the result of every quarter the loss started diminishing and price was picked up relatively and quitely. In the recent euphoria a news came that the company will show profit for first time during the quarter ending on Sep’07 and price reached to Rs.45-00 making TTML a classic turnaround story.

Now, like most of other investors I too felt missed out the TTML rally and decided to purchase some shares at a given dip. A single day opportunity was provided on 05-10-2007 when with the market crash the share price reached between 36 to 38 and I have purchased it in small quantity. Then today it reached to Rs. 42-00 and closed at some Rs.40-75. I will accumulate some more upto Rs.45-00.

Considering the face value of Rs.10-00 it seems cheaper than other telecommunication companies, particularly with Spice Communication which is also an loss making company. Further,some mutual funds also have shown some interest and purchases have been made between the price range of Rs. 31-00 to 43-00 , which is also encouraging sign.

Sometime back the board had recommended 10% , Re.1-00 , dividend but it seems that the recommendation has not been approved in the Annual General Meeting. But the prospective of dividend seems good and even at the price of Rs.40-00 it gives 2.5% yield.

Rumors in the streets are that the price will be near 200-00 within next 12-18 months. However, I still maintain my target for 20% annual return on the amount invested.

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