A SHORT BOUNCE .....OPPURTUNITY TO SHORT - 28.09.20

From the desk of Capt. D.Ganesh Raja

Dear Friends,

My travelling got extended due to personal commitments and I was unable to update regarding trading views. Let’s take off from where we left last. For some trade recommendations the trade exit signal might have come some time ago and in the recommendation overview I would be updating based on that. The idea is to stay true to the system reading without trying to inflate returns based on retrospection.

Note for reading this report:

Note1: The stop losses are on end of day basis

Note2: When trade recommendation is given around a certain price, it means that the trade may be taken the next trading day or if a price zone is given for taking a trade then trade has to be taken on the day price reaches within that zone.

Note3: A separate excel sheet is attached to view the performance of the recommendations, which also reduces the task of individually reporting the performance of each trade recommendation. Viewing the excel sheet “TRADE RECOMMENDATION LOG” will be self-explanatory. Also in this sheet Trade recommendations which are still active are marked.

For the sake of convenience we are keeping last Friday’s close (25.09.20) for our reference

MARKET & NIFTY OVERVIEW

Nifty Last close – 11050.25. Nifty had moved down from a very strong resistance zone of 11744 to 11870. The target for Nifty in my previous report was clearly met. I would like to quote what I had mentioned in my report dated 23.08.20 “Uptrend is mature now, in existence since March 2010 lows and being overly optimistic beyond couple of weeks would be imprudent. As of now target zone of 11744 to 11870 in next couple of weeks and after that need to freshly review the situation. “

For now following are the important factors which are to be kept in mind for synthesizing the situation:

1. The “UP’ fractal for the uptrend is complete coinciding with above indicated levels.

2. Lower high – lower low formation on the daily charts seen.

3. Short term oscillators are extremely oversold.

4. In previous report I had mentioned about the VIX levels falling to about 14-15 levels but on a day closing basis VIX touched 18.25 before stabilizing after a brief spike.

5. NIFTY weekly wave count indicates that 5 wave up move is complete and wave “A” of correction is in progress. Wave “B” and “C” are to follow.

6. Base and higher order wave structure on the daily charts indicate that a “zig-zag” correction is possible.

Conclusion: Sharp bounce till 11300-11400 levels can be expected in coming days in the NIFTY. This is the zone where short positions should be looked for. Exact entry level can only be evaluated by scanning with proprietary indicators. I might not be able to update on this due to paucity of time. However having seen this setup over several occasions before I would recommend a short trade at those levels, with a stop loss of 11650.

Target 1 -10340 Target 2 – 9902. Lever age 1x.

Minimum profit potential (Assuming entry price 11300) -8.49%

Minor trend: Down, Intermediate trend: Neutral, Long term trend: Down with bottoming out Indications.

Majority of the sectorial indices are more or less in line with Nifty and since I have not individually looked into it would not comment on it.

Also I am refraining from making trade recommendations on individual stocks due to risk reward not being in favor or some short side signals have already come during my absence. There is no point discussing about a trade after it has happened.

EXISTING TRADE RECOMMENDATION OVERVIEW

1. USD – INR: Last close – 73.72. Recommended price to go short (On 04.07.20) – 74.84 Continue to hold short position in this currency pair with profit protection stop at 74.17.

Target 1 – 72.0 Target 2 – NA. Minimum profit potential – 3.79%. Leverage – 0.5x.

Minor trend: Up, Intermediate trend: Up , Long term trend: Down with bottoming out indications.

2. GOLD: Last close – 49659 (MCX PRICE). Recommended price- 48878. Gold is undergoing a correction in the daily timeframe. I had already indicated in my previous reports about waiting for this correction for making long term asset allocation. To be on the safe side the investment can be spread over course of the correction to get a better price and avoiding exact entry levels. Short term traders need to avoid trading Gold on the short side to avoid possible losses.

Let me elaborate the factors which favor trading gold towards long side:

i) MACD indicator has formed a high which has not been seen in past 16 years, which indicates new highs are about to come.

ii) Elliot wave structure on monthly chart (Which I use in rare cases) chart indicates that wave 3 of the sub wave is complete and wave 5 is about to develop after the correction.

iii) On the alternate wave count scenario it could be the 5 wave formation of the larger wave structure because Gold has emerged from a 6 year sideways movement from 2013 to 2019. Here there could be difference of opinion among various Ellliot practitioners depending on where they are viewing “ground zero” of the base of wave structure.

Let us not discuss about targets for now since Gold is undergoing correction and we are looking at long term uptrend.

Minor trend: Down. Intermediate trend: Down. Long term trend: Up

3. GRASIM: Recommended price -636.55. Grasim gave a exit signal at 729.10 on 22.09.20, delivering a absolute profit of 14.53% and asset allocation based profit of 2.9% . Trade closed.

4. COAL INDIA: Recommended price – 135.10. Long side trade recommendation given on 23.08.20 gave exit signal on 28.08.20 at 139.05. Absolute profit 2.92% and asset allocation based profit 0.29%. The multiple bullish readings on this stock proved to be false and we should look for fresh short positions since bullish signal has failed.

5. L&T: Recommended price – 990-995 to go long. Stop loss price of 970.0 was touched on 26.08.20 but I had advised to hold position in my previous report. System gave exit on 01.09.20 at 964.95. Absolute loss – 2.53%, asset allocation loss – 0.25%.

This was a sucker trade where sometimes due to vagaries of the market even best designed systems fail to capture the correct signal occasionally.

6. INDIAN HOTELS: Last close - Recommended price – 93.0 to 98.0 to go long. The trade recommendation is still valid.

7. BEML: Recommended price - 690 to 720 to go long with stop loss at 647.0. Stop loss triggered on 08.09.20. Absolute loss (Assuming entry price of 700.0) – 7.57%. Asset allocation loss – 0.003%.

TOTAL LEVERAGE OF ABOVE NEW TRADE RECOMMENDATIONS: N.A.

COMBINED PROFIT POTENTIAL FOR ABOVE TRADES: N.A.

TIME WINDOW OF TRADES: 7 DAYS TO 30 DAYS

TOTAL LEVERAGE INCLUDING UNCLOSED POSITIONS AS PER PREVIOUS RECOMMENDATION: 0.55X

PROFIT / LOSS TILL DATE BASED ON A

LL TRADES BASED ON ASSET ALLOCATION: 6.91%

PERIOD IN WHICH ABOVE RESULT WAS ACHIEVED: 10 WEEKS

NOTE: DUE TO TRVELLING COMMITEMENTS NO NEW TRADE RECOMMENDATIONS WERE MADE FROM 26.08.20 TO 28.09.20 AND HENCE THIS PERIOD IS EXCLUDED FROM CALCULATION

TRADE RECOMMENDATION LOG.xlsx

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