QAUNT SYSTEM TRADE RECOMMENDATION - 07.08.22

From the desk of Capt.D.Ganesh Raja

Dear friends,

The stupendous rally in our markets continued and various questions arise at this juncture. Let us see what they are:

1. Is it a sharp bear market rally?

2. Have the markets rallied off a long-term bottom?

3. Are the underlying economic fundamentals propelling the rally?

4. Are are we going to decouple from the Fed rate hike and resultant US market gyrations?

5. Will the domestic investors be able to sustain the rally with reduced participation of FIIs?

6. How does the China- Taiwan tensions and involvement of US which can escalate into a major war look for various asset class? This in addition to the Russia- Ukraine war. Also, will it be “risk off “mode of investing?

I’ve been pondering over all these questions for a while. The rally was not predicted in my system. If one has to ride long term cycles, it is better to be a little patient before more data points come in alignment. Doing more research and putting out my views a little late rather than jumping into every swing move is my idea, because end of the day these are not just views but actionable synthesis which can either make or lose money. It pays to be prudent and advise with caution. As I have said before lot of the decisions of my personal finance, are based on the views which I put out, so that gives the credibility. Recently I had to make an important decision of liquidating some stocks to invest in a property. Based on my synthesis, I decided to wait before liquidating few target stocks.

Just prior to this rally I met a friend and he was predicting die levels for the market up to 12,000 levels for Nifty. Some “informed” market participants were going to “bring “it to such levels, whatever that meant. Such things are hard to predict and one of the best things to do when we are not sure of what the market is doing is to stay at the side-lines. I often tell people that before you venture out to make money, take enough steps that you don’t lose money. The idea is when we take care of the downside and eventually an upside presents itself you should be doing pretty good in the long term.

The above questions cannot be answered by any of the best brains in finance because there are too many “unknown unknowns”.

Semblance of stability in USD-INR exchange rate is a positive for our economy in general. This is addition of record crude oil imports from Russia at discounted prices is generally good for us.

India VIX placed at 18.9. The situation in world events is grave and one would expect it to spike up. We have two observations which are common and few based on my phone proprietary indicators, based on which it seems probable that VIX can swing to lower levels, which means that it is positive for our markets. Since 25.0.22 VIX has been forming a descending triangle pattern with the breakdown from the pattern on 15.07.22 and subsequent retesting in the week we just ended. One aspect which technical practitioners have to master, is observe pattern formation, subsequent breakout or breakdown from the pattern and retesting. Again, nothing is absolute, but diligently following this keeps one in right track. VIX monthly chart is also also indicating a downward swing. Few of my customized proprietary indicators in the weekly charts are also favouring lower levels in VIX.

Inflation Expectations in India increased to 11.10 percent in May from 10.80 percent in March of 2022. Source: Reserve Bank of India. Though May figures are higher than March, the general trend is down. The inflation expectation is below its long-term moving average.

Food inflation at 7.75% in June, over the same time previous year, has been on a sticky wicket. Above average rainfall due to ongoing monsoons should take care of food inflation going forward. Flood situations in some parts of the country might bring in unexpected complications.

The bank loan growth rate is also at a healthy 14% higher than the previous year this figure has crossed the long-term upper variance limit. Whether it would sustain about this cannot be predicted with accuracy at the moment.

Unemployment rate at 7.8% is little beyond the acceptable range. We need to see how this pans out with sustained economic recovery.

The 10-year government security bond index which is at 2021.28. I give a lot of weightage to this index since it is a leading indicator. This index has broken out to the upside from its long-term downtrend line. This leading indicator is favouring higher levels in the equity market.

USD-INR: Last close -79.39. People who have been following my previous recommendation of going long in the USD INR yielded a neat profit and now the system is indicating a reverse trade. Higher highs higher lows on the inverted daily chart is looking favorable to short the USD-INR currency pair at these levels, with stop loss at 79.83.

Target 1 – 78.60, Target 2 – 77.78, Leverage – 0.5x

Minimum profit potential – 1.0%, Asset allocation profit potential – 0.5%.

Minor trend – Up, Intermediate trend – Neutral with downward bias, Long-term trend - Neutral.

GOLD: Last close – 51350. I have given elaborate coverage in my previous blogs about the importance of staying invested in gold for the long term. For now, there is renewed buy signal in gold, so it is recommended to go long position in gold at these levels with stop loss at 50446.0.

Target 1- 54541.0, Target 2 – 57862.0, Leverage - 0.4x

Minimum profit potential – 6.4% , Asset allocation profit potential – 2.6%.

Minor trend – Up, Intermediate trend – Up , Long-term trend - Neutral with upward bias.

PREVIOIUS TRADE RECOMMENDATION

1. PI INDUSTRIES : Last close – 3237.55. It is at an absolute profit of 5.73% from recommended price. Continue to hold long position.

2. TATA CONSULMER PRODUCTS: Last close- 784.40. In my buy recommendation I had mentioned to go long during a dip, which is what the present price is indicating. In my trade recommendation log sheet, I have taken a higher price for records and for the sake of good order. Continue to hold long position.

NEW TRADE RECOMMENDATIONS

1. COAL INDIA: Last close – 208.45. Recommended to go long in the price range of 200-210, with stop loss of 185.0.

Target 1 – 242.00 , Target 2 – NA, Leverage – 0.10x

Minimum profit potential – 16.1% , Asset allocation profit potential – 1.6%.

Minor trend - Up, Intermediate trend – Up, Long term trend- Up.

2. ACC: :Last close – 2254.5. Recommended to go long between at these levels with stop loss at 2162.0.

Target 1 – 2450.0 , Target 2 – 2707.0, Leverage – 0.15x

Minimum profit potential – 14.1% , Asset allocation profit potential – 2.1%.

Minor trend - Up, Intermediate trend – Up, Long term trend : Up.

TOTAL LEVERAGE OF ABOVE NEW TRADE RECOMMENDATIONS: 1.15

COMBINED PROFIT POTENTIAL FOR ABOVE TRADES: 6.8%

TIME WINDOW OF TRADES: 15 DAYS TO FEW MONTHS

TOTAL LEVERAGE INCLUDING UNCLOSED POSITIONS AS PER PREVIOUS RECOMMENDATION: 1.95X

RETURNS TILL DATE SINCE 04.07.20 : 59.99%

TRADE RECOMMENDATION LOG.pdf

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