QUANT BASED TRADE RECOMMENDATION - 07.03.23

From the desk of Capt.D.Ganesh Raja DATE: 07.03.23

Hello friends,

Wishing you all a wonderful Holi. Celebrations are on full swing but multitudes do not know why this festival is celebrated in the first place and of course the usual sermon of save water during Holi which keeps propping up. I limit myself to that and get on with our discussions.

In my post prior to joining my marine assignment, I had asked the readers to stay in the sidelines and what followed was a roller-coaster ride in Indian equity markets, post controversy surrounding Adani group companies, which was triggered by US based research firm Hindenburg. Rightful action is what is required in markets not action for the sake of it. Some people who have are active traders would not agree with this view. This was perfect recipe for many who over analyze these events, which generally leads nowhere, instead of focusing on economic and stock fundamentals. This also gave opposition parties a chance to corner the Government stating their proximity to Adani group and asking PM to respond in the parliament.

Let us take an allegory. Suppose, a person is suddenly accused of having an affair with someone just on the basis of being seen with that person. The person, depending on his character would respond in myriad ways. If the accuser goes on repeating the same, hoping to prove it somehow, then the lie is bound to get exposed at some time, unless the accuser can provide tangible proof. Something similar is happening in this whole controversy surrounding Adani. SEBI, RBI and various other authorities can get to the bottom of the case and take appropriate action and if Adani group is genuine long-term player in the Indian growth story they should come out even stronger. This is their acid test. Till then, one has to tighten the seat belt and abide time. The crowd always looks for some kind of news driven movement in the market, which does provide ample volatility and sad part is compromise their long term financial goals based on these. The more we change the more we seem to remain the same.

Now let us look the factors for forming our view and take trade positions.

India VIX placed at 12.26 and poised for lower levels, augurs well for a recovery rally in the market. The stability of USD-INR which is seen for now is also a positive factor. I have given a separate view on USD-INR currency pair.

Applying proprietary indicators on 10-year Govt. Securities, also indicates a higher probability of upswing , which is a leading indicator for the equity markets. There was an inverse Head & Shoulder consolidation pattern since January 2022 and broke out of the pattern in the week ended 25.11.22 and presently it has consolidated well above those levels at 2081.31.

Nifty Energy Index has broken key support keep support levels and some kind of technical bounce is seen, however this should not be construed as a runaway rally. So basically, subdued energy markets should generally be taken as positive for our economy.

Looking at Nifty chart, applying quant based parameters and above factors, indicate that downtrend seems to have been halted but confirmation for taking a long position has not been triggered yet.

US Markets:

In my previous post we discussed about US markets and let us have a relook at it.

Dow is in near sideways range, so need to wait for some more time before a position can be taken.

Yield curve inversion which happened in 2022 is still extending into 2023 and we discussed about this in the previous post. There is a divided view among key economists about the policy stance Fed needs to take to rein in the muti year high inflation, so I am not getting into that lengthy discussion and neither am I an economist. However, what seems to be the gist of discussion is that a premature slowing of rate hike might again stoke inflation and the metrics followed by Fed might not be enough to take the correct policy measures. People of academic interest might read up more on this. Correction based on yield curve inversion, if at all it happens is some time away, as per my synthesis based on Quant system.

NASDAQ Composite: Last close 9037.11, seems to have completed its multi-month correction and poised for a new upswing. Long position can be taken in NASDAQ Composite around these levels, with stop loss at 8604 and target of 9964.0. Bounce from a very strong support zone at 7376 to 7600, downtrend channel violation, double bottom at 7630 levels further corroborate this view. Leverage for this trade – 0.2X.

USD-INR: Last close – 81.80. This currency pair has been stable in a range of 83.32 to 80.58, for past 5 months. Further weakening of the rupee against the greenback seems highly unlikely at these levels, due to softening energy prices and also domestic inflation at comfortable levels. One can go long in INR (Short on USD) at these levels with stop loss at 83.32.

Target-1: 79.77, Leverage – 1X.

GOLD: Last close – 55769.00. The present correction in gold is on expected lines and is healthy for the long-term uptrend. In one of my previous posts, I had recommended that people could have taken profit when prices touched 58000.00 levels but the objective for long term investors is asset allocation and not short-term trading, so keeping that objective in mind investors can continue to hold their investments in Gold. Classical chart patterns are being followed by Gold and up trend is intact. From the first recommended price in Gold on 22.10.21 at Rs.47797.00, it has delivered an absolute returns of 16.67% as of last close.

For individual stock and indices-based recommendation, I will try to update during the week.

RETURNS TILL DATE SINCE 04.07.20 : 72.33% (AS OF MONDAY 06.03.23 CLOSING)

TRADE RECOMMENDATION LOG.pdf

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