ASHU DUTT’S “THE CHARTIST’S ALMANAC” – JUNE 2009 EDITION – FROM www.ashudutt.com

You can access all Research Reports on Equities, Commodities, Currencies, Real Estate at www.ashudutt.com

ASHU DUTT’S “THE CHARTIST’S ALMANAC” – JUNE 2009 EDITION

Ashu Dutt’s THE CHARTIST’S ALMANAC
Edition: XXVIIPublished this 4th day of June, 2009Price: US$200 for 24 Editions
BOTTOMLINE (updated)
- Short Term Trend (7-30 days) – Neutral. The Odds areo +20% gain: 20%o +15 % gain: 60%o +10% gain: 20%- Intermediate Trend (30-90 days) – Bearisho +20% gain: 50%o +5% gain: 30%o -10% loss: 20%- Long Term Trend (90 days +) – Bullish/Bearish (too early to make any calls)o +20% gain: 30%o -10%loss: 30%o -20% loss: 40%
STRATEGY
- Nifty futures with a strike of 5,000 or even higher. Essentially playing deep out of the money (or going for the “fat tail”) may be the strategy for short term trading. Point is to keep the downside limited and the upside unlimited. The odds for a big wave are very favourable to play the extremes- Its best to stay away from stocks that show little momentum in such markets even if their fundamentals are strong- Instead of going in to sell trying to guess the price (or things like “fully valued” etc), its best to look for a serious fall (retracement in technical parlance). The rule of thumb I follow is a fall of 10% from a high is a good reason to get out (specially in these kinds of unidirectional markets- Its best to disregard analysts who keep saying “its going to correct”. May it will, maybe it won’t. A stopped clock is correct 2 times a day. Of course “it wll correct”. But when and after how much of a rise is not known. What is known is that the current market’s strength is all consuming. May as well flow with it
KEY DRIVERS
- The indices have defied everything on their way up. On good news, they have erupted (like the day after the election results). Bad news, well, they have disregarded. For traders though, the ticker is all that matters. If it shows this kind of strength, its best to avoid anything short and it makes sense to continue going long though going for “extreme” market moves- This has been a “skeptic’s rally” which means most players sat it out and that includes institutional and individual investors. If that’s the case, the biggest wave may yet to come and we could see the Sensex cross 20,000 in a surprisingly short period of time- The rupee’s appreciation (which I expect to go to Rs 44 to a dollar) in the next 3-4 months would provide another 10% boost to existing foreign investor portfolios. If you are a foreign investor and your bet is a weak dollar, there seems to be little reason to sell in markets like India- Mutual funds, insurance companies (through ULIPs) and the New Pension Scheme (NPS) has enough cash to prod the market up another 20-25%. I would say 30-45 days may be enough to make that possible
COMMENTARY – NIFTY & SENSEX
The Sensex is poised to add another 15-20% quicker than we think. I would say this could happen anytime by August. Same with the Nifty. Once this happens, the market is poised for severe corrections. Perhaps even as large as 30% from its peaks. You see, when you are in pure trading markets, 2 things can happen. Either they can “jump start” the economy (a very likely scenario) or they cannot sustain themselves for ever (which seems more likely to me)
COMMENTARY – MIDCAP
This is a misnormer. A number of mid caps have made massive moves to move from mid to large caps. Real estate companies and companies like Tech Mahindra are case in points. Forget the Midcap indices. Look for sustained price and volume action. The strongest momentum (both in price and volume action) may be the stocks to pick
COMMENTARY – SMALL CAPOnce we see the Sensex/Nifty make the “big move” (if it does), small caps will move with a lag but may make even a bigger move. Moves in small caps (or infact smaller priced stocks) could be as high as 100-300%. The difficulty in this segment is finding the next big moves. Look for a serious jump in “volume” activity (instead of price activity). Big volume increases are usually a good sign we will get big price moves. Specially if the stock is hitting circuits on very small volumes