Has Wave C begun?

Another bad day for the US markets and Asia following suit with the Nikkei down abt 290 points(at one time abt 350 points). Continuing the same trend we should see India following suit. Let's look at some of the charts below for what to expect:

DJI:
The trendline that has served us so well has been broken decisively today. However as we can see from the charts, 13200(give a leeway of abt 50-75 points) offers support. If this is broken, then we can assumed Wave C has begun and short/close positions on the pullback that will follow.



Sensex:
We can expect a bad day today following the Asian markets. Yesterday, it reacted from the trendline and was down abt 75 points. However, as marked on the charts, the Gap up at 13800(leeway of abt 100 points) looks like it will provide support. We will see the action and make our decisions accordingly. The key points to remember during such times are:

1. Don't panic and lose your mind.
2. Be unemotional and if the supports that we track break, then get ready to sell on the pullback. This will provide us with the valuable cash and emotional stability required to profit from the next upswing.
3. Take each day as it comes. Don't expect action too far away. Observe and act.

Will Rain Calcining rain money?

RAICAL: This is a stock which moves in sudden spurts. The idea with this stock is to buy and hold it for a while to take advantage of the spurts. We had issued a buy call on this at 35. During the previous week, there was news of this company doing a 500Million USD buyout of a US firm. Using the classic 'Sell on Good News', we disposed off 50% of our holdings at 49.

We would not issue a buy on this stock. However if you are holding this stock, then you can exit the stock when it spurts up. Ideally we are looking at a target of 55.

Banking on Bank of India

BANIND: This is a stock that we have traded very often. We initially screened then stock around 155 and bought on declines upto 140. Since then the stock has done really well. We exited 50% of our holding when it hit 200 for the first time. Since then it has moved to 215 and is now correcting.

We can initiate a buy on this at about 190-195. The target for this stock is abt 270. What we really like abt this stock is the very high volumes that is traded on a daily basis.

Does USHA MARTIN look like a buy?

USHBEL: This stock was first screened at 185. We then sold off almost 50% of our holdings around 230. The only worry that we have with this stock is the liquidity.

Our current stance is to watch this stock and buy it on declines to 230. The target for this stock is 310.

Our current view -

After the last 2 days of significant declines on the DOW and FTSE, it is a good time to revisit the market as a whole. Before we go with the view, let's take a look at what has happened so far:

US & UK:
DOW: Corrected from 13757 to 13466 = 2.1%
S&P500:Corrected from 1541 to 1517 = 1.5%
FTSE:Corrected from 6686 to 6523 = 2.4%

Asia:
Asian markets have had one bad day and looks like one more to come today
HSI: Down from its highs. Interestingly Sensex trails the HSI by a few days. (HSI Chart)
Nikkei:Finally managed to sustain above 18000.Been relatively immune so far.(N225 Chart)
Sensex:Corrected from 14683 to 14256 = 2.91%
Nifty:Corrected from 4363 to 4198 = 3.8%

So where do we stand. From our old view as jack_stockpicks summarized below:

My personal view is that Wave C will start after we take out 4250. Remember May 2006 was Zig Zag, and since corrective patterns should alternate, we will have a flat this time. In a flat the Wave B should move above the start of Wave A, giving an impression of a new rally before Wave C begins. I would say maybe 4300 should be a target.

As can be seen, our old targets were easily achieved. We still maintain that we will see 15000+ before the Wave C begins. Some reasons for our bullishness:

1. Individual stocks that we track on the Indian markets are showing signs of strength without looking like topping action.
2. The DLF IPO is between June 11-14. We feel that the big IPOs are kept just prior to the correction. In addition they are preceeded usually by nervousness.
3. This recent weakness is caused by interest rate hikes. Interest rate hikes are usually signs of bottoms and not tops.

That being said - where will this weakness find support. We feel 13800 offers support. A breach of 13800 implies that Wave C has begun and we will hit 12350 again. However the more important thing will be where the next rally will terminate.

Is 13800 a buying opportunity? We feel that it is not the right time to buy. The time to buy was mid-March and April. The risk-reward is not in favor of buying right now. Out view is that we will make new highs. But we always believe that the market is king and with the adverse risk-reward ratio, it will be better to stay on the sidelines for medium to long term investors. This bull run will offer plenty of opportunities in the next 3 months. Staying on the sidelines will help preserve cash, confidence and the mental strength to make use of these opportunities.

For the short term investor, if the move to 15000 happens we will see very good returns in the midcap section. The question is IF!!

Catching the recent correction

There is another forum which I frequent where I made the following comments -( Click here ). The details are posted below:

A month later we still remain bounded by the trendlines. Most stocks look to be in a distribution phase. Another week or two left? I have closed all longs and getting on the short side

What would you do?

Our Top Picks - US Updated June 17th 2007

As we have had a bearish view on the US markets, we have been short. Our current short activities. Click on the individual security for some more information:

1. ATHR
2. AMAG
   

Click on our real time Gain/Loss Tracker.

Our top Picks - India Updated June 17th 2007

Here is a brief snapshot of our current picks and our view. Click on them for individual analysis:

USHBEL: CMP 245, Target 310, Upside Potential 25%
BANIND: CMP 199, Target 270, Upside potential 36%
MORGOK: CMP 546, Target 1 775, Upside potential 42%.
RAICAL: CMP 41, Target 56, Upside potential 36%

Please note that predicting targets is a fool's business. A stock will know no highs and no lows. We are looking at targets in an ideal world. The targets are issued so that we can periodically book our profits and convert paper gains to capital gains. Whenever you have concerns abt any of the targets or stocks, pls leave us a comment or a note.

This Gain/Loss tracker will help us to track our gains and losses real time.

Real money thru Real Estate - Peninsula Land

MORGOK: Initialy screened at a price of 350, the stock has done really well. We sold off 10% of holdings at 450, followed by another 15% at 520. With the upcoming IPO of DLF to be started tomorrow, we should see some nice action on this stock

We give it an immediate buy call with an intial target of 775. The SL for this stock is at 490.