A PREMIUM

Volume 17, Feb 26. 2007

PRODUCT

TREND TRADER FROM

CHARTADVISE

EXECUTIVE SUMMARY

SENSEX NIFTY
TRENDS
Long: UP Medium: Up Short: Up
Month Week Month Week

Neutral 13850-13925 13880-14040 4000-4030 3995-4010

Support 13775-506-205- 13307-12936- 4092-4053-3906- 3845-3816-

044 12562-12304 3888 3754-3660
Resistance 14510-929-15532- 13692-14218- 4222-4361-4432- 4081-4104-
15722 14506-14832 4562 4162-4270

Highlights of last week Pointers for the coming week

• Trends hit the skids as the prices drop
sharply on the last two sessions of the week.
• Participation in the decline was wide and vol-
umes were also decent indicating some fresh
selling.
• Arbitrage positions unwinding was part of the
selling in the last week.
• All the sector indices in the Bse ended in the
negative underscoring the wide breadth of the
decline that was witnessed in the last week.
• Rally in the short-term signals was quick ter-
minated and now extension of down trends
are being threatened.
• Medium-term signals also are beginning to
waver and extension of short-term signals
would trigger bigger reactions ahead.
• Expectations of the budget, economic surve,
railway budget etc to drive sentiments this
week.
• Trapped buyers will ensure that upmoves
would be a bit staggered, at least initially.

CHARTADVISE RECOMMENDED POSITIONS

Long Term: Bullish. Hold all Investments. If weakness seen, then exit lower quality stocks.

Medium-Term: Bullishness faltering. Weak sectors to be exited during next set of rallies.

Short-Term: Weak. Use rallies to exit from trading long positions. Avoid fresh investments unless good fol-
low thru is visible on the trends of the stocks considered for buying.

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 Volume 17, Feb 26, 2007 Page 2 Page 2

INDEX VIEW:
Short-term declines look set to extend.
Sentiment found them on the charts up until last week. Read those
facts a few times over and then decide for yourself what
The biggest casualty over the last week was the senti-
the situation is.
ment. The crawl of the past several sessions had already
introduced a feeling that the market may not be as strong There is one more problem here. In the market, at any
as it should be and therefore led to a situation where given point of time, there can be several situations- all of
people were actually looking for dips. Of course, at the which are real. Many people cannot even recognize or
higher levels, there is never a dearth of people who keep accept the existence of such a possibility. It is almost
calling for 1000 point drops. Ultimately, one of the days like what quantum physics has said- that a person can
they too have to be right- like a stuck clock is right twice be in two different places at the same time! All of us
in a day. Perhaps, last week was their day in the sun. therefore need to know, with some degree of clarity,
what is our situation. Once this is defined then look at
The thing with such calls is that it is the one that sticks
the relevant market situation and its related reality. For
most in the minds of people. Because it is what they fear
example, for a day trader or a short-term trader, whether
the most- that the market will decline. Inherently, we are
the market is going to fall by 500 or 1000 points (or rise)
all bulls and are always looking for reasons why the mar-
is largely irrelevant. He should be more concerned
ket should move higher. But as soon as we have some
about the next 50-100 points only. Because that is the
investment or trading positions, we begin to fear that the
only situation that is really relevant to him. But for a long
market will actually decline. Conveniently, there are lots
pull investor, the details relating to long-term signals is a
of people telling us all the time how, when, where and by
lot more important and he should make an effort to look
how much the market will move up. But calling for market
beyond the noise of the short-term and see how those
declines is different. Even though people say it, most of
signals are set up.
them don’t even believe it themselves. Because if they
did, then they would have to sell out too! And who wants Perhaps we have rambled on more than necessary on a
to have that risk? Rather hold on to something and suffer subject that is not really everyone’s cup of tea. Well, not
along with all the others rather than be a hero and sell to worry. If you thought all the above was just some psy-
and find that you are the only one who sold! But they chological gibberish, you wasted about 2 minutes of
often remember the last one who told him “long time ago” your life. But for a few who lean towards more contem-
about the decline. They forget all the others who told plation about the market might value its content, finding
14500
them, also longBse Sensex 30 C (13,827.77, 14,060.35, 13,763.39, 13,860.52, +73.6094)
time ago, that the market would go up. its value worth the time taken to read it.
Because they themselves believe it will and hence you 14000 Chart Setup
are only telling them what they already know! 13500

Perhaps that was a bit heavy for a Monday morning 13000

read? But we felt it is important that readers understand12500

the aspect of market talk because it is what you hear
12000
around you that influences your thought process and
thereby your own self talk. The self talk is what finally 11500
determines your action. For your action to be correct, the11000

correct thinking needs to be applied to the market. 10500

And what, one may well ask, is the correct thinking proc-10000
ess? We don’t claim to have the answers. But with our
9500
long experience in the market we certainly know this.
When the bearish consensus borders on 100%, the mar-9000
ket isn’t going where the majority is expecting it to. Look 8500
at the facts of the market and its trends- the actual facts.30000
Not what is only shown to you briefly- on channels, in the 25000
20000
press, in the research reports etc etc. 15000
10000
We have laid down what we believe are the facts as we 5000 (Continued on page 3)
7 24 31 7 13 21 29 5 12 19 26 2 9 16 25 30 7 14 21 28 4 11 18 25 1 8 15 22 29 6 13 21 27 3 10 17 24 1 8 15 22 29 5 12 19 26
April May June July August September October November December 2007

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 Volume 17, Feb 26, 2007 Page 3

INDEX VIEW: contd

Lets first look at some short-term set ups. Shown above is
the 30 minute chart of the Nifty futures. There are several
points that would suggest that we may have already put in
a low on Friday. The move is perfectly channeled. (see the
green channel lines). Next segments AB and CD are re-
lated by an almost perfect relation of 1:1. The Friday low
was 2.618 extension of the first down leg of the decline
that began from the point C. Next both the points B and D
were on the 45 degree angle line projected downward
from X. Finally, the bottom of Friday was a 1.618 time ex-
tension of the time leg of X to A.
Now that is certainly a good bunching up of a diverse
number of factors and swing objectives.
This scenario is valid mainly for day traders and short-
term players. It shows that the probability is quite bright
that we may see an upward rally during this week, per-
haps beginning as early as Monday. If the channel is to
remain patent then the next rally should peter out around
the 4100 levels and may take about 10 trading sessions or
so.
For the next level player, check out the following chart.
This is the daily chart of the sensex for the past year or so
the recent dips stayed above this support line. Friday’s fall
is now threatening to move below this recent support.
The stochastic oscillator has a good strength band at the
top and hence the ongoing dip was a buy. But the market
shown a slight change in pattern with the revival not build-
ing up sufficient upward momentum, unlike any time in the
past. A second test of the momentum strength is in pro-
gress and it remains to be seen whether this will survive or
succeed.
The two time frame oscillators (5/35 and 10/70) are both
still positive, the latter comfortably so. But divergences are
evident. Nevertheless, without trend breaks these are
mere warnings. The 5-35 is still in the positive but may
wilt if declines extend further. The 10-70 is quite comforta-
bly poised and hence may remain undisturbed.
What this set up of the market shows is that the near term
trend for the active investor and trader may be a bit dicey.
The trend is turning a bit vulnerable here and further ex-
tension of the weakness seen last week could probably
pull the plug on the near term and we may get further dips.
The next halt could well be around the lower pitchfork
channel and that is a good distance away. The short-term
picture (above) is arguing against such a decline occurring
and since the momentum indicators are still holding out,
one can expect that the near term supports may hold and
the trend could yet survive. Nevertheless, active players
need to be on their toes right now as they may be called
upon into action. Note that if the support survives, they
have a buy set up too! So proactive action is a must for
such players.

This scenario for the next higher set of players

with stochastic and Macd (two different cycles) added be-

low. The price chart also has the pitchfork channels. The
following can be noted in the chart.
The prices made a high above the median line and then
have been struggling to get past the median line even as
they reached a new high. A 0.5 channel line has also been
drawn within the pitchfork channels and it was seen that

(Continued on page 4)

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 Volume 17, Feb 26, 2007 Page 4

INDEX VIEW: contd

The chart 3 is weekly sensex with trendlines and ADX and and has improved its levels in recent months indicating
trend Macd indicators added. Findings are fresh inflow of money into the market.
Break of the intermediate term support trendline. Major
support trendline quite a distance away from the current This situation shows that the long-term signals are intact
levels. and the current weakness in the short-term is only a gyra-
DI lines have crossed negative after many months. ADX tion within an overall bullish long-term. Hence those play-
line has been down since May 06 ing the market across the long-term need not worry about
MACD histogram shows a possible wave 5 formation set the near term fluctuations that may appear in the near
up at the recent high as the indicator shows a divergence future.
after a drop to neutral levels in May-Jun 6.
This chart shows that the intermediate term signals are Likely targets if short-term declines ensue
also on the verge of turning weak and some beginning in
that direction is already made. Prices have broken below
the intermediate term support trendline and this would
now trigger the oscillator signals. Thus this chart is already
into a bearish mode.
However, higher time frame charts need to be reconfirmed
by action in the lower time frame charts. Here we find the
evidence is just about gathering (as discussed earlier) and
once that happens, there shall be a simultaneous trigger-
ing at the next higher time frame. Therefore the immediate
future holds relevance for intermediate term players also.

And finally, this situation for the long-term players.

The sharp drop of the last week has set up possibilities of

further declines and a retest of the earlier swing lows. The
Jan low is at 13305/3811 while the Dec 06 low is at
12795/3656. As we have mentioned in earlier letters, the
index can pull back and even break the last swing low but
seldom breaks the second swing low back if the trend has
to be maintained. Thus we expect the prices to come
down to levels between the two prior swing lows.

In the chart above we have overlaid a short-term pitchfork

and here we find that the median line is around 3850 lev-
This is sensex monthly charts with Stochastic, CCI and els. Since the market has already hit one of the time lines,
Money flow (all correlated indicators). We find, it is possible that we may have a rally but the lower target
Uptrend is quite comfortable although some upper shad- zone will remain open until there is some evidence to the
ows have begun to appear. Current month candle is still contrary. If prices break below this we can look for lower
reasonable sized candle and not exhibiting any bearish- targets ahead and will deal with it in future issues or in our
ness. daily updates.
Stochastic is firmly in the overbought zone and strength
band is present. Next dip therefore is a buying opportunity.
CCI is positive but losing steam. Divergence is present.
The indicator however has been in the positive ever since CONCLUSION AND STRATEGY ON THE LAST PAGE.
2003.
Moneyflow has also remained in the positive since 2003

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 Volume 17, Feb 26, 2007 Page 5

Sector Indices:
Every sector took a knock in the decline of the last week. The breadth readings turned quite negative and we
had more declines on all the five trading sessions of the last week. As a result the weekly A-D line was almost
at 1:2, a ratio not seen for a while now. The worst hit was Banking as the index reeled under continued unfa-
vourable atmosphere and lost 6% over the week. Earlier strong contenders like
consumer durables and Teck too wilted under the selling pressure and notched All sector indices
up big losses. Even IT, that had seemed fairly strong in the earlier week- and de- showed losses during
spite a strong Nasdaq and Asian markets- lost ground and shed 4.79% over the the last week. Bank
week. index was the worst
Rally in global metal prices restored some life into the Metals index here and it hit with a 6% decline
was the least loser with only 0.87% drop. It was mainly the steel sector units that over the earlier week.
contributed to the gains in the metal index.
Power cable stocks that had been having a decent time in earlier months lost
ground and dropped sharply last week. Looks to be profit taking action here.
Profit taking also took toll on the fortunes of Construction stocks (down about 6%) as well as cement and ce-
ment products stocks (down about 8%).
Among the gainers over the week were stocks from the Entertainment industry. Possibly some sops are ex-
pected in the budget? MNC Pharma stocks also looked up a bit.

Sector Index Close Wkly Chng Pivot Support Resistance

BSE METAL INDEX 8798.93 -0.87 8849.25 8667.46 8980.73
BSE OIL & GAS INDEX 6536.47 -2.52 6613.78 6424.57 6725.69
BSE CAP.GOODS INDEX 9227.83 -4.27 9389.86 9030.55 9587.14
CNX IT INDEX 5527.5 -4.79 5632 5406.9 5752.6
BSE MID-CAP INDEX 5664.89 -4.84 5773.87 5530.56 5908.21
BSE PSUS INDEX 5876.34 -5.05 5988 5748.47 6115.88
BSE HEALTHCARE INDEX 3610.62 -5.07 3700.9 3499.38 3812.13
BSE SMALL-CAP INDEX 6904.43 -5.29 7067.53 6723.34 7248.62
BSE AUTO INDEX 5336.65 -5.31 5446.06 5193.54 5589.18
BSE I.T. SECTOR INDX 5261.84 -5.46 5372.59 5133.84 5500.58
BSE TECK INDEX 3703.56 -5.6 3784.68 3606.64 3881.61
BSE FMCG SECTOR INDX 1786.28 -5.62 1826.99 1741.72 1871.55
BSE CONS.DURABL INDX 3708.43 -5.86 3776.73 3600.09 3885.07
BSE BANKEX INDEX 6759.58 -5.89 6931.76 6523.55 7167.78
NSE BANK NIFTY 5473.6 -6.3 5616.37 5284.58 5805.38

Sector Watch: Entertainment Industry: Positive trends

The stocks from the entertainment sector appear to be in de-
mand. Charts of several of these counters are well placed
and show some accumulation patterns. A few already have
shown an upside breakout and these include Mukta Arts,
TVTN, Accentia Tech, Bag Films etc. Fresh investments of
a short-term nature can be considered in these counters at
current levels or on declines. Saregama has been into a cor-
rective decline for a while but continues to retain the promise
of big moves in the future once the current correction is com-
pleted. None of the stocks from the cinema multiplex seg-
ment of this industry seem to be in any major trends yet and
hence can be ignored for investments for now.

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 Volume 17, Feb 26, 2007 Page 6

SHORT-TERM: Spel Semiconductor (31)

CURRENT TECHNICAL STATUS:
1. Prices are undergoing consolidation phase after a sharp uptrend.
2. Oscillators and other indicators placed in a bullish mode.
3. Near-term outlook looks bullish and breakout from the sideways move will generate speedier moves

It can be noted from the chart alongside that a nice

uptrend has been building up in this stock. Prices after
giving a sharp rise in first two weeks of January went
to hit a high of 38. Finding it difficult to clear Septem-
ber 2005 top, prices slipped into a sideways consolida-
tion phase. In this round, prices managed to hold the
38.2% retracement support and are forming lower
shadows near it. With last week’s positive closing,
prices have looked up again. Further upside follow
thru will bring in speedier moves in this stock. A deci-
sive move beyond 38 will give a breakout from accu-
mulation pattern and opens room for higher targets.
One can also observe that the weekly RSI oscillator is
holding above 60 and has turned up afresh, indicating
momentum is backing the recent turnaround.

Buy if above 32 for the short-term targets of 43/54 with

stop of 27.

Mukta Arts (71)

CURRENT TECHNICAL STATUS:
1. Breaking out of the trend line resistance will generate speedier moves.
2. Volumes have been good with the recent up moves.
3. Higher degree charts also show bullish pattern. Hence current rise may be a signal for bullish trend resump-
tion.

Media was one of sector which was in the lime-

light in the recent sessions. One of the stock to
highlight from this sector is Mukta Arts. We can
see that this stock has undergoing thru accu-
mulation phase over a period of time. With re-
cent round of strong up moves, prices gave a
nice breakout from the intermediate trend line.
Giving a positive weekly closing above it is a
bullish signal for the short to medium term
trend. Prices are now heading towards 92 area.
In line with the prices, we also note that the DI
has widened up afresh which is a bullish signal
for the trend and improving the chances of
overcoming 92 level.

Buy now and on dips down to 65 for a minimum

target of 92. Stop of 10 points.

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Volume 17, Feb 26, 2007 Page 7

SHORT-TERM (contd..): Carol Info (55.40)

CURRENT TECHNICAL STATUS:
1. A consistent advance has been in progress on the charts.
2. Picked up well from 21 period moving average support.
3. Overall trend placed in a bullish mode and looks good for further rise ahead.

On the short-term charts, prices have been moving in a

trended fashion since past several weeks. Last week
we saw the stock witness consistent buying activity
that led prices to giving a nice weekly closing. This
helped the stock to hold the support of 21 period mov-
ing average support and bounce back. If prices con-
tinue their advances this week we may see it heading
towards its prior tops hurdles placed around 65. Near
this area it has formed several tops. Crossing this hur-
dle decisively will resume strong trended moves. Vol-
umes have been in sync with recent rise . Also we find
that the weekly CCI oscillator has turned up afresh
from the zero area. This is a bullish signal for the trend.

With this kind of positive development on the weekly

chart on both price and momentum, we suggest buy-
ing at current around 56 for minimum rise to 65 and
above it to 82. Place stop of 10 points.

Karutari Networks (235.20)

CURRENT TECHNICAL STATUS:
1. Breakout from the trend line on the weekly chart and closed at new high.
2. Stock is currently on a strong uptrend.
3. Momentum readings in support of the breakout.

This stock had been struggling to clear the ascend-

ing trend line region for a while. Most of its attempts
to overcome this hurdle led to the formation of up-
per shadows. This action of the prices near the re-
sistance area is an indicative of the fact that there
was a lot of selling pressure around these levels.
Last week’s gap up rise led the stock to give a deci-
sive breakout from the trend line region and has
given a strong closing above it. This is a positive
development in prices and is clearly seen on the
weekly chart appended aside. Adding fuel to the up
trend are most of the momentum indicators that
have turned up afresh. It has been proving to be
positive signal for the trend. Also an increase in
volumes accompany the current move.

Hence we recommend our readers to buying above

236 for advance 282-296 and above it to 340 levels
with stop of 25 points.

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 Volume 17, Feb 26, 2007
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CONCLUSION AND STRATEGY FOR THE WEEK

The idea of showing the different
situations is based on what we
wrote under the sentiment section.
Readers should choose the time
frame and the situation that is rele-
vant to them and decide their
course of action. What is right for
one person need not be correct for
another.
Summing up the four scenarios, we
find that the long-term signals con-
tinue to remain undisturbed. The
market will have to undergo much
more weakness than what is evident
currently before this trend takes a
knock. However, the short-term to
intermediate term trends are skat-
ing on thin ice and at places, the
ice seems to be cracking already.
Therefore we may be in for some
spot of weakness ahead and
hence readers should be ready
with some action plan to deal with
….the short-term to inter-
mediate term trends are
skating on thin ice and at
places, the ice seems to be
cracking already!
the same.
In earlier letters we had indicated
that partial profits should be
booked on non-quality items that
one may be holding and to tighten
stops on other counters. Some of
those stops may have been trig-
gered from specific industry groups
such as Cement, Fmcg etc.
Indices may rally initially but watch
for strength before buying into the
market once again. If downtrend
resumes afresh then we could see
Dec06 lows coming in for some
retest now.

DISCLAIMER
The report and information contained herein is strictly confidential and meant solely for
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form, without prior written consent of Chartadvise. This report is based on information
obtained from public sources and sources believed to be reliable, but no independent veri-
fication has been made nor is its accuracy or completeness guaranteed. This report and
information herein is solely for informational purpose. The recipient should independently
evaluate the investment risks. Chartadvise accepts no liabilities for any loss or damage of
any kind arising out of the use of this report. Past performance is not necessarily a guide
to future performance. Actual results may differ materially from those set forth in projec-
tions.

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