Tech Mahindra Wins Satyam

Tech Mahindra today won the bid for a 31% stake in Satyam Computers. It is estimated that the Tech Mahindra will pay Rs.1757 crores for the 31% stake. L&T was the other major which had participated in the bidding process. Spice Corp and Cognizant Technologies did not participate in the bid while the participation of private equity major Wilbur Ross could not be ascertained. Tech Mahindra won the bid by bidding at Rs.58 per share, a 23% premium to the last closing price of Satyam. Prof. JR Varma, in his blog, said that the acquisition was hugely beneficial to Tech Mahindra but detrimental to the interests of the Satyam shareholders. 

As far as the markets are concerned, one must wait for a fall before buying, cautions Devina Mehra of First Global. Mr. Jitendra Sriram, Vice President and Fund Manager - Equities at HSBC, feels that there seem to be more chances of the market coming down than going up. He says that the corporate results will set the course of the markets and that the burden of expectations in stocks may lead to a pullback.

I have talked a lot about dojis in my previous blog posts and this article clarifies the use of a doji as a reversal signal.

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Back in Business

Hi friends. A very warm hello to all of you. It's been ages since I last posted and I know a lot of my loyal readers have been looking for me. No explanations, no excuses, no reasons. I'll just say that due to unavoidable circumstances I have been unable to write. Things won't be very different in the future too. I will not be writing and sharing my analysis of the markets for some time to come. But yes, I am back and will try to share with you the views of various fund houses/brokers/analysts and any other thing about the market which I do find interesting. 

In today's series I have for you a beautiful article by the renowned technical analyst, Mr. Sudarshan Sukhani. This article is about buying on dips and he has beautifully explained the concept of making the entry and the exit at the right time. You can read the article by clicking here.

Mr. Jonathan Garner, Head - EM Strategy, Morgan Stanley said that global markets are still not out of the woods, though, he feels that risk appetite has returned and there is a possibility of the markets moving up further. You can have a look at the video here.

Mr. Seshadri Sen of Macquarie Research feels that the worst may be over and is expecting a one year target of 10000-10500 on the Sensex while Mr. Deven Choksey of KR Choksey Securities sees the Nifty bouncing back to 3750 levels by June this year. 

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Break From Blogging

The market has started showing some signs of capitulation now. On Wednesday, the Nifty after recording a low of 3329, managed to improve and finally closed at 3513, almost 200 points above the day's low. This did not happen due to any positive news that came into the market. I personally feel that it happened because of the value buying that took place in stocks. If it really was value buying then we might have seen the end of the capitulation. If it was something else, and not value buying, then there may be more downside possible. For that let us understand first what capitulation is. Capitulation is when there is negative news, negative sentiment, negative outlook and all the negativity around and everybody is busy selling stocks to avoid further loss. This was happening since the last 2-3 days. By this time the market has fallen so much that people have lost confidence in the markets and then suddenly, out of nowhere, stocks are so cheap that value buying emerges and we see the end of the bear market. It is still too early to say whether the bear market has ended or not but it does seem that capitulation has already taken place or is taking place now.

Okay, a little bit about myself now. I am a technical analyst and enjoy predicting the markets by using technical analysis. I am also a stock broker and I wanted to share my ideas and analysis with my clients. To enable that I started blogging on 20th Novemeber 2007. Since then I have come a long way. I now have more readers across the world and on any given day they outnumber my clients three to one. Over the last 11 months, I have never taken a break from blogging, except an odd day here or an odd day there or when I wasn't well or when my computers was attacked by viruses, and I have been there for my readers all other days. I do think that I need some time off now. I'm not going for a holiday. I'm going to be here only but I just want a break from blogging. I have also got a lot of other jobs which have piled up over the months. How about giving me two weeks off? How about if I come back with my posts in the last week of October or the first week of November? Okay, let us keep 27th Oct as the tentative date of my return to the blogging world. Meanwhile, if you do have any questions/suggestions, do leave them in the comments section below or just send me an e-mail.

For those who are not subscribed to my posts and do not want to miss my posts on my return, please do subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future.

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Nifty Resistance At 3630, Support At 3540

Today’s movement in the Nifty was not totally unexpected. It was to be expected that the P-notes issue being eased and the CRR slash would lend a helping hand to the Nifty, which did happen because the Nifty opened with an upward gap of about 125 points. But the overall sentiment being negative, it was also to be expected that the market would eventually lose its way and come down, and that also did happen because at one point during the day the Nifty was down by as much as 50 points. But a final surge that lasted about an hour and a half took the Nifty back up to make it close with a gain of 4 points, thus making a doji for the day. (A doji, as explained in all previous newsletters, is a day where the opening price and the closing price is the same or is very close to each other. Such a candle has a non existent body but has a lower shadow and an upper shadow, the exception being gravestone dojis and dragonfly dojis where one of the shadows is also missing.) The BSE Sensex, not having the luxury of having 50 stocks in its composition and not having gainers like National Aluminium, Reliance Power, SAIL, Tata Communications and Zee Entertainment, closed about 106 points in the red.

World markets continue to be negative. Asian markets remained weak, European markets were, more or less, flat but the American and Latin American markets continue to trouble us. The Dow Jones, at the time of writing, was trading 290 points in the red while the Nasdaq Composite was almost 75 points down. Crude oil was trading at almost the same levels - $88 a barrel while the rupee versus the dollar is now touching almost 48. Gold continued to remain good – after a jump of $33 an ounce yesterday, it has gained another $24 today, obviously as demand for a safe haven increased and on speculation that the central banks may slash interest rates.

Attached above is the 30 minutes chart of the Nifty. The daily chart is not shown here but it has already been mentioned that today’s candle was a doji. A doji, after a downtrend, represents indecision and confusion and indicates that there may be a short term increase in the prices. In the chart above there are two trendlines drawn. The steeper trendline, suggests a resistance near 3630 levels. If this level is crossed decisively, then we could see it go to the next resistance, as shown by the longer trendline, close to 3850. Since the trendline is sloping downwards, every new candle will keep bringing the resistance closer. Support comes near the brown line near 3540. A move below this level would not give us any support before 3130 levels. As suggested yesterday, that is the next support level but the market, being the supreme being that it is, may find a new support before 3130 wherever it chooses. Also shown on the chart is the Moving Average Convergence Divergence (MACD), which gave us a buy signal early in the morning today and continued to remain positive throughout the day.

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