Strong Resistance at 77-78 for Jaiprakash Associates

Let us see some Technical Analysis on Jaiprakash Associates today . Looking at daily charts for last 1 yr , We can see an extremely strong Resistance area around 75-80 (77-78 to be precise).

update (Mar 18 , 2009) : Just the next day after posting this article , JAIASS opened higher and moved up and finally closed above the resistance levels of 77-78 , If markets move higher and Jaiass sustains above that level for some days , It can touch 100 .

There are 3 levels for trend lines which are conforming that resistance level . Look at the following chart to see in detail , click to enlarge the chart .






















You can see that 3 trend lines at different levels are conforming that point (77-78) as the resistance point .

Long term trend line is very strong trendline and thats the most important one .

Medium term trend line and short term trendlines are also important because they also put some weightage on the long term resistance point . This chart shows the prices Monday , till Mar 16 ,2009 .

Today on Tuesday , Mar 17 , 2009 , markets have corrected a bit after 3-4 up sessions in this bear market rally . and JP Associates as expected changed there direction downwards and closed at 74 after opening at 77 .

How should it be traded now ?

BUY if :

- Global markets are rallying and sentiments continue to be good .
- Prices cross 80 and sustain atleast for 2 days .

Stop Loss : Stop loss should be little below the 77 point , around 75 .


SELL if :

- Global markets rally comes to an end and over all sentiment turns negative .

Stop Loss : SL at max 79 or as per your trading money management rules .

Notes : A lot depends on overall markets sentiments ,be in sync with markets direction . Keep strict Stop loss . Appreciate and expect if markets do something random and do not follow technicals estimates . markets are supreme , not TA .


There is an article on "Should you Invest in Equity Directly" on my blog . Read it if you want .
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Markets week , Did you Short ?

In the last post , I had discussed the trading opportunity of Reliance-RPL merger news. But market direction was negative and one should always expect the unexpected rule , People who jumped into market and traded must have burnt there fingers , because after 15 min of market opening , the trend for market overall and Reliance and RPL was down and they were moving lower .

Today was an important day , as markets were near support point of 2680 and in the last hour of trade , it went below it and finally closed below the support level , which brings further weakness in market .




If you see this 5 day , 30 min charts , Markets have closed below the support levels of 2680. This does not look very good for Bulls now .

US markets are at 11 years low , I have taken a short position through PUTs and also hedged them using a CALL position . If markets go down as expected , i will make some profits , If they bounce back which is very unlikely now , then i will make small losses .

Markets must fall heavily now once it breaches 2500 levels . As I write this US markets have breached the 11 yrs low of 7000 on the news of $61.8 billion quarterly losses by AIG .

If markets open higher on Tuesday , I would like to get out of my call position and then hold the PUTS . If markets open lower , then i would like to wait for small bounce and then get out of my CALLS .

Wait for 10-15 min after markets open for getting true idea of where markets are going .

Manish
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Trading Opportunity with Reliance RLP merger

Reliance RLP merger

Now after this news of Reliance RPL merger , the chances that one can expect a good bounce in these two shares is quite high , especially RPL .

Both the stocks are almost near there monthly support points and we can expect them to bounce back on monday with gap up is quite high and its possible that they break out of there resistance levels , that would be a good indication to go long these stocks .

Lets see both stocks one by one with there 3 months daily chart . click charts to enlarge .
Reliance




If you see the charts there is this upward trend line with support and the stock has actually bounced back a bit from that support point , Though it was in itself a buy signal , now it becomes a more stronger buy signal after this news. So What can be the strategy for this stock to trade .

Strategy :

wait for 15 min on monday , let dust settle and if stock moves up , then go long with SL at 1260 (support line) , better if you can wait for a dip and then buy it .

Dont just jump to go long soon after market opens up , wait for it to settle down , it may happen that it opens too up and then moves down again . Better to wait for 10-15 min first . this is the thing you should always do .


RPL



You can see the support line at Rs 76 , where this stock currently is closed at . After this news , if it opens higher on monday , which has higher chances of happening , go long after 15 min on monday , better to wait for a small dip and then go long . You can also see lower than average volumes for last month when stock was nearing the support , which is also in favour of going long .

Strategy

If stock opens at same levels of 76-80 , go long with SL of Rs 70 (earlier support) .
If stocks open above Rs 80 , you can use SL of Rs 76 (near term support) .

You should not prematurely exit the trade with small profits , better to have 2 targets and book partial profits at first target and hold the another one .

How can we trade this with options (only for people who understand options and have experiance) ?

Reliance and RPL :

Its only advisable for risky traders ,. You can buy at the money call, If stocks do not move in 2 day , get out . If they start moving up , then hold it with SL of buy price and then keep moving your SL after every 10% profit . It depends on your risk profile .

If stocks do not move then there can be chances of big loss , so better to very disciplined with your SL . and use it once trade is not in your favour .

What is the learning ?

The stocks were already near there support levels , and with news like this it becomes a great opportunity to go long on these scrips . But dont forget to see overall market trend and direction , Overall long term market direction is Down and its expected soon , so with some decent profits , get out and dont over carry the position because of Greed .
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