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Jun 27, 2012, 01.12 PM IST
According to Sushil Kedia, president of ATMA, the Indian market will resume its longer-term bull market within the next quarter.
In an interview to CNBC-TV18, Kedia says that the market will crack once again, even if it has rallied another 300 points from current levels, to touch 4500 levels once again. “On a medium to long-term perspective, there is good chance that we break 4700 and go to 4300-4500 which might become the long-term low,” he said.
It is post this slump that he sees that market resume the “mother of all bull markets.”
For the near-term, Kedia says that things are not easy to predict because correlations are not working. For the immediate term, he looks to take up short positions with a stop loss at 5160. “Only if 5090 breaks am I going to get more adventurous on the short side,” he said.
Similarly, he is willing to take up bullish bets once if the market can sustain above 5180-5190 levels. “Once we are clearly off those levels is when we can possibly see a rally of another 300-350 points,” he said.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: What’s the line of least resistance from here, to get to 5300-5400 or to revert back to 4800?
A: This line of least resistance is actually split across various numbers. Right now, across the whole world and particularly in India, correlations are not working. The rupee keeps on going to newer lows and Nifty does not weaken and it’s baffling everyone. So at time when conventional wisdom does not work is when correlations are not working and that’s where level based trading has some value. So for now 5090 or about 5100 is where this market has been finding small bounces.
For the very immediate timeframe, perhaps with a stop under 5160, I am going to look for short trades for the day. Only if 5090 breaks am I going to get more adventurous on the short side. Similarly, once we are clearly off 5180-5190 is when we can possibly see a rally of another 300-350 points. Inability to predict is not truly an inability but it’s in one sense a prediction that things are not going to be very clear and you need to move along with the levels.
On a structural level, say a month or two, the lows that we witnessed recently are classified as the irregular B wave. The lows are bound to break irrespective of the fact that we may rally 300 points from here to take out 5180. I don’t know if we will do that yet, but eventually we will see numbers far lower than 4700. On a medium to long-term perspective, there is good chance that we break 4700 and go to 4300-4500 which might become the long-term low. Maybe say an equivalent price of Rs 650 might come on Reliance from where I would say a 100% rise in straight line can come.
The resumption of the long-term bull market, the so called mother of all bull markets, will perhaps happen within the next one quarter. So on the one day’s perspective, ten days perspective, three months and one year, that’s what my view is.
Q: How does this tie-in with global markets and what do you see on charts for the S&P and some key Asian markets as well?
A: Key Asian markets like China have been leading the entire equities complex by almost 9-10 months. The rally upwards and this correction downwards has already formed I think its long-term low. China is right now going back to just retest that. I am not suspecting that 2100 is going to be taken out, and without 2100 being taken out I think the long-term low is already seen there, which I think is going to happen to the rest of the world in the next one quarter. Thereafter I think the Shanghai Composite is likely going back to 3800 or more without breaking 2100. If 2100 breaks, I will revisit it.
From the other Asian markets, while Japan is truly not counted within Asian markets, that’s one extremely interesting chart. A 10% drop is still perhaps pending there, and to comfort me on my mother of all bull markets thesis, I really rely very heavily on the chart of Nikkei. I see that without going under 7800, a marginal breach of 8000 to cause universal panic, and thereafter a minimum 50% rise on Nikkei over say the next 12 months going about 12,000 and we will revisit it then. If so much happens it can indeed go up to 16,000 as well.
So the most flopped market in the world, the most punished market in the world is also now showing early signs of close to minimum 50% and up to 100% gain over the next 18 months odd. That gives me strong courage to prepare to become a bottom fisher over the next quarter or two.
Coming to the western markets, most are mimicking the S&P. The patterns on the S&P right now are not telling me that we are going up in any hurry there. It’s a very large rebound within a weak bearish structure and I think it will start melting down again quickly in a few days, if not tonight itself. If that does not happen, if the dollar index corrects again over the next three-five days and a false sense of a sideways move on S&P can come. Over the next 15-20 days I think S&P has to go and hit one more low, lower than what we have already seen, and perhaps that’s where the end of this long-term corrective cycle world over for the last 12-18 months might get over.
Q: What do you see on the charts of large caps like L&T and SBI? Are they showing you any signs that they may have bottomed out already?
A: L&T was forming a classical long-term head and shoulder after breaking under that number of Rs 1,520. It went down to three digits and it became too easy a pattern. The rebound from there back to Rs 1,500 correction and now it’s forming a complex one. Still no evidence yet on the table, the long-term bottom in L&T is formed. Whenever the thesis on Nifty going to 4400-4500 may come true, I am still banking upon an idea that L&T will go and break the low that it formed and perhaps go under Rs 900. The evidence to start shorting L&T immediately is not yet on the screen.
A stock like SBI is perhaps going to go down to Rs 1,500. That’s pretty far for a trader, the number to be pegged up on one’s mind is about Rs 1,800 and over the next quarter, these are the kind of numbers that I see where long-term lows may happen.
Equivalently, as I talked about Reliance being close to Rs 650, Tata Motors might go and break under Rs 200; whether it’s Rs 170-190 we will see it when it comes. The same long-term charts that I see all over the place, even if Tata Motors goes to Rs 180 why it can’t go back to Rs 360 and Rs 400 is a question that openly shrieks out of my charts.
Disclaimer: The above views are the personal analysis of Sushil Kedia, President ATMA and do not reflect any opinion of ATMA
To know more about ATMA, please visit http://www.atma-india.net/
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