27 November 2010

Breadth Indicator : Week Ending 26 Nov 2010

As mentioned in the breadth indicator post last week the Nifty took a battering and so did the breadth. The current breadth chart has been made on December series data which starts from 1st of October when the nifty closing was at 6150. Last closing of Nifty has been on 5750, a 400 point cut.

The breadth has turned negative in an extreme way, not that it was good during the rally, but 142 stocks out of 193 showing a reading of -50% or less is certainly a sign of weakness.

We have seen sharp and swift correction and very obviously expectations are building up for a bounce.

The way to play a bounce can be to go long the most beaten down stock (HCC, RELINFRA and RCOM) or the strongest stocks (DRREDDY and HEROHONDA).

Though expectation of a bounce are building up market never does oblige us, more bad news and FII selling (which has only just started) can easily make look you stupid and impatient.


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