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Concepts & Tutorials

Four Stocks Making New Highs, Market Breadth and Index Technicals: MarketVision Chronicle March 19, 2011

Last weekend I had posted the MarketVision Chronicle and I wanted to let you all know about it. It’s free, but needs registration.

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You can read the piece here: Four Stocks Making New Highs, Market Breadth and Index Technicals: March 19, 2011.

Excerpt:

Japan continues to be in the news and for reasons that aren’t positive. Let’s hope the crisis ends soon.

This is going to be a slightly technical newsletter. Understand a way to look at market breadth with the Advance-Decline line and the McClellan Oscillator, applied to our own Indian stocks. See what technical support levels Nifty will have if it goes further down. And finally, and importantly, in this down turn, four stocks making new highs!

Market Breadth: The Advance-Decline Indicator


Market Breadth indicators sometimes give you great feedback. Let’s take Advances and Declines. Advances simply means number of stocks who closed higher than the earlier day.  Declining stocks means those that went down.

If you take this number – Advances minus Declines – for every day, and add it to the previous day’s A-D figure, you get the Cumulative Advances Minus Declines. Here’s a long term chart of just the Nifty constituents:
A/D Nifty
(Note: This is not yet adjusted for changes in Nifty constituents in the past. Working on it, but it won’t impact the graph very much)

The chart gives you the picture that the index doesn’t = the current drop takes us all the way down to levels last seen in March 2010 (which was a Nifty value of 4900, about 10% lower than Friday’s close). In comparison the Nifty has only fallen to the levels of August 2010. That means, really that on the whole Nifty stocks have lost a lot; only some of the index heavyweights have propped it up. Which is what you’d expect – Reliance, ICICIBank and Infosys form more than 25% of Nifty, and they aren’t down by that much since the highs of Oct/Nov 2010. The rest of the pack though has fallen off a cliff.

A look at the CNX 100 reveals even more damage:

Index analysis: Two support levels


A look at the Nifty index for the last year or so shows some support at the 5400 level. (Remember index levels aren’t usually exact, they tend to be a range).
Nifty Support

 

We’re at an important support point – the current value of 5400 sees the past price bounce off it from both directions in the past, creating an important source of supply and demand (mentality: I’ll get out even…people  who bought at these levels will sell at these levels to get out even, and people who last sold at these levels and felt miserable as the index went up will use this level to buy again).
The longer term graph is more troublesome though: If we consider the entire move from the bottom around 2600 to the top, and consider that traders follow Fibonacci retracements, the outlook is like this:

4 stocks making 52 week highs


When the market’s tanking, it’s great to see what’s making new highs. Four stocks catch my eye.

 

Editor’s Picks


A set of external links chosen from our daily updated Editor’s Picks section.

 
Data Driven Finance (The Economist)

ASKING a friend for a loan is a quick way to tide you over till the end of the month. But Wonga, a British internet firm, is almost as fast. Those in need of cash give the service some basic information about themselves. If Wonga considers them trustworthy, the money—as much as £400 ($641) for up to 30 days for first-time users—arrives in their accounts within 15 minutes.

 
Mean Street: The Disgrace of Rajat Gupta – Deal Journal – WSJ

In my last column on former McKinsey biggie Rajat Gupta, I wondered how a man of Gupta’s stature got caught up in the schemes of Galleon’s Raj Rajaratnam.

S&P 500 Sector Performance (Bespoke Investment Group)

While the S&P 500 closed the day down, it rallied nicely from the open to the close. Below is a chart showing how much each sector was down at its low for the day as well as how much it rallied from its low to the close. As shown, Materials, Industrials, and Energy were down the most at their lows (which all came in the first few minutes of trading), but they also rallied back the most. (author unknown)

Videos


This week we have added a short take on What does 40% dividend mean?

Mutual Funds in India often declare dividends like "40%" or "20%" – and if it gets you salivating that you’re going to get 40% return on your money, you should stop right there and see this video.

Learn about what they mean when they say 40% and why you shouldn’t bother. Instead, what matters is a "Dividend Yield" and even that doesn’t matter too much (since the NAV falls after the dividend payout).

(4 min)
Apologies for the lack of enough videos. I’m working on it and should get more done in the next few weeks. We’re building an inventory of educational material that we will offer for purchase, and that’s made us take our eyes off the free ball for a while. Sorry!

Past Short Takes:

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