FII views : See Nifty at 5,500 levels if 3,800 holds

Ray Barros, CEO, Ray Barros Trading Group said if the Nifty follows the US markets, the markets could be in for a decent bounce. “The Nifty should be in for a decent bounce up to 5,500 levels. I see Nifty resistance at 4,500-4,600 and then at 5,100-5,200 levels. If Nifty holds lows of 3800, it can bounce to 5,500 by December.”

According to Barros, crude could bounce to USD 121-122 per barrel, then turn down to the USD 83-84 per barrel.

He expects gold to hit USD 925-935 per ounce, and then turn down to USD 700-725 per ounce.

Q: We held out to those supports of 3,800 on the Nifty, what kind of a bounce can you predict from here?

A: If the Nifty follows the US markets, we should be in for quite a decent bounce. I was thinking that the market would go into what I call a reversal of seasonals where September is a high rather than a low. But it looks as though September is going to be a low which means December is going to be the high for this quarter. That being the case we should see a bounce on the Nifty all the way back up to about 5,500.

We have a couple of levels we have to get through. We have to get through 4,500-4,600 and then again we have got to get through the 5,100-5,200 area. But if we can keep on heading north in line with the US markets, then I would expect 5,500 to be the target.

Q: So, you see it by the time we hit December? Is it going to be a clean run you think for the Nifty from about 4,200 to 5,000?

A: Yes I do, provided we can hold the lows that we managed to hold at about 3,800. If we can hold those lows, then I definitely think we are going to get up to about 5,500 by the end of December.

Q: What is happening with the commodities space, big bounce back for crude, and gold is making easy work of USD 900 per ounce? What kind of targets are you setting out there?

A: Crude is behaving the way I thought it would. Last time I was on the channel, I had said that thought we are in for a three-wave structural bounce, that bounce should take us to USD 121-122 per barrel. I think that will hold and then the market should turn back south. If those targets hold, I am looking for around USD 83-84 per barrel to be the ultimate target for crude, and then I expect it to go back up.

Gold is in a similar sort of position. It is actually pretty close to my targets of about USD 925-935 per ounce. This is where I expect gold to stop, turnaround, and hit back south. If USD 925-930 per ounce does not hold on gold, and it goes all the way back to USD 1,000 per ounce, then we have got one-two scenarios. Either the market has bottomed out and is ready to move up, which I am not quite ready to say that yet. I would expect the market to come back and retest that USD 750 per ounce area. If it does come down from USD 925-930 per ounce mark, then the bottom for me would be around USD 700-725 per ounce.

Q: In your eyes, has the Dow bottomed out for the intermediate term?

A: I think it has bottomed out for the quarter. There are good seasonal tendencies, and a very reliable pattern that has been holding for the last 15 years or so. We have a low around the third-fourth week of September then the market rallies, comes back down into the third or last week of October and then rallies straight up to the end of December.

Initially, I thought that there would be a reversal of those highs and lows, sometimes we have an inversion but in this particular case the strong bounce that we had the other day suggests that these seasonals are in place. So, the Dow should rally now to the end of December with an intermediate low around October.

Q: From amongst the entire BRIC ‑ Brazil, Russia, India, and China ‑ universe right now, if you had a chance to look at all those charts, what looks like it has got the most durable rally going?

A: I really think that the US at this stage and perhaps Indian markets are by far the strongest on a relative strength basis. I would tend to lean towards the Indian markets rather than the US simply because you are likely to get more shocks in the US.

The key instance in both cases is that we need to hold these lows that were established back in September. One should remember that particularly in the US, the Federal Government has done everything it can to prevent these markets from going south. If those lows give way, then I don’t think there is support before 9,000-9,200 maybe 9,500 at the earliest for the Dow. But relooking at the chart probably 9,000-9,200, it would be my target if these lows break. I don’t think they will but we have to keep that in mind. If they do break, we are going to get very strong directional moves.