Perfect Reversal - Market Beating Expectations

Hi,
Yesterday was a day of strong trend reversal beating most of the technical charts and theories. Market has proved again that it indeed relies on sentiments than anything else. Market opened with selling pressure which was in line with global markets as usual and at one point it seemed that it may retest 3300 support. But as the good winds kept coming throughout the day market never looked back those lvls even for a minute. A good point to note that we didn't had gap down on the first case which gave the first bullish notes and as the market has done previously a thumb rule can be made - That when market is in bullish channel and having good winds any hint of good result can drastically change the direction of market. Same rule can be applied when market is in bearish channel (remembered sub 3100 lvls when anything which smells bad has beaten the market again n again).

Honestly speaking surprise results of companies were not a real surprise as we have seen in previous sessions that some I.T companies have beated the market expectations, and exactly same thing repeated in the morning too. Expectations of Nifty as well as non nifty companies kept the market cheering up and investors poured in money ahead of their Q4 results. HDFC bank and Reliance were the classic examples. Surprise was from Reliance's as their net profit was down but it has beated most of the forecast of greater declines. Reliance has always been promising on these crucial points and I can recall that last quarter bad results were expected and shorters and many research report have given sub 1000 targets for Reliance Industries. But despite all reasoning it held up firmly and people took it as an opportunity to value invest in their portfolio. So todays Reliance move was a delight to fundamentalist as well as an technical analyst who can correlate Reliance with Nifty. Do it either way and it gives you the same results.
Fundamentally Reliance showed that its Beta is indeed working. Lets see how:
Reliance has a beta of .85
Reliance gained in the day by 2.6%.
So Beta targets of Nifty comes to 2.6/.85=3%
and Nifty indeed gained 2.8%.

Isn't it amazing. So its clear that Reliance has got a perfect working Beta and the stock got to be looked on seriously as it has got a great weightage. So one can hedge its positions with Reliance considering its working Beta status. You can back test Beta resluts for the past Nifty movements and can apply it to coming days as well. So its clear that market is quite bullish on Reliance stock and it if Nifty has to go past 3500 reliance must breach its crucial 1800 mark in coming days. And I hope its not a big deal on assumption that corporates continue to surprise the market with their earnings (I really don't know how much books are cooked for giving surprising results ;) ) and short covering week ahead.

I would also like to give my fav fibs charts which once again came to rescue with its crucial 23.6% profit booking factor.





Phew!!! 23.6% you're spot on!!!

Hope you loved reading it.
Happy Trading.