Gaps are Efficient market anomalies.
A gap once created is an important point of support/resistance
If the market could see the future perfectly there would be no gaps.
When sudden news hits that is unexpected or a move in the trend occurs that is unexpected you get gaps.
The market is telling you that until the gap is intact you have support/resistances from people who might be on the wrong side of the gap.!
lic watch 150 region for support.
should hit 156-160 sometime next week, already went there once.
nifty futures gap up 3986-4037 is still intact and while i would like to see 3987 it might not be forthcoming.
Few days ago reccomended
Long aurobindo near 662 old spike lows with a hedge of short wockhardt @ 439
Reasoning : auro had good news at 708, formed top drifted lower on low volumes
Wockhardt had good news at 440 and started drifting lower.
Subsequently wockhardt hit 417 which was the target for the hedge. After that wockhardt became a pullback buy @ center of channel with target of upper channel
After wockhardt hedge was closed cipla hedge, short near 216-219 , target 215-214-210-208-180
The ideas were gr8
the execution was horrible.
made 2% in wockhardt, 0 in cipla+ auro.
so much for trying to outsmart the market :)
Auro is now up to 700 in futures.
Wockhardt could have been reentered long near center of channel 418 now at 430+
cipla is trying to consolidate near 210-215 and might attempt a dead cat bounce 224-240 region. For now trend is rather sharply down in cipla could go as low as 180 where value buying should be done regardless of what trend followers tell u.
I think over next few months a portfolio of pharma stocks would outperform cipla :)
Long all pharma except cipla type of trade.
Sell all rallies in cipla the numbers were very weak. Especially considering the high p.e at which it trades. When you do a high wire act , meaning purchase a stock above sensible valuations. there is very little room for error and your safety net , i.e value region is far far away.
Nobody is talking about this but drug makers are also exporters, don't they get hit by stronger rupee just like tech?? Why was pharma not bashed earlier along with tech?
I don't get it. Did pharma exports suffer because of weaker rupee? Still don't have an answer to these questions
Anyway
nicolas results down qoq, guidance up
wockhardt flat , guidance up
auro not out yet
cipla down qoq, guidance down
so wockhardt is looking strong both on the charts and on the p.e front and on future prospects+current prospects. My top pick in pharma would have to be wockhardt now.
DIVIS was my top pick @ a p.e of 20 near 1200 when no one was interested in it.
People will be cheering wockhardt on when it gets an eps of 32 sometimes in the next few years and is trading at 640-720+. P.S divis is trading at a p.e of 40 right now.
Unless you can justify 40% cagr for next few years , its not worth 40x earnings. Lets see next hedge could even be short divis near 3721-3774 maybe on 'good' divis results or after a sell signal comes.
No stops for fundas, the only stop is a change in the underlying funda trend.
Notice i said funda trend not a funda fluctuation. same principle as technical trends
one bad qrtr doesn't necessarily mean 4 more bad quarters, the guidance is as important if not more important than the actual results.
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