The Review level

Price confirmation or review levels are essential to understand where markets are headed. Most of the time these levels are drawn visually. A visual observation suggests that DOW 30 is still near key review levels and an inch away from all time historical high levels. Historical highs can be key resistances, but if crossed the same levels can become great supports.
These historical levels look like resistances for Sensex, Nifty and DOW but the same historical high levels are broken and have become supports for BSE health, NSEBANK and BSE AUTO. There are also sector like metals and OIL that are far away from historical highs, but near 2009 supports, a clear sign of underperformance.
Now it is the quality of dip that will indicate whether markets are heading higher or are in for a multi month reversal here. At this stage we maintain our NIFTY 8000 view and look at any dip as a small correction to accumulate.
Also in keeping up with the tradition of automating technical patterns and levels, we have modeled resistance and supports based on previous intermediate multi week trend. To improve signal quality we have modeled review levels based on key resistance and support levels. An entry happens if the price is either above a key support or above a key resistance. The review levels are classified with different widths, the widest one is the most relevant, closer to price action and vice versa. We have identified some clear entry stocks.
 

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Indexing: The INDIA 30 Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.
The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.
The India 30 Index is based on the above extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.