A Fat rally


August 12, 2009 12:26 PM

Dear Investor

I wrote in my 22nd Jun letter about the uptrend in the market and predicted 16500 level of sensex. Market reached close to 16000 level, just 500 points away from my target and pulled back.

Today, I am going to write about the most bullish scenario, I see unfolding, you have ever experienced in short time frame.

I expect, Sensex(market) reaching 17000 to 17500 level in as short as 2 months time. That is a fat 13% to 18% rally in 2 months. It may become fatter, if market corrects further to the level of 14500 before resuming uptrend. This is a possibility. But, in all you have next 2 months to make bundles out of the market.

But, what if you can earn 30% to 50% and even more in next 2 months!!! I know, what is going in your mind. Dhaval, are you mad? 50% in 2 months!!!. Is this a ponzy scheme? Heck, no.

Where does this opportunity lie? Why would it be so fat? And, How to earn oodles of money in this big move?

Some Facts, First

World Economy

First, let’s talk about World Economy, where the mouth of this big bull run, within Bear Market, is. : Lately, Economy, banking, blue chip companies 2nd quarter results and Housing data have started showing that Economies world across have started stabilizing and govt’s stimulus packages have been able to hold the decline. It is difficult to judge, for How long economies would remain stabilized? But, In short term, we will have more such data reveling that stimulus packages worked and recession is behind us. Unemployment rate would fall less and would look stabilized. Back on this reports, markets across the boundaries can stage a big rally.

Economists studying cycles suggest that short term cycle has turned positive. It is a 5 to 8 weeks cycle and signaling bullish trend. From long term cycle study analysis, now is the time when this bear market rally should enter into last legs, most probably after this leg which should end somewhere end of sep or 1st week of October, an another leg may be left. But, I would not advise to play that last leg as it would be severe in volatility and a sharp rally would be followed by sharp decline too.

When Bears will strike back?

I know, you are worried most about them. You are scared before putting every long trade of bears eating out your capital even.

I believe, we are about to enter into severe bear market after this rally followed by a few sideways days. For sure, 2008 was a welcome drink, a full course will be served in 2010. Fall may extend into 2011 and 2012 taking DOW as low as 3500. You read it right. Sounds illogical?

We have started experiencing stimulus money into many asset classes, which have started driving commodity and stock prices up. Very soon, you will see Central Banks hiking interest rates to curb inflation. Rising commodity prices and Oil will lead us back to inflation era for short while, followed by Great Depression. From Cycle study point of view, this time we have oil & commodity cycle of 30 years and depression cycle of 80 years, both are ending in late 2009 to early to mid 2010. This is brewing perfect storm for markets. We may see surge in all commodities and oil as commodity cycles are peaking out in late 2009 to early to mid 2010.Oil may peak out at around $100 and may rally a bit more. Increase in commodity price will spike the inflation, which may end the easy liquidity available due to rise in interest rates, which in turn will spoil the party giving way to depression.

I will write at length on that when it will be due some months down the line..

Now, coming to the opportunity of earning 30% to 50% in next 2 months!!!!!

I see this opportunity in Midcap stocks. Most frontline stocks have run up to their 50% to 65% retracements of entire fall. Sensex has retraced close to 60% of fall. But, many quality midcaps, with robust order book, relatively good QoQ results are trading even below 23% retracement or just tad above 23% and below 38% retracements!!! Remember, stock which has fallen 50%, requires 100% upside to recover the fall. Stock which has fallen 80%, Rs. 100 stock has fallen to Rs. 20, requires 500% rise to recover fully. Opportunity lies here. Even just 20% retracement could mean a fat 30% to 50% rally.

Wait for my hot recommendations until next week.

Updates on Recommended investments:

Gold : I alerted last week to hedge or exit positions for short term as Gold may correct to the level of $808 to $820 before resuming great bull run.

Shree Renuka Sugar: You are sitting on 153% return. Hold on it. Sugar has now started catching fire. It is still 70% down to its inflation adjusted peak.

Check your mailbox, next week, for my stock specific recommendations.



Dhaval Shah

Investment Academy | Baroda | 09825528815


One response »

  1. Pingback: Launching Two New Services « Investmentacademy's Blog

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