Sunday, September 19, 2010

Stock Futures Trading Made Ezy - Rcom

Rcom has been been an under-performer  since May 2009. In fact the entire telecom sector has been under heavy weather but not as much as Rcom. But Rcom has great potential for long term investors. Hence one can buy at present level of 160/170 and hold for two years for a target of 350. But here we will be discussing strategy for buying for very short term, since we are interested in stock futures trading.

On 7th Sep I recommended buying Rcom Sep Futures at 162/164 to my subscribers at . On 6th Sep the scrip had closed at 163.3 and was near its recent low. The decision on the face of it was fraught with danger. Every TV channel and print media was dead against buying Rcom before 135/140. So if these experts were right then holding a position at 162/164 would mean giving MTM of Rs 60000/- in case Rcom does fall to 135/140. So naturally Trading Room sentiments were one of fear and trepidation which can be felt through this link : . Subscribers were concerned and shared their concern in trading room. Sample these reproduced comment threads from above given trading room link:-

This just came in - BNP Paribas cuts target price on Reliance Comm
(Reuters) - BNP Paribas Securities said on Tuesday it had lowered its target price on India's Reliance Communications to 140 rupees from 175, while retaining its "reduce" rating.
Any thoughts?
On Monday, if Rcom trades strongly above 167, then hold with stop loss at 165 for tgt of 172/175. Otherwise exit at 167

After 6 trading sessions of idling within a range of 162 to 165.5, Rcom finally gave way to lower side and closed at 159.2 on 16th Sep. When it was falling below 162 I was advising subscribers to pick up more. Why was I doing so? Didn't the voices of all experts and Fund Managers scare me? Find the reasons below:-

    1. From 28th June onwards Rcom has been continuously falling. It fell from 206.7 to a low of 155.3 on 31st Aug. In this fall there has been no significant bounce. The wave count as per Elliot Wave Theory suggested that the technical bounce would take place from 155.3.

                    1. On 1st Sep there was bullish crossover of MACD by its trigger line from below zero, and the scrip closed at 164.2 confirming a minimum technical bounce of 23.6%.

                                    1. 23.6% bounce would mean a price target of 167, which is also the resistance level of upper band of Bollinger.

                                      38.2% bounce gives a price target of 173, which is slightly higher than the resistance level of 100 DMA and 200 DMA.

                                                                                                                                1. In the last trading session the scrip made a high of 169.3 and closed at 167.2. All my subscribers have already exited with profit ranging from Rs 2000/- to Rs 6000/-. But here the potential for making huge profit was definitely there, if and only if we had shut our TV sets down.