Thursday, October 8, 2009

If Your Future Is In Futures - Then No Options

There are many attributes you require if you want to be a successful Stock Futures' player. You need deep pocket, strong heart, accurate judgement, nimble footed, firmly flexible mind ( sounds oxymoronic !) , et al. But above all these you need Lady Luck on your side. And those who have that, they should not fritter away the opportunity to indulge in the game of stock futures. For such individuals some wonderful opportunities exist as of today which are presented as under. Take a look.

Ambuja Cement
In case initially market shows weakness on 08 Oct 09, then sell Oct futures at 96.25 for an intra-day target of 94. Since lot size is 4124 you can decide to book quick profit at 95 also. The other scenario is that the market shows initial exuberance of Reliance 1:1 bonus share and opens with bullish strength; then sell Oct futures of the scrip at 100 and cover your position at 97.5/98.5.

If market opens with bearish look then buy Oct futures at 200.5 and then cover the position intra-day at 210. Since lot size is 1200 you can decide to exit position at 206 also. However if market opens with a bullish flurry then buy at 206 and sell at 210/217. With a little help from the market on 08 Oct 09 you may even see ICSA touch 221.

With weak market opening buy Oct futures of BHEL of lot size 150 at 2415 and then cover it intra-day at 2465/2500. On the other hand if market opens on a strong note then buy Oct futures of the scrip at 2470 for a target of 2500/2560. With strong market continuing through the day BHEL may touch 2600 also.

Tuesday, October 6, 2009

Contrarian Picks - For Risk Takers

Contrarian investing can at times pay handsome dividends, provided it is weighed properly against various considered inputs. The general consensus of the market is not to be discounted but at times you stand to gain immensely by taking just the opposite stance to that of majority of market participants. When financial institutions were falling like nine pins and every shade of investor treated them like lepers, Warren Buffett took a contrarian view. He went ahead and bought $ 5 bn preferred stocks of Goldman Sachs. One year down the line he grew richer by $ 3 bn.

There have been many instances of taking calculated and considered risk by contrarian investors and succeeding with a bang. Laxmi Mittal of Arcelor Mittal fame bought distressed steel plants around the globe when steel as a commodity was in slump and prospects looked bleak. Result of that brave contrarian investment decision is for all to see.

Coming to Indian markets as of now, to my mind there are some distressed stocks one can consider for contrarian investment. It should be done with a view that one is ready to average the same scrips at lower levels and hold for long term if short term view does not work out. Under no circumstances should one discard the stocks at loss if the trade goes unfavourable. Lets see some of these scrip in succeeding paragraphs.

Buy the scrip at current market price ( closing price on 06 Oct was 98.75) for initial target of 160 to 180. If trade goes awry then keep accumulating from 83 to level of 60 in small packets and hold till its long term target of 320/330.

Buy the scrip at current market price (closing price on 06 Oct was 87.15) for initial target of 140. In case trade goes in opposite direction then start accumulating from 77 to the level of 70 in small packets and then hold for for its long term target of 320.

Buy the scrip at 250 ( closing price on 06 Oct was 268.3) for initial target of 350. In case trade goes in opposite direction then start accumulating from 220 to the level of 180 in small packets and then hold for its long term target of 600.

Sunday, October 4, 2009

Nifty - Crystal Gazing for Coming Week

Nifty still looks good for some more upside. That's little odd to say at this juncture what with Dow closing in the red for last four trading sessions. The fall in Dow has been against the back- drop of some bad data released last week. How can you expect consumption in US to rise when the unemployment rate hit 26 year high in September 2009? With confidence ebbing down, liquidity is sure to dry up. So my assessment that Nifty still has some headroom will seem a little out of place. But there are reasons for my foretelling so. Lets take a look of some of the reasons which prompts me to suggest that odds are in favour of bulls for some more time :-
  • Though Dow has been falling of late, but it is likely to take support from its trend-line and expected to move up to 10500 level as discussed in my last post.
  • Nifty has resistance at 5300 which it should now test.
  • Nifty is presently sailing near its supply zone of 5137-5300 which could be used as a Bear-Trap by bulls.
  • Such a strong move up has to culminate in a strong sell signal in majority of indicators and patterns which should also include candlestick pattern and maybe an exhaustion gap. We have yet to witness any of that in Nifty's graph.
The correction will take place but it will take place when you least expect it. If Dow despite last week's bad economic data surges towards 10500, then it will be very difficult to stop Nifty from touching 5500.

Friday, October 2, 2009

Dow Jones - Amazing Bull Charge

From the level of sub 1000 in 1971, Dow Jones (Dow Jones Industrial Average) has recorded its all time high of 14000 plus on 11 Oct 2007. In other words Dow has notched up around 13000 points in 38 years, or simply put it blossomed 14 times. That is an average annual return of 36.% which is not bad at all. In this journey northwards there has been some major corrections. Leaving aside a quick and serious dip in 1988, Dow has given overall good returns to its long term investors till year 2000.

Periods of excellent returns have been many but from year 1995 to 2000 Dow went ballistic and notched up roughly 8000 points. This leg of journey saw Dow cover ground from 4000 to 12000. To my mind this has been the most audaciously steep rise in a span of 5 years.

Then in year 2000 it started its tumble and lost nearly 5000 points in 3 years, scaring the wits out of investors with all pervasive climate of gloom and doom. Just when people thought everything was lost, Dow again picked itself up and almost did an encore of 1995 bull run in next 5 years. From year 2003 to 2008 Dow repeated its stellar performance of period 1995-2000. However this time around it managed to notch up about 7000 points, traversing the distance from 7177 to 14279.

No sooner did the 5 year period of joy for bulls got over that we became spectators to one of the worst mauling by bears on Wall Street. In next to no time Dow Jones lost approximately 7800 points. You can remember the ferocious agility when you recall this major index on planet earth lost more than half its worth in about 18 months. Phew! What devastation that would have caused to millions of investors !!

Since Mar 2009 Dow Jones is on a recovery path. In fact it has recovered almost 50 % of lost ground. Now the question that begs our attention is whether Dow is finally out of the woods or not. I am presenting some pointers which may help you to decide for yourself :-
  • Last correction of year 2000 lasted 3 years and we have completed only 2 years since this correction began in Oct 2007.
  • Bottoming out process is generally a long drawn affair for such a vicious fall. That indicates some more time may be required for Dow to finally recover and surge ahead for another bull charge.
  • Already news flow is turning negative in US, showing ugly signs of loss in confidence data.
  • 50% pullback to the bear phase means Dow Jones should reach 10360, which it nearly has. So one can expect a fall from level of 10500.
In all likelihood history would like to repeat itself. So you can say that Dow Jones may take another year to fully recover from the bear mauling. Till that time I guess we should be ready to witness another bout of selling which may take Dow down to 6500 level and maybe even lower. In the best of conditions expect Dow to touch at least 8500 level in coming months.

Thursday, October 1, 2009

Power of Wind - Coming of Age

In this century, apart from water, we are bound to face tremendous problems in power generation to meet the exploding power requirement? We will have to explore alternative sources to oil for meeting the burgeoning demand. All avenues have to be explored seriously - from nuclear to hydro to even ethanol. I say seriously because that's what the situation warrants. And that is exactly what the West is currently doing - seriously investing mega bucks into developing alternative sources of energy. Why the sudden seriousness? To find answer to that please take note of the following points:-
  • US alone has to import oil worth $ 10 trillion to meet its demand over next 10 years.
  • US economy can ill afford such ugly oil bill with real economy in tatters and debt situation getting out of control.
  • With demand rising the existing oil fields may not be able to cope up with it, which can trigger a runaway oil price situation.
  • The Wall Street Journal reported that output from existing oil fields is dropping by about 4.5% every year and by up to about 18% in some of the biggest oil fields in the North Sea, Alaska and the Gulf of Mexico.
  • New York Times reported that many of the major oil exporting countries may have to begin importing oil within a decade to meet the rising energy demands from within their borders.

The scenario as sketched above has prompted US President Barack Obama to give Wind Energy a top priority for his administration. US is deftly positioning itself in Wind Energy to be ahead of the pack in the next revolution after IT. Researchers at Stanford University concluded that even if 20% of available wind can be harvested, it will meet the global energy demand seven times over. This is how serious US is about wind energy:-

  • Green Chip Review estimates that by 2020 wind capacity in US will have grown by 360%.
  • US Department of Energy recently confirmed that 20 % of America's electricity requirement can be met through wind energy by 2030. Presently only 1% is being met through wind energy.
  • The wind industry in US is about to explode 20 times.
  • New York mayor Michael Bloomberg has unveiled plans to outfit dozens of the city's skyscrapers, waterways and bridges with wind turbines.
  • A cluster of wind farms south of Los Angeles will soon supply a large part of its electricity.

With so much seriousness how can the serious investors stay away. Bill Gates has picked up 9% stake in a wind energy company. Also consider the following investments in US:-

  • British Petroleum is teaming up with Clipper Windpower to build a 5050 megawatt wind farm in eastern South Dakota.
  • The Blackstone group, one of the top US private equity firms, has committed $ 1.6 billion to construct an offshore wind farm.
  • Shell and TXU Energy have joined hands to build a 3000 megawatt wind farm in Texas.
  • J P Morgan has already invested $ 4.4 billion into more than 40 US wind farms.

It seems that wind energy has finally arrived on the scene. Since 1990s cost of generating electricity from wind has dropped by about 80% and it is further getting more and more cost efficient by the day. That is why this industry is growing worldwide at a fast clip of 30% year on year. Experts feel that over next 5 years the number will further go up to 50% per year, thereby generating some $ 300 billion in revenues.

If you believe in this next revolution in offing, then do invest in some wind energy companies for at least 5 years. Returns can be astronomical!