Stock Futures Trading Made Ezy - Rpower

Since May 2009 Rpower has been moving sideways between the price range of 140 to 200. That is a very long time for sideways movement. It only indicates that any move outside this range will be ferocious in intensity. In my opinion the move out of this sideways range will be on the upside. This I have inferred from Elliot Wave calculations. Hence if you are a long term investor then Rpower is one space where you should invest at current level of 160.

For trading in stock futures the long term story of a scrip does not help. The daily requirement of mark-to-market (mtm) deters one from holding a position for long term. Trading by retail investors in stock futures can be meaningful at best for short term. Hence the moment I saw near term prospects of making profit in Rpower I gave my recommendations for buying it. On 16 Aug 2010, my subscribers at http://www.stockezy.com/  bought Rpower Aug Futures as per my recommendations between 154/156.

I had recommended buy of  Rpower for the following reasons :-

1. Support of 200 day moving average was available at 154.
2. My customized slow stochastic was at its maximum oversold position.
3. There had been no technical bounce worth its name from price level of 190. Hence from support of 200 DMA it was logical to expect at least a bounce of 23.6%. That would mean a price level of 163 if the scrip had made a bottom at 154.

However the scrip made bottom at 150.5 with a flourish. It formed the Hammer at 150.5 on 18th Aug which I explained to my subscribers during the course of trading and this can be seen at this link here: http://www.stockezy.com/opinions/7079/buy-rpower-august-futures/. From this link I am reproducing the relevant comment thread below:-

Posted by Archana Debnath - Mon, Aug 23, 2010 5:38PM IST

“

@Neelima. I know it is testing ur patience. For the time being just relax. Process of bottom formation at times can b testing to the nerves. Rpower has hammered its short term bottom price at 150.5. Before exploding upwards it is trying to shake away the weak hands. That is one of the ways for market makers to make money. After all futures trading is a zero sum game. If multitude of retail investors and other fishes do not lose money, then how will handful of big fishes gain handsomely??

”

With hammer at 150.5 in place, the minimum bounce of 23.6% meant a price target of 160. This hammer price was not violated on 26th Aug which gave me the strength to recommend to my subscribers to buy 2 lots of  Rpower 160 Call at average price of Rs 2/- on 30th and 31st Aug.. And as expected Rpower sailed to 161.8 on 6th Sep. Since Rpower 160 Calls were out-of-money call options, one lot of size 2000 shares was available for total capital investment of only Rs 4000/- . But the price increase in these calls was fast and furious once the stock price neared 160. Those who entered these positions realized how easy it is to profit from futures and options at correct entry point.