22 May 2010. Saturday 6.30 AM. Mangalore Airport in Southwest of India. Air India flight from Dubai landed, overshooting the landing zone and crashing to the valley below. The plane broke up in two and erupted into a huge plume of flames, killing 158 passengers and the entire crew. Eight passengers survived miraculously by jumping out of the ill-fated craft, just before it turned into a fireball. Sad sad day for India and the aviation fraternity. Our hearts go out to the families and friends of the bereaved. Investigations to the crash are on but one hopes that we find the exact reasons of the crash and implement the suggested reforms and safety measures to avoid such unwarranted accidents involving loss of human lives in future.
Away from the real world, even the financial world around us seems to be crashing. There is mayhem on the street as indices across the board are developing the habit of dropping 4% to 8% in single day's trading. Across the globe the events unfolding around us are quite unpleasant which have again turned this financial crisis into a pandemic contagion. From US to Europe to Asia, no financial market or asset class is being spared. Again the big guns of the financial world are behaving as if there is no tomorrow. There is a creeping feeling that czars of the financial world are up to their old ways of working in cartel, forcing volatility to be unimaginably high. Otherwise how can you explain Dow Jones losing 1009 points from its day-high and then gaining 651points from day-low on the fateful day of 6th May 2010. I call it fateful because I feel we should spare a thought for the retail investors in US who had to sell off their holdings thinking the Judgement Day was here, only to find that market has recovered 65% on the same day.
You can tow the official line of the Wall Street and believe that it was was glitch in the computer system, or someone inadvertently pushing the sell button. I really think these Wall Street guys have some guts, bandying out such outlandish explanation to what was clear work of cartelization. Here we are not discussing market index of some Banana Republic but market index of the most sophisticated and developed market on this planet. How can regulators in US take it lying down, because exactly after 10 trading sessions Dow Jones again fell to almost same low of 6th May but after first rising 140 points above the day high of 6th May. All this drama being enacted within a span of 12 sessions and yet the US regulators are uncannily silent on the issue. If such an incident had happened in any emerging market then thousands of censures and advisories would have been issued by the regulators and credit rating agencies. But this is Wall Street and they have the license to do anything to swindle the hapless retail investors.
The point I am trying to make is that irrational volatility is here to stay for some time, because bigwigs of the financial world have swung into action and they will do whatever to make market participants bleed both ways. Market bias is negative but beware of wild swings. Presently for investors in Indian market the key level to watch is Nifty 4842, which should not be violated if market has to move up from current level.
Monday, May 24, 2010
Friday, April 23, 2010
Harvesting Time in Intra-day Futures Trade : Through Stockezy
In my last post I had mentioned about this community investment platform called Stockezy (http://www.stockezy.com/) where investors in stock markets help each other to firm up their own investment decisions. And lately I have been closely associated in rendering advice to this community. In the following paragraphs I would like to illustrate the nature of my recommendations and the outcome of such calls.
On this day of 22nd April 2010, volatility ruled the roost in Indian stock markets. One must admit that it was a tough day in office for traders. What started off as a uninspiring and unsteady rise from day low, accelerated into a spectacular bull charge at around 11AM. And from 1.30PM to 2.30PM markets threatened to break free from day's high of 5332. But that was not to be. Quite contrary to expectations, markets tumbled suddenly and dramatically to retrace almost all the intra-day gains, catching most traders on the wrong foot.
If we analyze intra-day movement of Nifty, we find that Nifty rocketed from day low of 5221 to a high of 5332. This means that Nifty notched up an intra-day gain of 111 points from day low. But from day high it plummeted to 5246 in the last hour of trade, which means that Nifty lost 86 points from day high. At close Nifty managed to lift itself by 20 odd points, but the damage was already done. Bulls were caught on the wrong foot and there was no place to hide for many long-side-intra-day-traders.
Against the backdrop of circumstances just described, let us now evaluate the performance of intra-day trades in stock futures which were executed as per my recommendations. Today I had given two sell calls of stock futures during market hours. This was at a time when the market was reverberating with the sound of bulls all around. Many may think that as an act of bravado or even misplaced defiance. But before jumping to any conclusion, it will be my earnest appeal to thoroughly examine the performance of these sell calls:-
1. Siemens Apr Futures:- Recommendation was for selling one lot between 734/736 for target of 725 with stop loss at 738. The scrip made a day high of 735 and fell sharply to hit the target. The point to note here is that in a raging intra-day bull market, the high of the scrip was exactly within the recommended sell price range. It was a Rs 2/- range given for a scrip worth 730 plus and yet the scrip could not break free of this tight sell range. Moreover, notice the tight stop loss of just Rs 2/- above the recommended selling price.
Now for calculating profit, if we take the average of the recommended price range then our sell price works out as 735. This sell position met the given target at 725, thereby accruing a profit of Rs 10/- per share. Since the lot size is 752, total profit = 10x752 = 7520/-
2. India Infoline Apr Futures:-It was recommended to be sold between 117/118 for target of 115 and stop loss of 119. The scrip reached a high of 117.35 and then started falling. As the scrip fell, the target of 115 was met. If we take a careful look, here again the scrip could not break out of the recommended selling price range of 117-118. Even the stop loss given was only Re 1/- above the selling range.
For the purpose of calculating profit it is assumed that one could sell at 117.25 and then covered the position at given target of 115. Since the lot size is 2500, total profit = 2.25x2500 = 5625/-
Overall profit in intra-day trade from selling two stock futures = 7520+5625 = 13145/-
On this day of 22nd April 2010, volatility ruled the roost in Indian stock markets. One must admit that it was a tough day in office for traders. What started off as a uninspiring and unsteady rise from day low, accelerated into a spectacular bull charge at around 11AM. And from 1.30PM to 2.30PM markets threatened to break free from day's high of 5332. But that was not to be. Quite contrary to expectations, markets tumbled suddenly and dramatically to retrace almost all the intra-day gains, catching most traders on the wrong foot.
If we analyze intra-day movement of Nifty, we find that Nifty rocketed from day low of 5221 to a high of 5332. This means that Nifty notched up an intra-day gain of 111 points from day low. But from day high it plummeted to 5246 in the last hour of trade, which means that Nifty lost 86 points from day high. At close Nifty managed to lift itself by 20 odd points, but the damage was already done. Bulls were caught on the wrong foot and there was no place to hide for many long-side-intra-day-traders.
Against the backdrop of circumstances just described, let us now evaluate the performance of intra-day trades in stock futures which were executed as per my recommendations. Today I had given two sell calls of stock futures during market hours. This was at a time when the market was reverberating with the sound of bulls all around. Many may think that as an act of bravado or even misplaced defiance. But before jumping to any conclusion, it will be my earnest appeal to thoroughly examine the performance of these sell calls:-
1. Siemens Apr Futures:- Recommendation was for selling one lot between 734/736 for target of 725 with stop loss at 738. The scrip made a day high of 735 and fell sharply to hit the target. The point to note here is that in a raging intra-day bull market, the high of the scrip was exactly within the recommended sell price range. It was a Rs 2/- range given for a scrip worth 730 plus and yet the scrip could not break free of this tight sell range. Moreover, notice the tight stop loss of just Rs 2/- above the recommended selling price.
Now for calculating profit, if we take the average of the recommended price range then our sell price works out as 735. This sell position met the given target at 725, thereby accruing a profit of Rs 10/- per share. Since the lot size is 752, total profit = 10x752 = 7520/-
2. India Infoline Apr Futures:-It was recommended to be sold between 117/118 for target of 115 and stop loss of 119. The scrip reached a high of 117.35 and then started falling. As the scrip fell, the target of 115 was met. If we take a careful look, here again the scrip could not break out of the recommended selling price range of 117-118. Even the stop loss given was only Re 1/- above the selling range.
For the purpose of calculating profit it is assumed that one could sell at 117.25 and then covered the position at given target of 115. Since the lot size is 2500, total profit = 2.25x2500 = 5625/-
Overall profit in intra-day trade from selling two stock futures = 7520+5625 = 13145/-
Tuesday, April 20, 2010
Stockezy - Sharing Community Sentiments For Investment Decisions
To all my followers and readers I owe an explanation for being so quiet for so long. One might ask as to where I have been all these days and I'll have a tough time answering satisfactorily. I will sound indifferent if I tersely say that I have been busy. But that is the complete truth, standoffish as it may sound.
I have been busy connecting to a community of 15000 plus members who are into investing in stock markets in India. This community interacts at a platform hosted by http://www.stockezy.com/ which is fast becoming the leader in this novel concept of community investing.
As a social networking platform for investing in stock markets, Stockezy can also be termed loosely as Community Investing Fund, akin to Mutual Fund. The essential difference is that here every member is a Fund Manager controlling his own funds. The community aspect only helps each Fund Manager to tap intellectual resources of other members of the community, which in turn helps him in firming up his own mind before making any stock market investment.
As Stockezy grows in strength, the following announcement from the site reaches the length and breadth of India, echoing across various dailies and financial newspapers and periodicals:-
You may check out my contribution to http://www.stockezy.com/ , a pioneer site on social investing on internet, by following the links given below:-
http://www.stockezy.com/opinions/5903/outcome-of-buying-stock-futures-intra-day-on-19th-april/
http://www.stockezy.com/opinions/5829/result-sheet-for-trades-in-march-2010/
I have been busy connecting to a community of 15000 plus members who are into investing in stock markets in India. This community interacts at a platform hosted by http://www.stockezy.com/ which is fast becoming the leader in this novel concept of community investing.
As a social networking platform for investing in stock markets, Stockezy can also be termed loosely as Community Investing Fund, akin to Mutual Fund. The essential difference is that here every member is a Fund Manager controlling his own funds. The community aspect only helps each Fund Manager to tap intellectual resources of other members of the community, which in turn helps him in firming up his own mind before making any stock market investment.
As Stockezy grows in strength, the following announcement from the site reaches the length and breadth of India, echoing across various dailies and financial newspapers and periodicals:-
Social network to connect, educate & empower investors.
Stockezy is an effective platform where investors help investors and work together to make informed financial decisions. Whether you are a seasoned trader or new to stocks; Stockezy is the place for you.You may check out my contribution to http://www.stockezy.com/ , a pioneer site on social investing on internet, by following the links given below:-
http://www.stockezy.com/opinions/5903/outcome-of-buying-stock-futures-intra-day-on-19th-april/
http://www.stockezy.com/opinions/5829/result-sheet-for-trades-in-march-2010/
Saturday, April 10, 2010
Period of Uncertainty Persists: Will Markets Witness Deep Correction?
Indian markets have confounded most investors waiting for a deep correction to invest money for long term. The rally in Nifty that began on 06 Mar 2009 from a low of 2539 has been relentless in its intensity and reach. What initially seemed like a bear market rally has turned out to be a major Bull turnaround. Most retail investors have been left out of this stupendous rally and have been waiting ever since for a correction to invest for long term.
On 08 Nov 2009 when Nifty had closed in previous session at 4796, I had written a post titled Sensex And Nifty : Expected Movement Ahead. In that post I had mentioned that Nifty will reach the selling zone of 5320-5580 before a serious correction takes place, provided we receive positive Trans Atlantic Triggers (TAT). Having received positive TAT, on 15 Nov 2009 I again reiterated my point in a post titled Trans Atlantic Triggers - Did You Receive Those Signals? by concluding that "Nifty and Sensex should reach their respective selling zones before correcting" . At that point Nifty was trading at 4999 and from there marched on to reach a high of 5311 on 06 Jan 2010. After that Nifty corrected to a low of 4675 on 08 Feb 2010, a decent correction of 636 Nifty points.
The journey upwards from 4760 has now taken Nifty to a high of 5400 on 07 Apr 2010. Remember Nifty has again entered its selling zone of 5320-5580 and should witness correction any time within this selling zone. The headroom available from Nifty closing of 5362 on 09 Apr 2010 is only 200 odd Nifty points before any correction takes place.
Now the pertinent question that begs an answer is "How much will Nifty correct from its selling zone?". In other words, where will be the first support for any correction so that buying can be initiated? Well one can expect a support for Nifty in the region of 5050/5100. Hope you make the most out of trading with expected Nifty movement.
Tuesday, February 16, 2010
Global Equity Markets 2010 - Highly Volatile Mood
Global equity markets have behaved like a yo-yo for the past month. Markets from China to US have all displayed great volatility, which can only be construed as harbinger for future distribution. I say distribution, and not accumulation, because at market high that is what is most expected. This definitely is not good news for die-hard bulls, because such high volatility during distribution is only indicative of very strong down move. As for traders, the present high volatility can be best described as killing, since buying or selling at technical levels is proving counter-productive. Let me bring forth the plight of traders in this highly volatile regime.
A trader enters into a buy trade after confirming with the help of price action that an up-move is in place. A scrip qualifies for buy after it trades above a particular price, prompting the trader to initiate a buy trade. Then suddenly the market reverses gear owing to its volatile characteristics and buy trades turn into losses. Similarly a scrip is considered to have become very weak below a particular price, and so the trader initiates a sell trade. No sooner that is done, there is a strong bullish surge and the sell trades are virtually pulverized.
So what is the solution to the present condition. I am listing a few suggestions for the benefit of traders and investors alike :-
- Investment decisions should be deferred for the time being, specially long term investing. That is because equity markets have yet to touch their intermediate bottom. For Nifty, intermediate bottom could be as low as 4000 while in Dow Jones we can again witness 6400 level soon. If you are a long term investor then wait for levels just discussed above, before jumping into immediate investment.
- Traders should trade strictly along an established short term trend only. And then one should take small profits off the table.
- Wait patiently for correct buy and sell levels for initiating trade, and do not enter into trade in haste.
Year 2010 will be a challenging year for traders as well as investors. So become mentally tough to take the challenges in your stride. My good wishes to all !!
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