FROM AN EXPERIENCE
“One common adage on this
subject that is completely wrongheaded is: you can’t go broke taking profits.
That’s precisely how many traders do go broke. While amateurs go broke by
taking large losses, professionals go broke by taking small profits. The
problem in a nutshell is that human nature does not operate to maximize gain
but rather to maximize the chance of gain. The desire to maximize the number of
winning trades (or minimize the number of losing trades) works against the
trader. The success rate of trades is the least important performance statistic
and may even be inversely related to performance.” – William Eckhardt
“The spectator’s chief
enemies are always boring from within. It is inseparable from human nature to
hope and to fear. In speculation when the market goes against you, you hope
that every day will be the last day — and you lose more than you should had you
not listened to hope — to the same ally that is so potent a success-bringer to
empire builders and pioneers, big and little. And when the market goes your way
you become fearful that the next day will take away your profit, and you get
out — to soon. Fear keeps you from making as much money as you ought to. The
successful trader has to fight these two deep-seated instincts. He has to
reverse what you might call his natural impulses. Instead of hoping he must
fear; instead of fearing he must hope. He must fear that his loss may develop
into a much bigger loss, and hope that his profit may become a big profit.”-
Jesse Livermore
(to be contd)
FUNDAMENTAL
Last Week’s Market Round Up:
"Markets post a rally…"
Sensex closes at 16,720, up 4.7%;
Nifty closes at 5,068, up 4.7%.
US non farm payroll numbers
surprised on the negative, with payroll additions of 69,000 against consensus
estimate of 1,50,000.
Given weak global growth
outlook, and domestic headwinds we revise our FY13 GDP growth to 6.4% from 7.0%.
Rupee ended strong against US
dollar in the week, ending at 55.5/dollar, versus 56.2/dollar last week.
MARKET OUTLOOK
"Multiple
events lined up, recommend caution…"
At the current level of 16,720,
the Sensex trades at a PE of 15.1x FY12 earnings and 13.2x FY13E earnings estimate.
At 13.2x, we trade below
average valuations of 15.4x 1 year forward earnings.
Central banks in emerging
markets are expected to support slowing growth through monetary easing, leading
to a further fillip for growth and risk assets.
In the next fortnight, there
are multiple events lined up, IIP numbers on Tuesday, Inflation on Thursday, Greek
election results on 17th, RBI meet on 18th and FOMC meet on 20th..
The fate of these events, the
most important being Greek election results will drive near term market
direction.
TECHNICAL
Round-up: "Bounce back
on cards"
Nifty started the week with a
downside gap and made a low of 4770. Thereafter taking support at 4770 levels
Nifty bounced back sharply and broke the resistance of 5020 and further made a
high of 5084. Finally Nifty closed at 5068 with a gain of 4.95% on w-o-w basis.
Nifty Outlook: "Resistance
now at 200DEMA "
After taking support at 4770
nifty bounce back sharply and broke the mentioned resistant of 5020 and further
made a high of 5084.
On the weekly chart Nifty had
formed Bullish engulfing pattern as well as retraced 50% of the recent fall
from 5378 to 4770.
Beside this on the daily
chart Nifty closed above 5020 and lead to the conformation of Double bottom
pattern as well as Higher Top formation.
Oscillator’s still trading
positive and Nifty closed above the upper band of the Bollinger.
Thus above parameters clearly
suggest that further upside can be witness till 5150 which is the 200DEMA and
above that 5180 which is the double bottom target.
WHAT WOULD BE THE MOVE TODAY IN NIFTY FUTURES..?
LEVELS FOR JUNE 11
Day’s Resistance @ 5106-49-66
Day’s
Supports @ 5038-21-08-4995-70
If sustains above 5066 for 5 minutes watch
a sure hike upto
5100
To move more above this level NF should trade for 10
minutes above 5096 – If happens see more hike upto 5148-60
Suppose if trades below 5065 for 5 minutes
watch a slide upto 5040
5 Minutes below 5035 means more watch more
slide upto 5022-5009
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10 TRADING QUOTES
“Good investing is
a peculiar balance between the conviction to follow your ideas and the
flexibility to recognize when you have made a mistake." -Michael
Steinhardt
Do not stay bullish or bearish go with the current flow
of the market>
“There is only one side of the market and it is not the
bull side or the bear side, but the right side.”-Jesse Livermore
Putting it all together, it is more than just numbers>
“Successful trading depends on the 3M`s – Mind, Method
and Money. Beginners focus on analysis, but professionals operate in a three
dimensional space. They are aware of trading psychology their own feelings and
the mass psychology of the markets. Each trader needs to have a method for
choosing specific stocks, options or futures as well as firm rules for pulling
the trigger – deciding when to buy and sell. Money refers to how you manage
your trading capital.” – Alexander Elder
The money is in the primary market trend, not jumping in and
out>
“I think it was a long step forward in my trading
education when I realized at last that when old Mr. Partridge kept on telling
other customers, “Well, you know this is a bull market!” he really meant to
tell them that the big money was not in the individual fluctuations but in the
main movements-that is, not in reading the tape but in sizing up the entire
market and its trend.” – Jesse Livermore
This is one of the best ways I Know to measure short term
trends, and be on the right side of the primary moves>
“The 10 day exponential moving average (EMA) is my favorite
indicator to determine the major trend. I call this “red light, green light”
because it is imperative in trading to remain on the correct side of moving
average to give yourself the best probability of success. When you are trading
above the 10 day, you have the green light, the market is in positive mode and
you should be thinking buy. Conversely, trading below the average is a red
light. The market is in a negative mode and you should be thinking sell.” – Marty
Schwartz
Why it is so important to let your winners run and cut
your losers short>
“It’s not whether you’re right or wrong that’s important,
but how much money you make when you’re right and how much you lose when you‘re
wrong.” -George Soros
Eliminating the risk of ruin in one easy step>
By risking 1%, I am indifferent to any individual trade.
Keeping your risk small and constant is absolutely critical.” Larry Hite.
Never add to a losing position because you are fighting
the trend>
“Losers average losers.” this was posted in Paul Tudor
Jones’ Office
This is successful stock trading summarized>
“My basic philosophy is: Expose your portfolio to the
best stocks that the market has to offer and cut your losses very quickly when
you’re wrong. That one sentence essentially describes my strategy.” – Mark
Minervini
Trend Trading in a nut shell>
“It is always the best discretion to let the market show
us where it is going and just simply follow (this would be prudent), rather
than predict where the market is going and place a position (this would be
gambling).” -Anne-Marie Baiynd
INDIA'S FOREX RESERVES PLUNGE TO $285.85bn
India’s
foreign exchange reserves plunged by $2.40 billion to $285.85 billion for the
week ended June 1, apparently due to the central bank selling dollars to defend
the rupee, Reserve Bank of India data showed Friday.
This
is the fifth weekly drop in the forex reserves kitty. The reserves had declined
by $1.74 billion and $1.80 billion respectively in the previous two weeks.
The
Reserve Bank of India
The
partially convertible rupee slumped to a record low of 56.52 against a US
dollar on May 31. It has weakened sharply in the last two months due to
increased demands from oil importers and outflow of money by the foreign institutional
investors as poor GDP growth data dampened sentiments in the Indian markets.
Foreign
currency assets, the biggest component of the forex reserves kitty, dropped by $1.31
billion to $253.09 billion during the week ended June 1, according to the Reserve
Bank of India
The
RBI did not provide any reasons for the change in foreign currency assets.
It
said the assets expressed in US dollar terms included the effect of
appreciation or depreciation of non-US currencies such as the pound sterling, euro
and yen held in reserve.
However,
market experts said the RBI had sold dollars from the reserves to curb the
slide in the value of rupee.
The
value of gold reserves declined by $1.03 billion to $25.58 billion during the
week under review.
All components of the
foreign exchange reserve registered a drop during the week. The value of
special drawing rights(SDRs) dropped by $34.2 million to $4.34 billion and
GREECE WOULD BE EXPELLED FROM THE EUROZONE
If the left wins Greece ’s election on 17 June, a left government
is formed, and it sticks to Syriza’s promise to stop and reverse the
“memorandum” cuts, then – so it’s often said – Greece
But how? Syriza says that it
wants Greece
Malcolm Barr, an economist
with the J P Morgan bank, has looked into the issue. His analysis indicates
that a Greek expulsion would not be anything “automatic”. It would not be a
routine application of well-known rules.
It would be an explicit, unprecedented,
and high-profile decision by the ECB (maybe, as Barr says, after the ECB had
got an explicit endorsement from the EU leaders). The scope for political
mobilisation against such an explicit, unprecedented, and high-profile decision
is large – if the left across Europe puts in
the necessary effort.
Barr:
Let’s imagine Syriza is able
to form a government. It then antagonizes the rest of the region by rejecting
the Troika program in its entirety and declares a debt moratorium. Even with no
further disbursements of official loans, the region’s loans to Greece via the TARGET2 system [the system for
settling payments between different central banks in Europe ]
will continue to grow. Loans from the Greek central bank to Greek banks would
be almost completely forced into the ELA [Emergency Liquidity Assistance scheme].
The ECB can limit the TARGET2
loans if it exercises its veto over the ELA loans (requiring a two-thirds
majority on the ECB Governing Council), and if the Greek central bank respects
that veto. But, the Greek central bank would likely be faced with the need to
impose very restrictive controls on euro deposits to limit outflows if ELA
loans to Greek banks could not be made.
If the Greek central bank is
faced with the prospect of either imposing capital controls, or watching a
collapse of the Greek banking system, or defying the ECB’s veto on ELA loans, which
route would it take? If it chose the latter, the only way for the ECB to “shut
off” the TARGET2 loans would be to prevent Greek access to the payments system
itself, refusing to accept payments of euros to and from Greek banks.
At that point, reserves
created by the Greek central bank would no longer be euros. That decision would
not be made by the ECB alone, but would likely be deferred to the European
heads of state.
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