BULLS FLAG RAISE...?

FROM AN EXPERIENCE

Losses are tough.  Errors and mistakes are bothersome.  And, yet there’s almost always a lesson in there if you remain alert to improving.  I’ve always said that mistakes are okay if you acknowledge them and learn from them.  James Joyce said, “Mistakes are portals of discovery.”

As I trade and make mistakes, I say to myself, “I don’t have to do that again.”  And I feel reassured and optimistic about the future. Of course, I do, “do that again”.  We all do.  There are certain default attitudes and positions we naturally fall prey to.  But with an attitude of learning, we do it less and less until we (hopefully) stop repeating the unhelpful thinking and behaving.

When you trade with an attitude of constant and never ending improvement, you are alert to small and large ways to get better.  Not perfect, just better.  You pay attention to what you are doing that works so you can repeat it.

I like to end the trading day asking myself, “What did I learn today?”  Then I ask myself, “How can I utilize that tomorrow?”

You always want to be careful to ask yourself those questions that will get you where you want to go?  “How can I become a better trader?”  “How else can I become a better trader?” are both good questions.  Never ask yourself toxic questions such as “Why do I always lose?”  Worse still, “Why am I such a loser?”  As Carl Jung said, “To ask the right question is already half the solution of a problem.”

1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!

2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.

3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

4. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.

5. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.

                                                                                                                                                        (to be contd)

                                                                                      

A MYSTERIOUS PROPHECY

IF 4760 NOT BREAKS & CLOSES ABOVE 9 DEMA ON THIS EXPIRY(MAY 31) - WITHIN JUNE 22 2012, NF CROSSES 5340 – JUST MARK THIS & WATCH

                                  NF LEVELS TODAY (MAY 28)                                       

Day’s Resistance @ 4944-73-5018      

Day’s Supports   @ 4900-4894

If sustains above 4927 for 5 minutes see a hike upto 4944-70 & if trades above 4973 for 5 minutes see more upto 5012

Suppose trades below 4926 for 5 minutes see a slide upto 4902 -4896

NF has to trade below 4895 for 15-30 minutes to go into bears hands but the chances are remote in a normal opening

FUNDAMENTAL

Last Week’s Market Round Up: "Markets consolidate..."

Sensex closes at 16,200, up 0.3%; Nifty closes at 4,930, up 0.7%.

The biggest highlight of this week was the petrol price hike the oil marketing companies (OMCs) announced this week. A hike of Rs. 8/ litre is the highest ever absolute price hike undertaken on petrol.

Auto stocks like Maruti Suzuki were the biggest losers during the week, as the impact of the petrol price hike would be the sharpest in Maruti’s case.

This strong move on petrol price hike sends across a signal that the government wants to be more aggressive on policy actions and other pending reforms like FDI in aviation, FDI in retail. If this happens, this could be a major positive for markets.

Rupee ended weak against US dollar in the week, ending at 55.5/dollar, although it bounced back and recovered from lows of 56.5.

Market Outlook

"Euro fears may dampen sentiment in near term..."

At the current level of 16,200, the Sensex trades at a PE of 14.7x FY12E earnings estimate and 12.8x FY13E earnings estimate.

At 12.8x, 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.

As a market stance, we maintain our long bias given expected recovery in corporate capex, stabilization of downgrade cycle in corporate earnings, and attractive valuations of 12.8x FY13E on the Sensex.

Sectoral Outlook

"Stay with companies robust business models"

RBI in its latest policy cut interest rates by 50 bps to provide a fillip to deteriorating growth environment.

We expect pick-up in corporate capex and credit growth buoyed by further monetary easing.

We would advice clients to play interest rate sensitives like Banks and Capital Goods (Yes Bank, City Union Bank and Larsen and Toubro) to capitalize on falling rates theme.

At the same time consumption and agri stories (GSK Consumer, Bajaj Auto, Coromondal Fertiliser) would continue to do well.

We recommend reducing exposure on global cyclicals like Tata Steel as concerns from China slowdown intensify.

         

             TECHNICAL VIEW

Nifty opened the week on a negative note and made a low of 4788, which was near to our mentioned downside target of 4750. Thereafter after taking support at 4788, Nifty bounce back and made a high of 4956. Finally Nifty closed at 4920 with a marginal gain of 0.72%.

                                Nifty Outlook: Strong resistance at 4955

  

On the weekly chart Oscillators are trading in highly oversold region. Beside this Nifty had formed “Hammer” pattern on the weekly chart. Thus now going forward conformation of Hammer pattern will come only once Nifty starts trading above 4955.

And in the coming days if Nifty starts trading above 4955 levels then bounce back can be witness till 4976 and above that 5034 levels which are 61.80% and 50% retracement level of the recent fall from 5279 to 4788.

As Nifty continued to formed lower tops and lower bottoms as well as trading below the short term averages clearly suggest that the overall trend is still weak and bounce back should be used as an exit opportunity from the long positions.

However downside Nifty has support at 4788 and on upside resistance at 5125.

FIIs PULL OUT 435 CRORES FROM STOCKS THIS MONTH ALREADY

After pulling out over Rs 1,100 crore from the Indian equity market in last month, overseas investors have withdrawn funds to the tune of Rs 435 crore in May so far.

During May 2-25, Foreign Institutional Investors (FIIs) made gross purchase of equities worth Rs 36,228 crore and sold shares valued at Rs 36,663 crore translating into a net outflow of Rs 435 crore, according to data available with the market regulator Sebi.

Market experts attributed the outflow to a slew of reasons such as depreciating rupee, high fiscal deficit and the current account deficit as well as lack of reform momentum.

“Foreign investors are staying away from the Indian equity market, despite an attractive valuation, mainly on account of weakness in rupee, which is hovering around the Rs 56-level against US dollar,” a broker said.

Last month, FIIs pulled out Rs 1,109 crore from the stock market amid S&P lowering India’s credit outlook to negative from stable.

In May so far, while foreign investors took out a total of Rs 435 crore from stocks, they seem to be bullish on the debt market. This is because FIIs poured in Rs 1,660 crore taking the collective net investment into stocks and bonds to Rs 1,225 crore during the period.

BSE benchmark Sensex has lost around six per cent so far this month to close at 16,217.82 points on Friday.

After taking the latest withdrawals into account, FIIs have made an investment of Rs 42,407 crore into the equity market so far this year and Rs 17,270.40 crore into the debt market during the same period.

However, in the first three months of 2012, FII had invested a record Rs 43,951 crore. Of this, Rs 10,358 crore was poured in January, Rs 25,212 crore in February and the rest Rs 8,381 crore in March.

The strong FII inflows in January-March period was attributed by market participants to the Reserve Bank of India’s (RBI) pause in rate hikes and the improving liquidity position.

As on May 25, the number of registered FIIs in the country stood at 1,754 and total number of sub-accounts were 6,335 during the same period.

                                      6 MISTAKES

1. Failure to have a trading plan in place before a trade is executed. A trader with no specific plan of action in place upon entry into a futures trade does not know, among other things, when or where he or she will exit the trade, or about how much money may be made or lost. Traders with no pre-determined trading plan are flying by the seat of their pants, and that’s usually a recipe for a “crash and burn.”

2. Inadequate trading assets or improper money management. It does not take a fortune to trade futures markets with success. Traders with less than $5,000 in their trading accounts can and do trade futures successfully. And, traders with $50,000 or more in their trading accounts can and do lose it all in a heartbeat. Part of trading success boils down to proper money management and not gunning for those highly risky “home-run” type trades that involve too much trading capital at one time.

3.Expectations that are too high, too soon. Beginning futures traders that expect to quit their “day job” and make a good living trading futures in their first few years of trading are usually disappointed. You don’t become a successful doctor or lawyer or business owner in the first couple years of the practice. It takes hard work and perseverance to achieve success in any field of endeavor–and trading futures is no different. Futures trading is not the easy, “get-rich-quick” scheme that a few unsavory characters make it out to be.

4.Failure to use protective stops. Using protective buy stops or sell stops upon entering a trade provide a trader with a good idea of about how much money he or she is risking on that particular trade, should it turn out to be a loser. Protective stops are a good money-management tool, but are not perfect. There are no perfect money-management tools in futures trading.

5.Lack of “patience” and “discipline.” While these two virtues are over-worked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed. Don’t trade just for the sake of trading or just because you haven’t traded for a while. Let those very good trading “set-ups” come to you, and then act upon them in a prudent way. The market will do what the market wants to do–and nobody can force the market’s hand.

6.Trading against the trend–or trying to pick tops and bottoms in markets. It’s human nature to want to buy low and sell high (or sell high and buy low for short-side traders). Unfortunately, that’s not at all a proven means of making profits in futures trading. Top pickers and bottom-pickers usually are trading against the trend, which is a major mistake.

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