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Monday, June 11, 2012

CORRECTION WAVE STARTED...?

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%.

China’s central bank, PBOC cut interest rates by 25 bps ahead to revive its slowing economy.

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 is believed to have sold dollars during these weeks to curb the slide in the rupee’s value.

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’s weekly statistical supplement.

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 India’s reserves with the International Monetary Fund (IMF) fell by $22.3 million to $2.83 billion.

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 will be forced out of the eurozone.

But how? Syriza says that it wants Greece to stay in the eurozone (so do around 80% of Greeks, when asked in polls), and points out that there is no legal provision for expelling a country from the eurozone.

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.

DISCLAIMER

THE RECOMMENDATIONS MADE HERE DO NOT CONSTITUTE AND OFFER TO SELL OF A SOLICITATION TO BUY ANY OF THE SECURITIES/COMMODITIES OF ANY OTHER INSTRUMENTS WHATSOEVER MENTIONED. NO REPRESENTATIONS CAN BE MADE THAT THE RECOMMENDATIONS CONTAINED WILL BE PROFITABLE OF THAT THEY WILL NOT RESULT IN LOSSES. READERS USING THE INFORMATION CONTAINED HEREIN ARE SOLELY RESPONSIBLE FOR THEIR ACTIONS. SURFING OR USING ‘tradersharmony.blogspot.com' DEEMS THAT THE SURFER ACCEPTS AND ACKNOWLEDGES THE DISCLAIMERS AND DISCLOSURES.THE INFORMATION PUBLISHED ARE FOR EDUCATIONAL AND INFORMATIVE PURPOSE ONLY AND THE USER/READERS SHOULD TAKE ADVICE OF HIS/HER ADVISER BEFORE TAKING ANY DECISION FOR BUYING, SELLING OR OTHERWISE DEALING WITH SECURITIES/COMMODITIES OR ANY OTHER INSTRUMENT WHATSOEVER.

Monday, June 04, 2012

BEAR THIS BEAR WEEK DEAR BULLS

FROM AN EXPERIENCE

-Good day traders have analytic minds and are able conduct quick calculations and think on their feet, they must be able to identify trends and patterns without relying on a fancy chart or computer program.

-All successful day traders are confident, they are decisive, able to think quickly and have no time for uncertainty or self-doubt as this is what often leads to missing some of the best trading opportunities of the day.

-Self belief goes hand in hand with confidence, you have to believe in your decisions and run with them. If you are indecisive perhaps day trading is not be a suitable career for you.

-All successful day traders need discipline, once you have a plan stick to it. When day trading you can lose money as well as make money, as losses can result in an end to your career you need to manage your risks, know where to set your limits and stop loss orders accordingly. Once you have met your objectives do what you planned don’t let greed or fear take control of you.

Trading across multiple-time frames must be one of the hardest things to do as a trader. Many I know have chosen to avoid this completely while others wait patiently until all time frames correlate with their general read, which sometimes can take weeks if not months depending on the various time frames in question.

—Some struggle with the volatility of the tape, while others struggle with a psychological bias. At present I am struggling with the different pictures on different time frames. Currently I have trades on both sides of this argument taking index shorts against the weekly pattern while playing daily longs as they setup. The net gain has been a whole bunch of nothing which is making me ask the question if the different trades are worth it or if it would have been better to simply wait for one picture to resolve itself and correlate with the other. In hindsight this certainly sounds like it would have been the smarter play.

—Patience is never fun but until we have some solid resolution I still believe it to be the best play.

There’s that ‘P’ word again…

(to be contd)

WHAT HAPPENNED LAST WEEK..?

Since the contract expiry of MAY (of Nifty Futures) closed below 9 Days Exponential Moving Average, our subscribers are advised to enter into 4800PE of June and short Nifty Futures @ 4885 on Friday –

On the very same session it slides 70 pts leading Nifty Futures to 4815, giving a profit of Rs3500/LOT

Picture it for a greater quantity (10-20 LOTS)

The profit mentioned here excludes the gain in Individual scrips done intraday.

That’s why we proudly proclaim this blog and our news as your free ATM

Subscribe us to know more and enjoy the whole benefit each and every day with us in Indian stock Market

What next...?
LEVELS OF NIFTY FUTURES (JUNE 04)
Day’s Resistance @ 4864-75
Day’s Supports @ 4803-4774

If sustains below 4827 for 5 minutes see a slide upto 4803-4774

FINAL SUPPORT @ 4774

Suppose if trades above 4828 for 15 minutes with good volume,

see a hike upto 4852-75

ENJOY THE FOLLOWING TIPS TOO TODAY

INTRADAY SELLING TIPS TODAY (JUNE 04)

Sell SUNTV @ 227.60; T – 218.20

Sell MARUTI @ 1082; T – 1046

Sell ADANIENT @ 243.50; T – 236.65

Sell RECLTD @ 162.40; T – 158.15

Sell SIEMENS @ 648; T – 630.75

Sell EDUCOMP @ 135.50; T – 130.10

FUNDAMENTAL

Last Week’s Market Round Up: "Markets end weak"

Sensex closes at 15,965, down 1.5%; Nifty closes at 4,840, down 1.7%

Q4FY12 GDP grew by 5.3% as against consensus estimates of 6.1%. The pace of growth has slowed down considerably where we have recorded the lowest figures in quarterly GDP growth since March 2003, when GDP grew by 3.6%

Manufacturing PMI numbers for the month of May for India came in at 54.8 versus 54.9 in April.

Meanwhile, manufacturing PMIs across Europe and China were weak, Eurozone PMI coming in at 45.1 and China PMI at 50.4

Rupee ended flat against US dollar in the week at previous week’s level of Rs. 55.5/dollar.

MARKET OUTLOOK

"Euro fears may dampen sentiment in near term"

At the current level of 15,965, 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.

We recommend being less aggressive than earlier and expect some consolidation in markets in the near term as flows run dry. We recommend accumulating stocks with strong and robust business models in this phase.

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

Round-up: "Market Gives Up after Expiry"

Nifty started the week with positive note crossed our mentioned resistance of 4955 buy didn’t manage to sustain at higher level and corrected sharply from higher level. It was expiry week with 200 points swing on weekly basis. Power, IT and FMCG were major gainer while Capital Goods, Automobiles, Real Estate and Metal was major looser. Nifty ended the week with loss of ~2% W-o-W.

Nifty Outlook: "Sell off Below 4780"

We mentioned in our previous report that "Nifty had formed Hammer candle stick pattern on the weekly chart and thus going forward if this pattern is confirmed with Nifty trading above 4955 than rally till 4976 and 5034 can be witnessed". Nifty achieved our 1st mentioned target and fall short of our second target with making high of 5020.

As Nifty continued to form lower tops and lower bottoms as well as trading below the short term averages we retain our view that the overall trend is weak and bounce back should be used as an exit opportunity from the long positions.

Going forward, If Nifty starts trading below 4780 than sell could accelerate and Nifty may test 4700 and below that 4650

On Upside short term resistance is placed at 4960 (20 DEMA) and above that 5030

GREAT INVESTOR cum TRADER QUOTES

Warren Buffett (Net Worth $39 Billion) – “‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

George Soros (Net Worth $22 Billion) - ”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

David Rubenstein (Net Worth $2.8 Billion) – “Persist – don’t take no for an answer. If you’re happy to sit at your desk and not take any risk, you’ll be sitting at your desk for the next 20 years.”

Ray Dalio (Net Worth $6.5 Billion) – “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.”

Eddie Lampert (Net Worth $3 Billion) – “This idea of anticipation is key to investing and to business generally. You can’t wait for an opportunity to become obvious. You have to think, “Here’s what other people and companies have done under certain circumstances. Now, under these new circumstances, how is this management likely to behave?”

T. Boone Pickens (Net Worth $1.4 Billion) - “The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.”

Charlie Munger (Net Worth $1 Billion) – “If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.”

David Tepper (Net Worth $5 Billion) – “This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.”

Benjamin Graham – “The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.”

Louis Bacon (Net Worth $1.4 Billion) – “As a speculator you must embrace disorder and chaos.”

Paul Tudor Jones (Net Worth $3.2 Billion) - “Were you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt. After a while size means nothing. It gets back to whether you’re making 100% rate of return on $10,000 or $100 million dollars. It doesn’t make any difference.”

Bruce Kovner (Net Worth $4.3 Billion) - ” My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks. The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.”

Rene Rivkin (Net Worth $346 Million) - “When buying shares, ask yourself, would you buy the whole company?”

Peter Lynch (Net Worth $352 Million) – “I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.”

John Templeton (Net Worth $20 Billion)- “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”

John (Jack) Bogle (Net Worth $4 Billion) - “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”

CANNOT ARREST PLUNGING RUPEE IF 'FUNDAMENTALS' WEAK - RBI

The Reserve Bank of India (RBI) cannot arrest the rupee’s decline if it is caused by weak fundamentals or global factors but can only take more calibrated steps in the forex market in such a scenario, top official said today.

“If the rupee fall is due to fundamental weakness of the economy, or due to global factors, then the RBI cannot support it,” RBI Deputy Governor K C Chakrabarty told reporters on the sidelines of an HR summit of the state-run banks here.

The government must address trade deficit issues if the fall of the rupee is due to weak fundamentals, he added.

“If the rupee is depreciating due to real sector issues, financial sector measures will not solve it,” Chakrabarty said.

The rupee has been losing value against all the major currencies, especially the American dollar, since April and hit an all-time low of 56.52 yesterday. It has shed nearly 24 per cent year-to-date.

As a measure to contain dollar demand and help support the rupee, Chakrabarty also hinted at opening a separate window for oil companies.

“The option (of opening a separate dollar window for oil companies) is open. Whether they (RBI) is doing it or not, I don’t know, because it will not be done in the public view,” he said.

As the rupee loses ground almost everyday against the US dollar, with the hands of RBI are tied in view of depleting forex reserves, there have been talks of directly selling dollars to oil companies — the biggest consumers of the greenback — by opening a separate window for them.

The move can take off the demand pressure from the open market for the dollar.

Oil has been the biggest component of the country’s import bill for decades. In FY’12, out of the total import bill of USD 488.6 billion, as much as USD 155.6 billion was on account of oil as India meets 70 per cent of its fossil fuel needs through imports.

This has widened the current account deficit to over 4 per cent last fiscal, as against 2.6 per cent in 2010-11.

Also, fiscal deficit shot up last fiscal hitting 5.76 per cent of the GDP, from a projection 4.6 per cent.

Economists have been blaming these factors for the plight of the rupee, apart from fall in investments, which came down to 30 per cent in FY’12 from 38 per cent in FY’08.

Without referring to the forthcoming mid-quarter review of the monetary policy slated for June 18, the RBI Deputy Governor said, “If inflation comes down then interest rate will also come down.”

On the highly disappointing GDP numbers, he said it does not matter if it is 6.5 or 7 per cent, if we take corrective measures. Unless we work hard, GDP will fall further.”

According to the GDP data released yesterday, India’s growth rate during 2011-12 slipped to 6.5 per per cent from 8.4 per cent in the preceding two financial years.

Even during the 2008-09, the year when the country was facing the impact of the global financial meltdown, growth rate was higher at 6.7 per cent.

ARE YOU IN STRESS WHILE TRADING? – HERE’s THE SOLUTION

1. Think positively. Being optimistic helps in stressful situations. Do not let stress affect your mind and keep focusing on the positive side of your trading. What we think may result in decisions that can lead to better or worst situations. Thinking positively helps in making good decisions.

2. Change your response to stress. Being able to manage stress means developing strategies to deal with stress. Think of stress as a reaction rather than an event. It makes it easier to identify healthier ways to manage stress. Learn to Reframe Your Brain when adrenaline kicks in as the result of a win or a loss.

3. Task division. No man is an island. As a human being, we cannot survive being on our own. Having a trading mentor or trading buddy can provide both a sounding board and a support system.

4. Manage your time. Time is such that once you lost it, you can never get it back. Managing and limiting your trading time will help to keep your emotions and trading on track.

5. Learn your priorities. Our behavior towards ourselves and others may also contribute towards stress. Sometimes it is important to say no towards requests that you find it hard to meet. Keep in mind that by saying ‘yes’ to everything may please everyone but you may add on more stress and cause disappointment if the target is not meet.

6. Look away from your charts to take a break. Learn to calm mind and reduce stress while trading. By mastering Your Traders Journey and performing the brain reset function will get you back in the zone when you feel stressed.

7. Always be cool. Remember that stress is normal. However, it is important to keep your cool. Focus on the situation to gain control and don’t give up. Try your best to remedy the situation. An easy way to remain cool and distributing your load it to use four A’s of managing stress: avoid, alter, adapt, or accept.

8. Strong social network. Having a strong support from family, friends, peers or colleagues is important to help you through the stress. This is something that you can cultivate when you are not under stress and helps you to feel that there is someone who will be there if you need them. Try getting together for dinner, calling your parents/long lost buddies, chatting with colleagues or having coffee to help reduce stress while helping to build a bond with people around you.

DISCLAIMER

Monday, May 28, 2012

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.

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.

DISCLAIMER

Monday, May 21, 2012

CORRECTION WEEK AHEAD...?

FROM AN EXPERIENCE

“You can learn from this how to develop independent judgment, so that you need never ask anyone’s opinion or listen to anyone’s tips, or take anyone’s advice. You can so train your judgment that you will know just what to do and when to do it. When you are in doubt you will do nothing.” –Richard D. Wyckoff

Wyckoff was talking here about trading. He was talking on the subject of studying the markets to determine how they operate. You will find developing your own trading strategy/method can be the most rewarding and challenging experience of your lifetime. You need to be comfortable with the risk, before you are comfortable with the reward. There is an age old saying, ‘If you can’t stand the heat, then stay out of the kitchen.’

As traders, we are exposed on a daily basis to the trading concepts of risk and reward. Personally, my own reward to risk tolerance took some time for me to feel comfortable with it. How much do you want to risk on each trade, and how much are you looking to make at a minimum?

Are you at its minimum profit objective going to make more money than you risk? So if you would take two trades, and one would win and the other would hit your stop loss, would you turn a small profit on your trading? Obviously, the goal of every trader should be the three general trading rules.

3 General Trading Rules:

Cut Your Losses Short

Let Your Profits Run

Take Profits On The Ride

What I found out over time, as a trader, the hardest component of a trading plan is to stick with it when you are winning. You will find it is easy for a trade to take out your stop loss, because you have mentally prepared yourself for it.

But on the other hand, you may find where do you take profit the hardest component to quantify as a trader. What I believe for my own personal reward/risk trading strategy/method is to set up for a minimum 2.5 to 1 on every trade.

Be happy to move out of a trade a break even, if it doesn’t set up correctly. You should find two words to be a part of your trading plan: flexibility and change. These two words will be your best friend, if you use them properly.

Wyckoff goes on to say to trust no one’s opinion or tip. Do your own trading is what I gather from what he is trying to tell us. To allow yourself the ability to succeed or fail on your own without utilizing other people’s advice no matter how well intended it may be.

You can learn from other trader’s, but your trading decisions should in the end be your own. OWN YOUR TRADING PLAN!

The last part of Wyckoff’s trading advice can not be overlooked. You need to find a way to stay away from markets that are not operating according to your trading rules. The best place to be, but also the hardest thing to do is to stand aside as a trader.This is a business where it is very easy to lose money doing.

This ‘game’ is rigged! The faster you understand this … the better off as a trader you will be, in my very, very humble opinion.
(to be contd)

NIFTY FUTURES – AN OVERALL VIEW

-Overall Trend is 101% down !

-If able to close below 4759 for 3 Days with a weekly close, then will see NF kissing 4570-52 as soon as possible within 2^nd week of June.

-Short Term wrench is inevitable!

-Even though good for Bears to go short once again !

REMEMBER..REMEMBER..REMEMBER..

Pls do remember Nifty Futures should cross 7 Days Exponential Moving Averages sustain and close above the level (that did not happen since MAY 03) for a decent correction – otherwise 101% it will favour only BEARS

– any pull can be considered as a DEAD CAT BOUNCE firmly.

WHY AFFRAY...? WE PROVIDE YOU BOTH

FUNDAMENTAL

This Week’s Market Round Up: "Markets closes lower for fourth successive week"

Sensex closes at 16,152, down 0.90%; Nifty closes at 4,891, down 0.79%.

In the week gone by, crisis in Eurozone deepened with failure in formation of coalition government in Greece raising fears of country’s possible exit from Euro.

Run on banks in Greece and Spain threatened the banking system in eurozone. Sharp slide in Euro against U.S dollar sent world markets into tailspin.

Most Asian currencies were under pressure. Rupee fell sharply against U.S. Dollar to a new all time low of 54.91. RBI intervention, helped rupee to recover smartly to close the week at 54.46.

Week saw stellar Quarterly performance from Capital goods major L&T and India’s biggest lender, State bank of India. Tata Motors however, disappointed with slowdown in April numbers.

Positives:

1) Cheers to Mark Zuckerberg and Facebook for building an incredible business and whose reward today is hugely deserved and exciting to watch.

2) April Housing Starts back above 700k for 4th month in the past 6 at 717k, above est of 685k and March revised up by 45k to 699k.

3) After rising from 19 to 28 thru the winter months and falling to 24 in April, the May NAHB home builder survey rises to 29, the best in 5 yrs.

4) Refi apps up by 13% with new low in mortgage rates.

5) NY mfr’g in May rises to 17.1 from 6.6 in April but still down from 20.2 in March and 6 month outlook falls to 29.3 from 43.1.

6) Old news but Q1 GDP in Germany surprises to upside and region sees flat Q1 growth instead of expected contraction. That will certainly change in Q2.

7) China cuts RRR again, market though yawns.

UK jobless claims unexpectedly falls.

Negatives:

1) Europe again the main concern as Greek stocks fall another 10% and new PSI bonds sell to lows as bank run fears spread and we have to wait another month for new elections. Spanish IBEX down 6% as Bankia falls 15%. MIB lower by 7% and both Spanish and Italian bond yields jump and Spanish CDS goes to new high.

2) Philly mfr’g falls to -5.8 from +8.5 and well below expectations of +10 as weakness is broad based and the outlook falls sharply.

3) Initial Jobless Claims 5k more than expected at 370k and prior week revised up by 3k.

4) April Retail Sales reflect give back as they rise just .2% m/o/m ex gasoline.

5) CPI moderates to 2.3% from 2.7% y/o/y but tell that to people whose wages are flat. Core rate up 2.3% y/o/y matching most since Sept ’08.

6) Shanghai index closes week at 1 month low. FDI falls for 6th straight month and home prices fall in more Chinese cities than the previous month.

Market Outlook

"Eurozone turmoil likely to weigh heavily on sentiments in near term"

At the current level of 16,152, the Sensex trades at a PE of 15.0x FY12E earnings estimate and 12.9x FY13E earnings estimate.

At 12.9x, 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.

Sectoral Outlook

"Stay with companies having 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.

And this is going to happen in today’s session

TECHNICAL VIEW

Round-up: "Southbound Journey Continues"

As mentioned in earlier report that "Going forward, Nifty is likely to trade with negative bias and index can witness sell off till 4800 if it breaches and start trading below 4900 mark", Nifty started the week with negative note and achieved our mentioned target of 4800 and further made a low of 4788. However in the last trading session Nifty recovered all its losses and finally Nifty closed the week at 4891 with marginal loss of 0.44%.

Nifty Outlook: "Strong support at 4750"

On the weekly chart Nifty had already retraced 38.20% of the recent rally from 4531 to 5629. Beside this oscillators are trading in the oversold region. Thus going forward in near term bounce back will be witness only if Nifty starts trading above 4960 on the weekly basis.

However on the weekly chart as Nifty had made lower top as well as trading below the short term averages clearly suggest that the overall trend is still weak and we maintained our downside target 4750.

Bounce back should be used as an exit opportunity from the long positions. On upside, short term Nifty has resistance at 5125.

NIFTY FUTURES LEVELS FOR MAY 21

Day’s Resistance @ 4922-55-83

Day’s Supports @ 4854-30

*No problem to kiss 4921 above 4890 – To see a bulls run (intraday) Nifty futures should cross 4922 and sustain above the level for 5-10 minutes – If happened we can see 4952-82

*Suppose if cuts and trades below 4889 for 5 minutes see a non-stop slide upto 4855-37 and 4821 after that.

9 SKILLS TO BE ACQUIRED BY THE TRADERS

1) Learning the dynamics of goal achievement so you can stay positively focused on what u want-not what u fear.

2) Learning how to recognize the skills you need to progress as a trader and then stay focused on the development of those skills, instead of the money ,which is merely a by product of your skills.

3) Learning how to adapt yourself to respond to fundamental changes in market conditions more readily.

4) Identifying the amount of risk you are comfortable with -your “risk comfort level”-and the learn how to expand is in a way that is consistent with your ability to maintain an objective perspective of market activity.

5) Learning how to execute your trades immediately upon your perception of an opportunity.

6) Learning how to let the market tell you how much s enough instead of assessing the potential from your personal value system of how much is enough.

7) Learning how to structure your belied to control your perception of market movement.

8) Learning how to achieve and maintain a state of objectivity.

9) Learning how to recognize “true ” intuitive information and then learning how to act on it consistently.

PURGE EGO IN TRADING

“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”

“At other times in the past, investors lost a good profit by holding on too long, trying to get a long-term capital gain. Some investors, even erroneously, convince themselves they can’t sell

because of taxes—strong ego, weak judgment.”

“When did you turn from a loser to a winner?When I was able to separate my ego needs from making money. When I was able to accept being wrong.Before, admitting I was wrong was more upsetting than losing the money.”

“Most traders who fail have large egos and can’t admit that they are wrong.”

“Clearly, flexibility and suppression of ego are key elements of Gelber’s success.”

“Actually, the best traders have no ego. To be a great trader, you have to have a big enough ego only in the sense that you have confidence in yourself.”

Ego can also stop you from being profitable as a trader. Maybe you only like to short because you think this economny is going to H____ and the market rallies for a month and the whole time you try shorting it when you should be buying the pullbacks. In this scenario, the stongly held belief system is affecting the traders ability to see what is really going on and costs either being stopped out, or only making a small profit and missing the big moves etc.

So, the more we can become egoless, flexible in our mind and not have a preconceived direction the market is going in, the better we will be as a trader.

Ego as a trader can also be, we think trading is like playing an electronic game: enter a trade without a set up or proper understanding of PA etc.

There are a lot of skills to develop as a trader and if we thought, we didn’t need to learn stuff that would be having ego.

A best trader is always learning about the market and about himself.

He knew his set ups and did his trades mechanically. Sometimes he was right and sometimes he was wrong but when the market trended he was all over it very intensely.

So, he would kick into high gear when the market trended; He would click his entry button like a rabbit, tttttttttt would go those entries. When he felt unsure of the market, he would cut down his contract size and be conservative.

DISCLAIMER