Market Outlook

I am here again and wanted to write a tutorial before this post. Have started writing it and it should be online for you tomorrow or day after. In the meantime, in this post, I thought of taking stock of our Market and see if any trade exist for coming week. Hope you will like it.

So without wasting any time, let us see the NIFTY chart.

As you can see in the weekly chart above, NIFTY has erased the gains of previous three weeks in the past week alone. It is very frustrating for investors who see values of their picks going up inch by inch and then all of a sudden everything comes crashing down. But it was always on the cards. Right now also as you can see for NIFTY to maintain its bullish momentum the critical level is 5100 as depicted by horizontal line of low of July second week. So we may not be completely out of woods as yet.

This same support is around 5050 on daily level. See below;

RSI is not indicating any oversold condition at all and even MACD (which you will see soon in a tutorial post) is not indicating any reversal. We may not have any respite from downtrend immediately.

I was thinking of making a Straddle or Strangle or Spread trade suggestion but am seriously short of time to work it out. Have to seriously make an automatic excel based worksheet to do the calculations based on the NSE quotes exported or updated directly into it. Will take some doing but it will be a wonderful tool to help us decide things much faster. I had something similar before but it was too crude. Have to make a professional version of it. Will let you know as and when it is done and will also share it with you guys.

Right now, for trade, my thinking is like this. I expect some kind of (at least temporary) up-move on daily or intra-day basis and if I want to trade for a week, I will short the markets tomorrow (if) after they go up. Am expecting markets to maintain downtrend on weekly basis and hence expecting to square off this trade during the week sometimes.

However if I want to keep the trade till end of the series then I would like to think of markets getting back to positive territory after falling for a week or two. This is with the assumption that markets will not violate earlier low as seen above. So I would like to go long sometimes during this week or next for a trade which I want to keep till end or close to end of current series. I hope to get in around 5100 or 5050 level but I will keep position short with some serious stop-loss.

Once again, I will remind you that this blog is not intended as an investment advice for you. It is just my loud thinking about what I expect in the markets. Follow it at your own peril.

Then there is a dearth of comments from you guys. Please let me know what you think of the posts and what would you like to see my writing. It helps surely. Will be back soon with MACD. Happy Trading.

I still hate IT Returns

And I will continue to hate IT Returns. But that is for next year, at least for this year I am through with them. It is a relief and I can say that next year it will be a cake walk unless new FM changes something and brings up new so called 'Saral' form to make returns 'Simpler'.

Then in a related development my usual charting software has gone bonkers and I was trying to get it back up online through today. Failed; so you will see a different chart today.

The chart is slightly different than usual but I am sure you will not find it difficult to read. It lacks few functionality but will make do for some time. The interesting thing to see on the chart is the close proximity of 50DMA and 200 DMA. We are inching towards a Death Cross and it can be confirmed only after it lasts for a few sessions.

I will reiterate that in my opinion we are still in a bear market which is seeing counter trend rallies in between. Out trading horizon is usually less than 4 weeks and hence we have to mind the short as well as medium term trends and factor them in our trading decisions. It may be little difficult to believe we are in long term bear market looking at the chart above so may be our perspective will be clear if we see the chart of long term.

If you see this chart on a weekly or monthly basis things become a lot more clear. I expect some weakness in the market even in next four weeks but I am not sure about the magnitude of the move. It may not be as violent as in the last series. We may see some downward move followed by a rally and then some consolidation in the new trading range before a break out. That will be a good point for us to make some investment (not trading) decisions.

Have to study few more things in details before I can make a sound trading call. It may be simply buy/sell trade or I may work out some 'Spread' kind of trade to reduce the risk. Will try to make that post very soon but have to get some idea or some news from Europe/US to make it worthwhile.

Finally I have made up my mind regarding tutorials also so will be back with that as well. Will try to start that tomorrow itself if trading scenario is not clear. Lets hope for best. Happy trading till then.

Attempted Trading Post

Hello friends, my apologies for not being able to make post 4 of Moving Averages. Been busy this entire weekend. However I am trying to at least keep the second post promise and though I have not got sufficient time to look at the charts in details, I am just posting what I think will unravel in the July series.

What a start we had for July series on Friday. Few would have expected (including me) that markets will cheer so much the announcements from new FM. As I had mentioned in last post that MMS (ManMohan Singh) had made all the right noises and even the clarity on few announcements by PranabDa will help. Also Euro Summit happened over the weekend and though I would have loved to make a detailed post on it's outcome the time is not on my side. In a nutshell, many people think (in Europe) that out of 20 odd Europe Summits so far since the problem started, only this summit probably not only met but also exceeded the expectations. Now, me thinks, the primary reason for this is the inherently low expectations that everyone had this time. Also though Angela Merkel was vocally against shared liability of Eurozone debt, she also understands that there are not many options left. Anyways what happened in Brussels is expected to prop up the markets at least in the short term so expect another rally tomorrow.

As for the trading; I believe that though we may see the rally in equities to continue, it may be short lived. If I have to trade, I would probably wait for the market to go up tomorrow and would like to bet on to a correction. This definitely carries a risk that market may continue to go up. It also carries the risk that the correction may not happen in time for July series.

The best way to cut risk is to buy a PUT Option at 5300 or 5400 Strike if you agree with my thinking. Right now 5300 Put Option is around 105 Rs and 5400 Put Option is around 160. I will probably wait for markets to gain tomorrow so that these prices drop and depending on the level of the markets and price of these two Option will do a quick break-even calculations and based on my risk appetite get in to one of them. Needless to say Options is a risky business and will not play it beyond my risk money.

Please note that this is not a investment or trading advice. It is only my personal thought process on what I would do if I trade tomorrow. I have been wrong more often than not and lost money. Please do not treat this as an advice and do not blame me for your decisions.

Finally, I would like to say that I am really really disappointed that no comments on my earlier post. Probably that is also one of the reason I could not write MA post 4. So this time do not let me down and let me know what you think of this post. Also its been long that I took any feedback from you guys so it would be great if you can let me know if you want any changes in the way this blog is shaping up. Will be waiting for your suggestions. Happy trading.

Disclosure: Been very busy so may not get time to trade at all. Right now I do not have any trading positions open.

DLF Limited

Lot of stuff has been said about DLF in the last week. Veritas, in its research report casted strong doubts over DLF’s accounting practices and its dealings with DAL (DLF Assets Limited). Year after year, DLF showed a large chunk of its sales to DAL without getting paid for it. So in effect, DLF on its books showed property sales to DAL on one side and showed receivables of almost full amount from DAL on the other side for balancing. From FY07 to FY11, through this accounting practice DLF inflated its Sales by Rs 11236 Crores and Profits by Rs 7233 Crores. After doing so for many years without any payment from DAL, it merged DAL with itself in 2011.

DAL is a DLF Promoters company and its merger with DLF was done at ridiculous valuations. This is cheating in most open terms but allowed very well by Indian laws. This is why I do not like fundamentals as all these years DLF books showed good topline and bottomline growth. Balance Sheets and P&L Accounts hide much more that they reveal and only after careful scrutiny you can find loop holes which have been exploited by these companies. Many a times, even trained persons fail to spot these irregularities (remember Satyam) then what are the odds for lesser mortals like you and me here.

Well, Price and Volume data does not lie (in most non-penny stock cases) and fortunately for us it is not in the hands of these companies to publish it. So let’s look at the chart now…

Chart is no good and does not help much. All moving averages are beyond reach of the price as of now and they are drooping too. MACD or RSI are not inspiring any confidence at the moment either.

First level which can be called as some support is around 171-175 for DLF. It is created by the lower trendline as well as it is the same level from where stock has rebounded twice/ thrice in last six months. Rs 100 valuation as created by Veritas will also acts as mind magnet for various players. Veritas has couple of success stories backing them up (Kingfisher, Reliance Communication, etc) where they identified the cancer in early stage and that will play at the back of mind of any person dealing with DLF. The inquiry initiated against DLF by Ministry of Corporate Affairs (MCA) if done correctly, will very well decide what lies ahead for this Script (Life Milegi ya Tawe pe fry hoga).

Fundamentally I have some unidentified allergy with real estate sector and I believe that ethical behaviour and real estate sector do not (or cannot) go hand in hand. This applies to ‘one of project builder’ to ‘big blue chip NIFTY component companies’ alike. Now this kind of business practices can get you to top very fast but cannot sustain you there for long. Real Estate sector in India is not plagued by rising input (Cement, Steel) costs or by non-availability of labour. What stops it by realising its true potential is widespread malpractices across the breadth and width of entire sector. Too much political interference, bad brokers, crooked builders, one sided agreements, non-fathomable (to layman) beaurocracy and greedy investors are some of the factors which keeps the general public away from real estate. The scene is so bad that the real pain for a person starts after he books a flat which actually should be a point where he should starts to relax.

Bad and heart breaking stories are too many to ignore in this space and I personally do not like them. Hence I do not get in to real estate stocks for these (foolish as they may sound) reasons.

Technically too, there is nothing positive in the charts so as of now it is ‘stay away’ in my deeds as well as advice too.

Happy Trading.

Disclosure: No Positions at all.

Update

I am feeling a lot better. In my last post I forgot to mention that sometimes last week I had managed to buy NIFTY 4700 PUT under 40 (all inclusive). It was a very small contrarian (opposite to majority) move which as I had mentioned I entered for the heck of it. I had this feeling that I will not lose money on it. It is not just gut feeling but the knowledge that there is more pain in the market. Today I exited it at a small profit deciding not to push my luck too far. Needless to say, I squared off without looking at the charts and finding about what is happening in Europe and America. Looking at the US Markets, I am getting the feeling that I hurried into it.

Well, no fun in crying over split milk... Market will be there tomorrow and so will be new trades and new money to be made. Looking at the chart below, it looks like that there will be a short term break at the NIFTY party and we may see some down moves now.

I, personally, am still a fan of the secret society who believes that NIFTY will touch 4700 at least once more. Tricky part is the prediction about the time. With some conviction I would like to say that it will happen before next months series ends. That also reminds me of my recent theory that 2012 (World may not end in it as shown in the painful movie) could be the worst (or at least one of the worst) year for the equities. I will make a separate post on why I think so.

Haven't looked at all the indicators in detail and hence not posting a trade right now but will definitely do that over the weekend and post something. Needless to say that I have been wrong earlier with both; my trades based on charts and also based on my beliefs/theories and I am proud about that. It only shows that I am just a human being; my falling sick also shows that on some other platform but that is now what I am talking here.

Until next post.

Markets this Week

Hi guys, I am back again. For those of you, who don't know, I was not feeling well and was slipping in and out of consciousness for last three days. It all started with the weekend exertion and manifested itself in to a full blown thing which culminated in me being stuck with bed all the time. Much needed rest I guess.

Not that I could have written much even otherwise. Markets continue to be unpredictable (what else was I expecting?) and no clear sign of resuming downtrend still. Yesterday Market formed a Doji indicating some indecision but as I explained on Doji Post on Equity Blog it does not mean much apart from indicating even honors for Bulls and Bears.

Looking at the Asian, European markets today and present state of US Markets I guess we may have a slightly negative opening tomorrow (off course unless US Markets spring a surprise in the later half). Important levels for tomorrow;

Support 1: 5010

Support 2: 4980

Resistance 1: 5062

Resistance 2: 5085

Some Explanation of these levels can be seen here.

Posting a chart indicating these levels. Click on it if you want to see the larger picture (pun intended).

Happy Trading.

Market this Week

The markets did manufacture a good turn around thanks to support from West. The idea of all large Central Banks coming together to loosen their purse strings in tandem is... to be honest... scary. It may help stock markets all over but watch out for commodities as well. May not be a good thing for developing economies which are fighting high inflation.

Anyway, coming back to NIFTY. See the chart below.

Market is clearly trying to get back to the upper end of the channel which lies somewhere over 5300... a long shot I would say. MACD and RSI both are in supportive mood though I have to admit. Today market has taken a support at the 21 day EMA which is at 4938 and the next immediate resistance is somewhere at 5018 which is 50 day EMA for the NIFTY.

I wanted to get in to the Trade with a 4700 PUT today but could not do so in time. Today Europe were down by up to 1% while US was half a percent down when I last checked before going to bed. If markets are in positive territory again, will get a micro PUT trade just for the heck of it.

Hope to have a more definitive trade for the coming week.

Happy Trading till then.

Market Today

Get ready for a bumper opening of at least 120-150 points. No definitive trade for this week from my side... Was cooling off.

Happy Trading.

Disclosure: Might buy a micro position on short side... May be a 4700 PUT.

Trade for the Week

Honestly, I do not have a clear trade this time around. As I said in the last week, NIFTY is very delicately balanced at around 20-30 points away from a Support. If it decisively breaks 4680 then we are looking at more than 200 points free fall.

Sooner or later I believe this is going to happen. In the chart above RSI is in extreme oversold condition and looks like turning back but MACD is not helping. Moving Averages are still diverging indicating strength in the downtrend. Even RSI upon a close look gives impression of flattening out rather than turning back. See below.

Click on the picture to see a larger image. My apologies for this technical mumbo-jumbo for the uninitiated of you. Keep following Equity Blog and soon enough you will be laughing about it.

We will have to kind of wait and watch NIFTY for the direction before entering in any trade. Even US markets are not helping much. Will use mobile for a short post in trading hours if opportunity arises.

Happy (no)Trading.

Market today

European and American markets are down substantially yesterday. However I do not expect Indian markets to follow them blindly.

SGX NIFTY is also in the positive region and so is some Asian markets. Go fresh short today at your own peril.

Happy Trading.

Coming Week

My apologies for absence in last week. Will try to make up for that soon.

For this week Market still seems to be in down trend. First support is around 4750 followed by 4690-4700 level. This week however can see some counter trend rallies as well.

I will be back with a full post very soon.

Happy Trading.

Trade for the Week - Analysis

I could not post yesterday from mobile and also could not post in the evening. Was just too busy in office through the day only to be too tired at home.

Our reading of down trend in the market is working too well for us... I say too well because last two weeks as well as this week so far has been negative. We are due for a counter trend day at least. But mind you, this is pretty strong trend and normal expectations of a counter trend move may take some time to materialize.

Let's see status of our trade so far.

When I first posted the cost of one lot of 5300 CALL and 5100 PUT was around 95 and today it is 100... so not much to mention. However, lack of time on Monday morning caused to me to hurry up the post (I am also learning) and I did not elaborate on my way of trading a strangle (Caution: it may not be correct way).

Many a times lot of experts mention that hedging trades are difficult to be executed at the same time and so there is risk. You may not execute both buy/sell, CALL/PUT trades at the same time at the price you want which creates this risk. In my case, I intentionally do not want them to be executed at the same time... in fact I do not even place the orders together.

Usually when I want to trade strangle with the bias of a particular direction and market is moving in the same direction, it makes my preferred Option Premium higher and I don't like that so I tend to wait (even though I may not get the chance again as market may just run away in the same direction). I can just let it go consoling myself by saying that this is not the end of the world. Agreed that the Premium of the other Option (which is to be used for hedging) goes down but I do not buy it before making the main trade.

On Monday, however, market was moving in the positive direction in the morning making Premium of 5100 PUT Option go down to 33-35 levels. An ideal level for me to enter. In the afternoon, market resumed downtrend so our main Trade was increasing in value while hedging trade was going down giving us the opportunity to hedge the position at a much lower cost.

You may think that this is good to say in hindsight and difficult to execute actually... I agree. Not the hindsight part but the difficulty in execution part. You have to be looking at the market through the day to understand the undercurrent and then time your trade.

I will have to be more active in posting through my mobile I suppose.

As for the trade, both Europe markets and US markets (presently) are down marginally. The chart (not posted) still shows weakness so you may want to hold on to it. (Disclaimer: I missed the bus... was too busy.)

Will post about further trading strategies in between. Who knows, may be next post will be on some trading strategy. Happy Trading.

Trade for the Week

Hope you had a great weekend. My plan to write a post yesterday night went for a toss after some guests. So woke up early to study some chart and find out if some possibility exists for posting before leaving for office... oh these Monday mornings.

Well, the NIFTY chart is pretty interesting. On a weekly basis we are still going down with the resistance being at 5360... the same level as per our earlier charts (The upper trend line). Support levels are also not changed too much. On a daily chart however, there is a gap created on Friday which I guess would be because of trading holiday on Thursday. Our markets had to catch up  after joining the party so can't read too much in to that. Will write about significance of Gaps on Equity Blog.

Right now the chart looks like something like this.

Friday closing prices of NIFTY 5100 PUT is at 52 Rs and 5300 CALL is at 43.20 Rs and this is what I will get in to after looking at how the market behaves in the opening hour. Don't forget to read How to Identify the Trend and also this before trading.

My earlier experiment of posting from mobile worked well so will resort to that I get time and if there is some change in above.

Happy Trading and have a great week ahead.

Post from Mobile

NIFTY 5200 PUT is currently trading at 98 and you may want to square off the Trade for the Week. Will post again if a new Trade for the weekend is possible. No guarantees.
Happy Trading.

Happy Gurunanak Jayanti

Thank you guys. I love you all.

Thanks for adding insult and then rubbing salt into injury. Yeah, I know I totally missed today's trading holiday but why none of you were prompt enough to remind me of it before 09:15? Tell... tell...

Anyways... this situation has inadvertently given us something to discuss. What to do when we have a trading holiday between the week or what to do on Friday? To be honest, I don't prefer carrying any one sided trades over the weekend (particularly these days) unless I am in driving seat. This compulsion comes in two forms; once when I am very sure about the trade and also definitely have adequate hedge against any End of the World event. Second when my trades s**k so bad already that things can only get better from that point onward...

As for trading holidays... we can take them on case to case basis. In these uncertain times I would have closed my position yesterday only; after being content with 50% profit. But that was because I did not fully hedge my position. I would never do so in case of an off day or weekend and will always remain prepared for any adverse move. Luckily for me, this may not be a costly miss.

There are mixed signals from Europe and US Markets are marginally up. If things don't become hunky dory in US suddenly overnight then we are still in the game.

Ideally I would love to get into a Straddle or Strangle (with Negative Bias) tomorrow for carrying it over the weekend as things are very interesting in West. What Strike Price to choose depends on how the markets fare tomorrow. Whatever happens, we can expect a decent move on either side on Monday as weekend is too long a time not to happen anything.

Happy Trading.

Trade for the Week - Analysis

A recap of today's market movement in our trades.

It was really good day for us and both the contracts are almost 50% up from the point of our entry. At this time it will be difficult to resist the temptation and take home some profits.

My entry point was 55 and a gain of 50% minimum is what I look forward to. 50% of 55 is 27.5 and hence my first target was (55+27.5) 82.5 which was achieved today. I sold part of the position to book the profit partially. Accordingly I reduced hedge position also. This kitty already is in the bank and gives me good leverage cushion for the remaining position. I can be more aggressive with the stop-loss and wait longer for next target... correct?

No, I do not work it that way. I will, on the contrary, move my stop-loss closer to the present price so that my already booked gains are not wiped clear by remaining position. I will rather book a modest profit in the remaining position... close this trade completely and move on to next trade. Old adage is let your winning horse run and cut the losses in other cases cannot be more true.

One more thing is I would have been happy to close the trade completely today itself and have fun for the rest of the week . This would have been completely acceptable if our target was 50% as usually the case with me. However this target cannot be a rigid thing and you have to adjust your expectations dynamically. Looking at the events in Europe where Italy is trying hard to join the party with Greece... things can get extremely messy. Present stress in the market due to Greece would feel like a bruise against a full body fracture that Italy can induce across the world markets. Hence stayed on the short side (with hedge off course... you can never be sure). However the trend is clearly downward. Have a look.

As of now US Markets are down (more than 2%)  in line with Europe and that bodes well for our trade. The chances of them coming back to positive territory are not very bright but respect your stops and targets. I will book full profits if 5200 PUT reaches 100 tomorrow.

Happy Trading.

Trade for the Week - Analysis

A recap of the day for underlying of our interest;

NIFTY was moving to our advantage until European Markets opened and then we got back into positive territory. I got into NIFTY 5200 PUT at around 55 price in the morning. Did not square off during lunch time and could not create a full hedge also in the late afternoon. I created partial hedge not because I did not get time but because I was not convinced about European Market move (You are advised not to have such single sided position till you get enough confidence and your risk capital is high).

I got two interesting e-mails about today and we will discuss that here.

First, regarding stop-loss of 5360. Query was if NIFTY reaches this level; then PUT Option of 5200 would be almost worthless and 5300 would be less than half of original Premium... So isn't the stop-loss too far away?

Here my logic is... Option trading is not like intra-day where you have to square it off on the same day. In such case you do not have time for Index to recover (or correct) in the direction you want. However in case of Options, you get some time (in days) for such move and hence if you keep stop-loss very close then there are chances that one day or even couple of hours of adverse move will trigger it and you end up squaring off at the wrong time.

Hence going by the chart in previous post, 5360 is the level indicated by trend line and also somewhat closer to 200d EMA and unless NIFTY decisively crosses them, these levels are expected to hold.

Second e-mail which I received this evening is regarding squaring off of the trade today itself. One of you bought NIFTY 5200 Put at 56 and squared off at 68 making a neat 20% profit in one day. Now this is something very good... isn't it?

No, it is not. If you ask me I will say that Option trading is a risky business and hence accordingly your reward should be higher. 20% profit in one above lot is a sum of 600 Rs and you need to look at the profit in absolute terms as well. Since your stop-loss was almost 80 NIFTY points away (where you would have risked loosing something like 1500-2000 Rs of your original 2800 Rs Premium) your target reward should have been attractive enough for this kind of risk.

Now I am not totally against booking a small profit initially and gaining confidence. However, as we move along it is important that we keep above logic in mind and decide our targets accordingly.

US Markets are showing marginal negative move as of this moment and I will say that Fundamentals of our Technical trade is still intact. More tomorrow.

Happy Trading.

Trade for the Week

As I am writing this, US markets (DJIA and S&P500) are around 0.7 to 0.8 percent down. Any drastic changes in this scenario by closing time... changes the trades below. As for tomorrow and the week I expect the market to have negative bias with many key events like Europe Meetings, Italy Vote and US Consumer Data coming in at crucial times.

Markets are already touching the upper trend line as can be seen above and the chances of a breakout from this trend line tomorrow are very rare. So in a negative downtrend what you do is simple... you buy a Put Option. As per Friday's closing prices a NIFTY Put Option with expiry of 24 Nov with Strike of 5300 (In the Money) is approximately 95 Rs and Strike 5200 (Out of Money) is roughly 59 Rs.

You can decide to buy any of this Strike. Stop loss should be at the trend line which is roughly 5360 and you can book your profits at first target (Support) of 5200 (it is possible in intra-day also). If your risk appetite is high you can continue to hold the position and take a call depending on how Europe Markets move in the afternoon.

If you decide to hold the position overnight, do not forget to create a hedge by buying a Call Option at the same Strike (Straddle) or a Strike which is Out of Money and Premium is less (Strangle). This is advisable even if you think that the risk is minimum and you can live without a hedge... it gives you peace of mind and that is something Master Card cannot buy. It is priceless.

Trade for the Week - Starting Point

Well, we have been waiting for this for very long. It seems to me that we have actually covered quite a bit of ground (looking back, it feels amazing) such that we are ready for spinning a few trades. However, we will set a few ground rules before we make posts about trades. First and foremost is clearing myself of any responsibility about these trades... I repeat do not take these trade posts (or any posts here) as an Investment Advice and I can not be held responsible for any loss you incur by following this. As for profit... I may have second thoughts. Seriously speaking... please read this before proceeding further.

Second thing, I will be making this post a night before or at most in the morning before leaving for office once I check status of US markets. I will also try to post scenarios like if-then for you to make a better decision about trades in the live market. Also I may or may not execute the trade depending on whether I get time to do so in office or not. Then I will post the loss-profit analysis for one lot each of the trade I post. Will make a format for that which can be followed then.

As far as possible, I will try to trade the immediate series as that is most liquid and made available by all brokers without fail. In exceptional cases only we will include next month series in the trades.

In between these posts, I will keep posting about further refined strategies for Options Trading. We will also see some advanced strategies and try trading them if favorable market situation is available.

Finally, how much money we make will also depend on how actively we follow market and how well we stick to our stop losses and how well we are able to time our trades. Let's give it a shot.

Meanwhile hope you have seen the twin posts on twin candlestick patterns on Equity Blog. Will post more on that regularly now.