Sunday, December 14, 2008

Making money….

I was interacting yesterday with some friends and we started discussing stocks. The talk naturally moved on to 69777 how many have made money in the markets. The story was simple and was repeated so many times. I was doing so well till Jan this year and now I am down to 45%(best performing), 20%, 10% of the money I invested. Basically everyone had lost. Then like a miracle – one of them raised his voice – cleared his throat and said – “.. gentlemen my father is a financial wizard .. he is the man who has made money not only when the markets had gone up – he still makes money when the markets are down in the dumps..” a few jaws dropped – including mine and we all waited eagerly to jot down the notes. He continued “…he has a secret weapon that he does not share with anyone but only with me and today I will tell you his strategy…” “ and his strategy is  -- invest in Govt Bank FDs…”  - WOW that is the voice of a true Indian of his generation. That is exactly why a generation gives a damn whether the markets go up or down… unfortunately this is the exact reason why the other generation has suffered – they took no heed to the words of wisdom and wanted to become financial wizards themselves overnight. Over leveraged in the markets where as any management guru worth his salt will profile your risk taking capacity and then put you with this profile in a band and give you a break up of what and where you should invest – FDs, Bonds, low risk securities, Insurance and then stocks – generally 5-10 or 20% of your portfolio .. and in that a very small portion – probably in derivatives – but the greed took control of logic and here we are – a group of looser finding ways and means to make money. See – I can assure you – if we have the will and intelligence to continue then it is just a matter of time before we start making money. There is rule somewhere – 80% of the money is made by 20% of investors. So all you have to aim for is to be in this 20%. I would have loved to talk about a strategy on capital preservation in good times and bad times – running out of time now – some other time perhaps.

There was a flow of news that kept the markets at the good levels last week – one was the 100 basis reduction in repo and reverse repo rate. Then the government unveiled a 307bn fiscal stimulus package. Next came the much awaited reduction in petrol and diesel prices. Last but not the least was the government plans to accelerate the investments in the infrastructure. This has translated into a package close to 100 Billion Rupees. This made the Reality, metal, auto and banking to stage a strong rally. IT was the factor that has lost out in this race and closed negative. Pharma was the next looser.

We were the best performers in Asia – simple. Asia fell like a hot brick. Nikkei down 5.56%, Hang Seng  down 5.48% and Strait Times down 3%. Europe also did not do particularly well closing anywhere from 2 to 2.5% in red. FTSE was 2.47% red, Dax down 2.18% and CAC down 2.8%. The bad news in US continued and markets continued doing the dance as in Sharukh’s Rab-ne… – but people seem sick of bad news and eventually – steadily climbed in green ending – Dow up 0.75%, Nasdaq up 2.18% and S&P up 0.7% – yes you read it correct – they went green. And now the confusion begins as to where are we going to go on monday!getImageFromSession.php

There was a fierce fight between the bulls and the bears. Two Dojis’!! But unfortunately I strongly feel that they do not go well for the bulls – the only factor if any will be the other indicators that are glowing green. Also it is just a matter of a few points and its appearance after a run up otherwise the Doji would have neatly been classified as a Dragonfly Doji – and that is a good bullish Doji. But since it fails on these points – I am confused. The Bollinger bands are narrowing still – cannot say that they are anywhere at their historically narrowest level – but all the same – the break out may be violent – whichever side – or whoever wins – the Bulls or the Bears. The 5 EMA red line is above the blue line and sits there with confidence. MACD divergences is virtually the same as yesterday and as positive. RSI is good but has taken a break  - now flat but remains bullish. Slow Stochastic is in overbought zone – both the %K and the %D lines. However red line continues to be above the blue line. TRIX is looking up and is very very good – I wonder why should you short with these indications. What are the bears doing? waiting for some better opportunity? Ummm! food for thought – they can make us fall harder only if we go up – so bulls are taking the line – and up we are likely to go eventually.

Pivot data…
R3 3060 against 3029 on friday
R2 30013
R1 2967
Pivot 2889 against 2908 on friday
S1 2843
S2 2765
S3 2719 against 2788 on friday
Projected High Range 2928 to 2990
Projected Low Range 2881 to 2819
Fib Projected High 2969
Fib Projected Low 2778

Interesting – Pivot has shifted down and the range between the R3 and S3 has increased. It would be interesting to see the outcome on monday – best of luck everybody.



Natasha said...

Dear Mr. Cheema,

Again a great presentation of facts and some food for thought to munch on!
Waiting eagerly for your strategy on capital preservation in good times and bad times!!
Kind Regards,

S S Cheema said...

Sorry saw your comment today (18th). Will do on so on sunday.