Friday, January 30, 2009

Update for 30 Jan 09…

Sh*cks – it did not last for the time frame I had in mind – Two bloody days and we cannot keep the gains in hand – where do we go from here? I have asked this question to myself so many times that I am sorry I really do not know – Blondiebut I know for sure that down south may be the Million Dollar right answer. We do not have our destiny there in the bottom of the well – but till that painful decoupling takes place –this is the way to go. The earnings coming out of US are going just one way and that is down. The problem now – a – days is not the results – it is the guidance that is being given by the companies that is doing the major damage – you can imagine the scale of the problem that some companies declaring results in US are not giving the future guidance! It is this that is killing the markets more – there is no clarity of what lies in the future. So here we are – middle of nowhere really ;-). 29 Jan 09

The markets yesterday were not particularly bad – after two/three days of upswing requires a breather – especially in our markets where we look outside our own window for guidance. In any case the inflation is flat (increased marginally) did not help the case. As far as inflation is concerned the govt has taken the steps that I feel – will get it where the govt claims it will be – less than 3 by Mar. Fair enough.

The Global cues have gone negative – Europe started flat with FTSE green and then kept on dropping never to look positive again. FTSE was down 2.45%, Dax down 2.01% and CAC down 2.15%. US too started red and then there was no looking up. DOW was down 2.7%, Nasdaq 3.24% down and S&P down 3.31%. What would be interesting is the 8000 level on DOW – hold or break? It is the unemployment data and new home sales data that cracked the US today. Just wait and see if 8000 will hold or break. Last day of trading today for the week and the month. Will see – how much do we loose or gain this month.

The candles are somewhere in the middle of Bollinger bands. I had expected us to go a little higher before turning down but that was not to be. Now we will perhaps test the lower band of Bollinger and that is as of now flat at 2600 levels on Nifty. ADX was in a mood perhaps to show strength of the upmove as it was moving above 20 but is flat. The MACD could have moved to positive divergence but once again the divergence remained negative. MACD is bearish. RSI is down, Slow Stochastic is has turned back up before going to the oversold zone. It is TRIX that is looking up and I do take TRIX seriously – as generally it signals the way of the things to come. We will have to see the TRIX for some more time as it might just be flattening out before dropping more.

Let us see the pivot data…daily 29 Jan 09

Okay too the Pivot data now…

R3 2951 against 2945 yesterday
R2 2908
R1 2865
Pivot 2830 against 2823 yesterday
S1 2787
S2 2752
S3 2709 against 2701 yesterday
Projected High Range 2848 to 2887
Projected Low Range 2859 to 2820
Fib Projected High 2894
Fib Projected Low 2773

The pivots have not moved much from the yesterday’s levels – 8 points at the most on the lower side and 5 odd points on the upper side. Opening is going to be red but will S1/S2 hold out is my concern.

Best of luck for today. If you deal in NTPC trap it at 180/190 range with 8/10 rupees max investment and I feel the move will be good to give you good results. Best of luck.



Uma said...

cheema, your charts are becoming highly populated with technicals...but they're better and better :)
Am going to watch NTPC.
It's kinda long-term outlook is bearish and short term is bullish (Reliance only)

S S Cheema said...

Uma: Hi and welcome. Uma some lessons from running simulations on options. Try to gauge the direction of the market - let us say that I was bullish two days back - perhaps the right time to take a put was when the market went to the overbought territory - when i became reasonably confident that the market will fall - and it does in one or two day time now invest in call. What happens - especially in a straddle is that - if the stock has an ATR of 10 Rs (ntpc has an 14 day atr of 10 rs) and the total cost of investment is 12.5 (190 call 5.5 and 180 put 7) within two days of directional move in any good direction gives you money. Well as to how i time out is - without becoming greedy and seeing the momentum indicators in one of the extremes. On the other hand - if the momentum is extreme in one end only that position can be loosened so that a reverse direction earns you one or two more brownie points. The simulations are giving me profit in every other trade with about 50 percent accuracy - now all have to incooperate is the time decay accurately so that I can be better and start actual trading in options seriously.

S S Cheema said...

for example - ntpc is overbought - so it was a good idea to buy put yesterday and buy a call - when it is 5 rs in red today.
and one more thing - i talked about a straddle and gave an example of strangle - so pardon me for that.

Uma said...

cheema, I sure hope you make money with options, but don't focus there too much. Only some very volatile counters work out and patience is a big part of making it work. Why? Because where you entered will determine how much range you get. (This is where bollinger bands come in.
For more volatile counters (or more volatile phases of market) set the standard deviation at 2.5 or much higher.
These days all I do is trade small quantities of stocks with a great deal of discipline. For instance, I have 5 shares of Reliance which I held since about 1110. I still hold. I made Rs.1,000 (notional) there. Similarly Educomp recently gave me 2,300 on 10 shares shorted. (Of this I have lost Rs. 500 on shorting Educomp lately).
It's just SO much easier to control emotions when I hold only 4-5 shares. What are you going to do if the price gets too tempting? Sell two shares? rofl. And why panic...? SL is typically 200-300 bucks on the position. It just works for a complete chicken like me.

Uma said...

I think you have really mastered the art of using these simulators and getting the best out of them. I am completely useless at that stuff and usually pour good money on my hare-brained tests rofl.

Uma said...

Oh by the way....test some far out calls and puts of Reliance. The nifty support levels are falling but Reliance support levels are moving up. Their whole goal is to take Reliance as high as possible while keeping the rest of Nifty stable. Operators want to impress the market with a good hold on this counter.

S S Cheema said...

Thanks for the tip Uma - I will study then during this weekend.