Monthly Archives: December 2012

NICKEL – 957.80

Nickel, after one and half months rally from low of 852 to high of 980, showing an initial sign of waning.  As we can see in below attached chart that, recently Nickel has broken its one and half month rising trend line.  Secondly, momentum oscillator MACD has given Bearish Convergence on daily chart, as well we can see that RSI is trading almost flat from last few days.  This gives us initial sign that momentum is waning, and if you are holding long Nickel than better book your partial profits here.  Confirmation of weakness comes in as and when Nickel close below 950 levels, and this will be the point where we like to go short in the counter, strategy should be taken according to risk appetite of individuals.

NICKEL AS ON 21 DEC 2012

NICKEL AS ON 21 DEC 2012

Tata Coffee – On the radar of Big Bosses

Anybody who looks below attached chart will agree with me that, for sure there are big hands involved in Tata Coffee.  If we see past price movement than it is quite evident that since from May’11 till June’12 Tata Coffee moved in the range of 900-800 barring few jerks, and that to were too small.  From June’12 onwards activity picked up and price moved gradually higher & higher.  In fact on 16 Nov, 12 stock made a high of 1564 with huge volume, which clearly tells us that either FII’s or DII’s increased their stake in stock, and if we see price movement then after, than in last one month prices are moving higher and closing slightly above than previous close, which clearly means that every dip there is a buyer.

Tata Coffee

Tata Coffee – CMP 1400

I know, up till second week of Nov’12 prices were trading just in the range of 1100-1000 and with one sudden spike range shifted substantially higher to 1450-1350.  For retail investor, this stock becomes too risky to take bet, but I sense that investors who are ready to take risk can take action on dip near 1250-1300 (if it comes) with stop loss of around Rs 50-100 according to risk-appetite.  Follow simple rule here, don’t hurry to accumulate and don’t panic with others when you see a dip.  Technical target for Tata Coffee is around 1750, so risk reward will be quite in favor.

According to my observation, in very few counters you see action like this.

Breakout Trading

Dear Reader,

While you are trading and following recommendation of many research houses, you must be reading technical reports and must have come across many jargon’s  clichés and specific words, which are either new to you or not understood the meaning or reason to behind the purpose of word or sentences.  In general human psychology is such that if you don’t understand something than it is either useless piece of material, or one step further its job of analyst to confuse your more.  We know it is not your fault, but it is the fact that many of the analyst try to give you unbiased view, where they like to stand on both the fronts, so irrespective of market takes any route their views held true, because they have given the possibility of both the moves. Any ways, we don’t like to delve much into it, in our series of Educational Articles, we attempt to educate our patrons, and make sure that whatever we convey, that should be fully understood by them, which helps to make them sound decision.

It is said and statistically proved that only 15-25% of time market trends, and rest of the time either it consolidates or give false breakouts and trade in choppy range.  If this is the case, than, it becomes difficult for any professional traders to trade the market, because there is little or no scope in range bound markets.  To solve this quandary or an alternate way to respond such type of market, many analysts have developed tools and oscillators, which can help you to take right decision, but that can only be applied with expertise and considering all the facts and figures into the account.  Simplest approach to this situation is trade only the Breakouts.

Breakout: – Stock that has consolidated against a price level for several bars.  The point where it breaks beyond that price level is called the “Breakout” and often is the beginning of a short to intermediate term move in the direction of the breakout.  Adding further to above statement, if price is consolidating for several bars and breaks beyond the price level on a downside than it is called as “Breakdown”.  This can be understood by below attached

Breakout Trading (a)

a)      Here price was consolidating in a horizontal range and gives breakout on an upside.  In such type of scenario, trader should always wait for real breakout to initiate the position i.e. initiate only after some minimum price movement in the direction of breakout.

Breakout Trading (b)

b)      This is a Rising Wedge formation in falling market, which is a continuation price pattern, well respected and traded in the market.  As we can see in the attached figure, price was falling up to one point and then started trading little higher, but the whole move proved nothing but distribution, than it gave a downside breakout after brief period which resumed its original falling trend with more vigour & intensity.  (There are total four types Wedges, detailed description is already available in our tutorial on Wedges).

Breakout Trading (c)

c)      It is a Flag pattern, another continuation price pattern.   These are small rectangles that form majorly on lower degree charts.  It is part of a fast moving market and signifies temporary halt in the trend that will continue the prior trend.  As we can see, on breakout price accelerates again on an upside.

Breakout Trading (d)

d)      It is another Flag, in falling market.  Crux remains the same; we have to wait for decisive price breakout on a downside.

Breakout Trading (e)

e)      Other than price pattern, trader should keep an eye on previous day’s High & Low.  Breakout from either direction gives excellent opportunity to trade.

Breakout Trading (f)

All breakouts are well traded if caught at a right time, with a sharp eye.  There are some Do’s & Don’t about Breakout trading

Do’s

  • Before taking any breakout trade, you should always check back history of an instrument, to understand its particular behavior on breakouts.  It will be a highly useful key to increase the success ratio.
  • Breakout from resistance or support line, is best to trade, but make sure price have space to move beyond the range.

Don’t

  • It advisable to wait for some decisive price move in the direction of breakout, otherwise you’ll get trap in the head fakes as you can see in attached figure (f).
  • If instrument has multiple resistances coming on its way just after the breakout, than avoid such trade, even if it has given ideal breakout from consolidation pattern, look for something else.

Generally, breakout trading is more suitable to intraday traders, who seat live on the market, or else you have strict watch on the market, if you are investor or occupied with some other work than it is not advisable to experiment such methods in your trading.

Keep trading…

Why Prices of Gold not falling in Indian Market???

Or

Why Gold is Expensive in Indian Market.

Many Investors are amazed at this point in time, when Gold was continuously falling in International markets, but not in Indian markets, basically it has to follow the suit and react accordingly.  Investors are right, but pricing model of Gold is not as straight.  In this article we try to investigate reasons behind variation in Indian Gold price and its prices in International markets.

Before going further we should take one glance at some of facts & figures about Gold.

  • First and fore most reason is India is net importer of goods & services, including Gold & Silver.
  • Whether we believe it or not Indian is the world’s largest consumer of Gold, India accounts for nearly one-third of the total world demand for gold.
  • Indian is not largest consumer but also largest Importer of Gold, and Average rate of growth of import from 2008 – 2011 is 26.8% p.a.  Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11.  In terms of percentage share of gold and silver combined were the 2ndmost imported commodity in 2010-11.

From above facts it can understood that India is the biggest consumer and importer of the Gold, due to variety of reasons, which can altogether become different topic to discuss for.  Now, coming to the point, because of India is net importer of Gold, price of Gold varies with the exchange rates from which India is importing.  Moreover such transactions happens in Dollar, considering most liquid and globally accepted currency; so price of gold varies with movement in US Dollar with Indian Rupee (USD/INR).  So if Rupee appreciates in compare to Dollar, price of Gold tends to fall, and if Rupee weakens so the Dollar appreciates, price of Gold increases, irrespective of fluctuation in International price of Gold, and obviously with fluctuation in International prices of Gold, pricing in India will be accordingly adjusted.

Above points can be looked with two base case scenario, one in which only prices of base currency changes and not the actual price of Gold, and other scenario could be prices of Gold changes without any change in currency quotes.  In real world, both scenarios occur simultaneously and a price of Gold varies keeping every aspect in consideration.

Lets look at first scenario, where a price of Gold remains static in International market, and we only notice change in price of Gold due to change in currency valuations.  If Rupee depreciates in compare to Dollar (Base Currency), for example current USD/INR quote is 55 and if quote rises to 56 than it means Rupee is depreciating in compare to Dollar, than in that case prices of Gold will rise; whereas if Rupee appreciates than prices of Gold tends to fall.

In second scenario, where we only notice fluctuation in price of Gold, assuming there is no change in currency quote.  It is very much obvious that keeping all other things constant, with rise in International price of Gold, inevitably price Gold in Indian market will rise.

In practicality things are not as simple as we explained above, commodity prices are influenced by number of factors namely, price is function of demand & supply, fundamental reasons which can affect the commodity prices and last not the least any asset class including commodities are influenced  by the speculative forces.

EQUITY MOMENTUM CALLS FOR 18/12/2012

Recomm Scrip Last Close BPL-1 BPL-2 Stop Loss Note
SELL REL INFRA 515.5 495 485 521 Sell Below 510
SELL BPCL 344.9 332 322 355
SELL SIEMENS 669 650 642 685 High Risk
SELL WIPRO 370 355 349 376 High Risk
SELL ONGC 257.8 250 246 261
Please don’t forget to read disclaimer attached below

Dont try to jump in the trade, if Nifty is turning positive.

As such, i sense that most of the indices are trading near make or break level, and today’s announcement will drive the market.