Saturday, September 6, 2008

It is a 'Nuclear' Deal

The Nuclear Supplers group has finally agreed to sell nuclear supplies to India. This will enable us to utilize our nuclear reactors to the maximum capacity, as also expand our nuclear power generation capabilities.
The deal itself has two aspects for the Markets.
First, the Euphoria. The stock market may well decide to use this as a trigger for a large and substantial rally. A rapid fire move to 4650 is possible. This move will not require the assistance of international markets. We can do this on our own. Once the Nifty reaches the outer edges of resistance, a breakout from the 4200 - 4650 range will take place if world markets turn bullish. If this happens, we can be looking at 5100 / 5200. Lot of "If''s, but it is possible.
Second, the Reality. The deal itself is just a small help to the massive task of uplifting Indian poor to a better standard of living. In fact, the deal itself is likely to play an insignificant part in the removal of poverty. This realization will also come to the market, although the period of euphoria could last long enough for a decent rally.
How should we trade this news ? First, avoid taking short positions. Traders should never fight the trend. Second, go with the flow, which may be up. It is possible to buy on breakouts / on dips. Third, allow for increased volatility, by widening your stop loss. To control possible losses, keep volumes smaller than normal. Fourth, look for tell tale signs of trend exhaustion. Since the trend has not even began, this is a little premature. My point is, remember that the best of moves will get exhausted at some point, so do not get carried away.
It does appear that September might be fun !


krishnamurthy said...

my feelings that the market already has discounted this news . Open interest of nifty suggest that we may have alread seen a top at 4650 in this rally . My best bet is that if at all there is a rally on this news do not be fooled to make any new purchases . Instead try to short nifty at 4450 4500 levels . stop loss still remains at 4650 which looking at global markets and FII's sell figures in this week do not sugggest that it may get hit . so short aggressively as nifty is headed to lower levels that 3800 .

VIKRAM said...

Dear Sir,

With great due respect to your views i m of the view based on charts that there can short up move, which may be short lived and this week nifty will move to 4200-4250.