Tuesday, September 16, 2008

Morning Views: What lies beyond 3800 ?

The morning is not good for the bulls. The Dow is down 500 points, while AIG - the large US insurance group has been downgraded, requiring more funds which they may not have.
Let us go through some scenarios.
First, the Nifty continues to fall, touches 3800 or whereabouts, then finds support. It builds a base here.
Second, the Nifty rallies before it touches 3800, goes back into the trading range.
Third, the Nifty continues to drift down, then breaks 3800 decisively, trading lower. This is the scenario we are discussing here.
If 3800 is broken, the Nifty finds support at two different levels, 3650 and 2700 where minor support exist. Strong support comes at 2000. Now I do not believe that the Nifty will fall to 2000. This is not my suggestion. My point is: charts will not provide any technical support below 3800. There is a free fall, the Nifty can stop wherever it wants. We do have 3610 which is also the 50% retracement of the bull market that started in 2003. Then, we may be looking at the Nifty finding support around 3600. This is the best case scenario if 3800 gets broken. The worst case scenario is that these minor support numbers do not hold, the Nifty begins what may be a free fall.

The purpose of such scenario building is to face reality. If we are mentally prepared for a situation we can adapt to changing circumstances. We can go with market flow instead of fighting the market.

5 comments:

Ilango said...

To put it simply, NIfty's sideways trading between 4200 to 4650 got broken on the downside. Hence, the trend which was "Long term down & short term sideways" has now " All term down".Just play the down by selling each rallies whether intra or daily till one day your SL gets hit, by which time you would have made enough to part with a small change as SL.

Your reminding the investment/ trading community often to go with the flow and not resist/ fight the markets is highly appreciated as you are one of the widely followed sensible technical analyst.

Shashank Jogi said...

First, some philosophy to soothen frayed nerves:

Over a lifetime, we shall see magnificent advances and disasterous declines in the markets with a thousand things in between. Keep things in perspective. This too shall pass.

As long as your risk is under control and you dont go against the major trend, you would always be ok. Of course, if you leverage yourself too much and take high risks, the results will be similar to those of Bear Sterns, Lehman Bros, Merill Lynch and the like.

We are in a bear market. In a bear market it is logical to either be short or be flat. Be wary of long positions.

In bear markets, supports eventually get taken out just like in a bull market resistances get taken out. Dont get into a 'value' trap just because prices have fallen significantly.

Prices go up and prices go down. I find it amusing to note how we rejoice when prices go up and wail when they go down. A wise investor needs to be dispassionate about price directions. Up and down does not mean good or bad. They just are what they are, just like breathing in and breathing out. Accept both sides of the moves. Your trading/investing will become much calmer.

krunal said...

the fed will cut rates today (most probably) & pump the system with liquidity.
wot happens then??
1. the commdities bull run resumes after its sharp correction.
2. inflation the world over goes to new highs & unsustaible levels
3. many fiat curriences start showing cracks if they are not already visible
4. derivaties (wepons of mass finincal destructions) the ticking bomb goes 1 step closer to imploding.
5. the ever growing dollar bubble inflates even faster.

conclusion :- th fed the biggest creator of 'Capital' out of thin air cannot sustain an global delevaraging process, the problem does'nt lie in credit crisis nor in run away inflation nor ne other coz these are all just symtoms of the bigger problem & i.e. levaraging which is still very very high & until & unless the U.S. atleast acknowledges it forget bout bottoms as this is gonna end into an hyperinflation followed with the worst deflation.

the U.S. has forgot basic economics & is gonna learn that there no1 in economics which is 'too big too fail' (the $ will be the biggest example to it)

p.s. gold & silver are only 2 assets which can do capital preservation.

Deepak says sudershan is Best said...

Thanks Mr Sukhani But could you please suggest something how to trade this market or not to trade in this market ..............

As nobody can predict what is next it falls one day,second day makes a DOJI,Amazing recovery ...I lost 6-7% of my capital this month & dont want to trade in this market until it settles......

Mr sukhani if you could please explain about gaps as why there are gapups & gapdowns & who get benefitted by these gaps .....

shabsaif said...

I lost my 20 % profit of last 7 months ( which are all profitable expiry)in this month September, because I started to read different blogs and my experience was much confusing and its reflect in my trading.

When all good news comes and NIFTY crosses 4500 all are dreaming for 4700 and 5100 and NIFTY Turn back and break 4200 and now all are dreaming for 3600 and 2000 but today and yesterday was bounce back and NIFTY now 4100.

I fill better to away all of reading and thinking and best is self thinking and sensing ideas for trading is always good.