Saturday, October 4, 2008

Where has technical analysis gone ?

Almost all the email / comments I receive in this blog have been appreciative. Now, like a favorite student admonished by the teacher, I am receiving comments that I seem to have strayed from the path of technical analysis.
Guilty.
The Nifty closed at 3818.30, the lowest weekly close since 8 April, 2007. If we are closing at the lows of 18 months, we are in a bear market.
Follow the trend, is a basic maxim in technical analysis. Then, most of our trading should be on the short side. The bear market is assumed to continue until proved otherwise. What is the proof of a new bull market ? If the Nifty closes above 4300 (the last intermediate high), we may well say that a new up move has started. (The 4300 number will change with time).
Within an intermediate down trend, there will be sharp rallies. This is the nature of the bear market.
Trading, then, is possible for taking short positions on rallies (going with the primary trend), and, also for intra day / 2 or 3 day up moves that can emerge suddenly.
Weekend cheer:
Goldman Sachs now predicts the US recession will be "significantly deeper" than previously thought. 'Headline' unemployment (the number cited by the Bureau of Statistics) will reach 8% by 4Q09. Also, 3Q08 GDP growth will be 0.0% at best. U6, a broader measure of unemployment and underemployment used by Bureau of Labor Statistics but not often publicized, now stands at 11%.

1 comment:

Anuj said...

One of the Qualities of a professional trader is that he realizes that he has made a mistake or things are starting to take a different course unlike the way he thought of (against his basic principles or trading rules) and accept his mistakes humbly with out any ego

Sudarshanji’s feeling of ‘guilt’ of straying away from technical analysis shows why we respect him as a trader so immensely .The ability to quickly identify that things are not going as planned is what we should learn from him and apply it to our trading

Not getting emotional or tied down by our trading position (long/short) is perhaps the most difficult aspect of trading (especially all so called long term investors)..perhaps this is the only difference between a professional trader and an amateur (a profit or a loss)

We all know that getting emotional is not the right way..We all have read that in every stock trading related book..still we tend to make the same mistakes over and over again(i made that on friday by buying reliance at 52 week low!!!)..knowing things and practically applying these basic principles makes the difference between success and failures

Trading rules as discussed in previous posts by sudarshanji and some readers is the best way of keeping emotions out, continuously tweaking the rules to make them effective will probably lead us to better trading

Cheers to all

Anuj