Tajinder asks:
"i want to know that is this a bear mkt. rally or now the time has come to invest the money in to the mkt. I am wonder to see the behave of the mkt. because many large cap stocks are still stands on 2550-2600 level like L&T, SBI and some more, Those stocks which are heavily shorted by the traders that moved up from theirs lows. So please tell me i should invest now or should wait to next dip."
My Notes:
How I approach the investment cycle.
1. Identify a stock I want to own if price was much lower (fair price)
2. Wait for a dip, as deep as possible. Sometimes I wait for many years.
3. Buy half of the planned quantity.
4. Wait patiently. if the stock falls and becomes half, i will buy the balance quantity provided nothing else has changed.
5. Stock selection: good managements, share price falls due to business cycles and not due to 'news'.
While Tajinder may not be aware, my feeling is that the desire is for trading in the market, because investments do not need market timing with any kind of precision.
To answer the questions, is this a bear market or new bull market ? I cannot say. We will all be wise after the event. If you wish to trade, this is not a good time. Nifty is up by 450 points (almost 18%, I think). You have to wait for a dip.
My sense is that this is a bear market rally.
What is the difference ? In a bear market, new lows will / may be made. That's possible even now.
July 2 2010
4 weeks ago
Posts
11 comments:
It seems to be many retail investors are getting ready to invest for long term.
3150 may be on the cards.after that we may go down or this bear market rally will take us 3600??
Sudarshan ji lot of questions like this,many retail investors are facing.
As per ur suggestion dont fight with the trend,go with the trend.Is a best idea.
Please tell us the levels to watch out on s&p,dowjones.
Warm Regards
R/sir, if this is the bear rally then what are the levels to place the shorts on nifty or else what should be the strategy now. i only trade in nifty no stocks.
Hey sir,
your first point of investment cycle is very tricky part. I am talking ab fair value. how to get the fair value.. do u really think that sell side analysts are capable of finding the exact fair values. they always follow the trend ; downgrade if market is going down and upgrade if market moving up ..u can have so many examples especially in US ..even i remember in credit ssuise report there was an indicator based on timings of market bottom and analyst downgrade and upgrade ..the finding was that there is always a difference of 6-9 months between market tops/ bottoms and analysts upgrade/downgrade ..
I am not blaming them .may be if they r using DCF model then that itself is faulty because there are so many variables in DCF valuations that u can always change them to find out fair value tht you want to have ..
what about the Fair valuations of US banks. No one had any idea about it, except few good ppl like robert sheller or Peter schiff ..Even one of the renowned fund manager(i don't remember his name) performing consistently for last 15 years gave -76% return betting on financials.
In case of real estate stocks, many ppl must have invested in june, looking at 50% drop from peak and speculating that these levels are near to fair value...but another 75-80% down from there ....
i have no idea about fair valuations..please guide me to find out a better way of investing.
Dear Master,
You are one of the few unbiased tech.analysts I have come accross. (Prakash Gaba is another of my favourite analysts and friend.)
I most often watch the business tv channels in "mute" mode just to shut myself off from the ridiculus contradictory "advice" some other analysts regularly churn out.
I have tried to use Astrology, Numerology, Tarot Cards, and Pendulum Dowsing (which I call my "Occult Tools")along with the tech.analysis of scientific analysts like you, to trade only in options.
It is my personal observation that sudden movements in the market can be better predicted by the Occult methods, while using tech.analysis to further validate the possible outcome.
I feel that successful stock trading requires accurate entry and exit timing, with the ability to understand how our own mind acts during stressful situations. Our own Egos most often create losing trading patterns, which have ended the trading careers of even legendary traders like Jessie Livermore.
You personify true trading spirit, and are an inspiration to many of your fans like me through your blog and through your media appearances. I salute your knowledge, humbleness, graciousness and spirit.
Prabhu
will the close above 3150 confirm a bull trend ? or we have to wait for some more time to see whether a new low is made or not in current time?
This is the first time since November 2008, that oscillator signals are not working properly.
I mean various oscillators are overbought now since 2830 levels, but still nifty is rising. Why?
Sudershanji you might have seen such moves in past. Tell me what happens next?
I think today we will get a strong SELL signal provided Nifty doesn't breach 3100.
But is it worth to play on the short side against the trend?
hello Sir,
My question is what are the factors that determine the start of the Bull run/market.
You must have a good knowledge of the same.
For a novice like me it will let me understand the next face of the Bull run.
Hello Sudharshan,
I very much understand and appreciate your consistent viewpoint of not to ask WHY there is a trend but to identify WHAT the trend is so as to trade successfully.
On those lines, it seems like this rally is now starting to prove that its a little different from the ones we have had so far since Jan 08. The NIFTY is now starting to trade consistently above important SMAs and EMAs. Add to that there are some interesting crossovers that are taking place (between a few averages). While it may still be a whipsaw, its interesting to note that if one had gone long during these whipsaw times in history, he/she would only make marginal losses (and sometimes even profit) if they had a stop loss at a point where the shorter moving average starts to fall below the longer average.
Such whipsaws have occured only a few times in the history and this includes charts of different countries particularly Asia.
China, Taiwan and to some extent South Korea have done very well from the previous year lows. Their relative performance and the confidence in markets are looking a lot better than most of the European and American counterparts. One just wonders if this really is the indication of things to come in the next bull run. It also underlines the point that many fundamental analysts were making last year - "Asia will be the first to recover" - They said.
Having said that, a couple of points are still keeping me out of these markets.
1) You have always maintained that bear market bottoms happen at previous bull market tops. That simply means an eventual NIFTY target of 1800-2000. Scary!!!
2)This has now been a strong rally. Now almost 500 points on the NIFTY. There may be some correction.
Any thoughts Master
Srinivas
Right on spot... You had told about 3100.. 4 trading sessions ago itself.. when many had chosen to disagree.. 3 cheers to you for being on the right side!!
I think....Nifty 2575....RIL 1075....Dow....6550.... wud come back now...ongoing rally is perhaps over....!
Dow touching 7950(still few points left) wud mean technical rally over and may be(or even may not be) after some overshooting it resumes its technical journey to 6550....
Current global rally was just a technical pull back which most probably wud fizzle out now..
Though it does not feel good to talk about lower levels in such an atmosphere where optimistic voices have started coming from here and there but it is always better to control the temptation and not to get carried away...
Then how to do this...??
Even I do not know any magic by which I cud tell some surefire technique to invest in stk mkt with correct timing...
So the only solution for people (including me) who do not understand the complex technical analysis(though it not complex at all) is that take a "REFERENCE LEVEL OR BAND"..
It means take some level as reference for taking decisions....
For example....If Nifty stands above 3000/2960 for next day/week/month/year ..I wud remain invested on Long Side in Nifty else I shall quit my position...
And what if it takes a dip and again bounces back above my reference level after I exit my position...
Answer is "Try & Hit" is the only theory practised in this mkt...because as I said there is no "foolproof" technique available till date and in my knowledge at least..
So keep trying with the self specified reference level for a specified time span..
I bet that biggest problem comes in the form of following the system....People including me get tempted and either they frequently keep changing their reference levels or the time frame..!!
So "No Discipline" proves bigger enemy than price fluctuations in stk mkt..
Stop Loss are frequently hit...
but what is there purpose....????
There is a normal feeling in all of us that our SL should not receive a HIT...okay fine....but why to forget that SL was not a tool to ensure "profit" on our position...rather it was a tool to protect us from big losses and so the erosion of capital...and by receiving the hit it has done its job...because simply mkt direction was either not clear or not in line with out position....!!
But by loosing its sanity SL has probably conveyed that it is time for us to review our decision on our open trading position(if still open)...sitting blindly & praying or feeling or thinking or being in hopes wont be a very good idea perhaps to handle the stk mkt....
I may be wrong....but I think this way only.. :)
regards
http://retailersblog.blogspot.com/2009/03/just-thoughtnifty-back-to-2575.html
Thanks for clarifying your approach to investment. Sometime ago, you had mentioned taking position in Hindalco in the same spirit.
I wanted to mention another script in this regard. It is Sona Koyo steering systems. They have a leadership position in this segment. The management is very good and have a very strong focus on quality. It is around 8 Rs now. I do believe that no one can drive a car without a steering wheel. So, I bought some today. What do I have to lose? Assuming I bought 100 shares, I stand to lose 800 Rupees, on the other hand in five years or so, I stand to gain probably 4000 Rs. which is not a bad risk reward ratio. I am sure that there are other scrips like this, just wanted to mention my two cents here, which is anyway learned form you.
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