Tuesday, June 2, 2009

Nifty still at significant resistance

The NSE Index stands at 4500, a zone of strong resistance. Now, this fact by itself does not imply that the market should now stop rising. Strong resistance means - If the market is getting ready for a correction or dip, then the 4500 location is a good place for the dip to begin. So we understand that momentum is currently controlling the scenario - if there is sufficient momentum the Nifty will simply cross the 4500 zone and continue moving up.

Emerging Markets:
Bloomberg has a news item which says "The four-week flood of money into developing-nation stock funds that drove the MSCI Emerging Markets Index to an eight-month high is sending the strongest sell signal since equities peaked in October 2007."
Why?
“Fund flows at their extremes are contrary indicators,”

Now, we all hear that liquidity is driving the markets up. This is good news. But, liquidity has limits, since it is based on the 'greater fool theory'. Traders should continue to ride this market with stop losses. Investors can as well wait, because liquidity has never been a good reason to invest. Value is a much better option for investors. An overheated market is not the ideal place for value. Wait!

Replies to comments:
Manu asked :
"there are many technical analyst Service provider, one of them is Snpnifty.com, which is linked to sudarshanonline.com"

My Notes: I provide google ads in the blog. Perhaps some ads have given this impression. We do not have any links with any provider. (I own a service company: http://www.technicaltrends.com/ ). If you note, I have removed the ads to avoid any confusion.

Bhupesh asks:
"can we see a 4672 level before we get into a good correction."

My Notes: I really cannot say. The reson is simple. This market is not driven by fundamentals or technical patterns. It is now working on liquidity (the greater fool theory), so anythin can happen.

Manish asks:
can we see inflation as a indicator in stock markets . When inflation goes really does , we can buy some stocks ?

My Notes: stocks and gold are a hedge against inflation, but gold is probably better because stocks may also be influenced by current economic environment which may be good or bad.

Krishna asks:
What are SEBI norms to qualify as a professional Technical Analyst?Which certification/qualification is legally required to take technical analysis as a profession .

My Notes: SEBI does not provide any norms for a professional technicl analyst. Our new association The Association of Technical Analysts will offer the CFTe certification in India, starting from Octobe 2009. This certification will confirm that the holder is a qualified technical analyst.

Rajneesh asks:
"sudharshanji-- this may be a stupid question-- but which trading software are available for the indian market? please help since i am lost."

My Notes: There are many technical analysis software available in India. I can direct you to a company that I own - http://www.technicaltrends.com/ (This is a bit embarrassing,....)

Stop losses for 'running' stocks
Mem says:
Now that most stocks are >200dma's by 5-20%, what should the stop loss for these stocks, and how should we go about it?

My Notes: Search for the shortest moving average below the stock price, maybe 5 or 8. Use this average as a stop loss. You need to decide if the stop loss will be intra day or on a close. I prefer a close only stop, meaning the stop is triggered if the stock is closing below the average.

And..
Secondly when using RSI, what gets precedence the stock price or the RSI? For eg. price goes up and RSI comes down and vice versa.

My Notes:
Price always gets precedence. If price goes up while RSI goes down, we simply say that the stock is losing momentum. Maybe it will begin a consolidation, maybe not. The trend does not change even if the RSI is going down. Trend changes only when the price goes down.

2 comments:

CHANDU said...

First of all thank u for taking time with us.We always wait for ur new post to learn some thing.Thank u.

Why dont u give basic course on technicals, online training.

Regards.

men said...

Dear Mr. Sudarshan,
Thanks a TON for clarifying my doubts. I REALLY APPRECIATE YOUR GESTURE you made my day, thanks once again and MAY GOD BLESS YOU.
Yes I also feel some small tips like these from your end would would go a long way in polishing our skills.