Tuesday, July 28, 2009

Too good to be true

(the date is Tuesday, but the post was written on Thursday morning!)

I have found that if something is too good to be true it usually is not true. This simple principle has helped me many times in my own trading and investing. The context in writing this today is an article in Bloomberg by Jeremy Grantham who says that the China story may well be flawed and in the next few quarters events are likely to take place in China which will scare away all the investors. It is quite possible that the much hyped China story may turn out to be a flop as the country could face setbacks not visible now.

This news adds up with the news item in FT which says: "Asia’s forever blowing bubbles" .

Gold may be forming a symmetrical triangle, says http://www.afraidtotrade.com/ in its analysis. The boundaries are between 920 and 980 dollars.

Nifty in trading range, may simply drift down!

As world markets begin a process of consolidation, the nifty may follow suit, simply moving sideways, not going anywhere. A small range in the Nifty is visible between 4500 and 4600. The next trade is liekly to come when the Nifty moves out of this range. Even a range breakout may not travel much, since there will be support at lower levels and resistance in the 4700 zone.

Buying New Highs

Saket asks: " have a query on how to trade in stocks making new highs,how can we work on targets for these stocks,what can be the stops,what can be the strategies on such stocks"

Stocks making 52 week highs as well as all time new highs should be tracked closely. These are shares you want to buy.

Trade these stocks based on a daily chart. You can enter part of your position on the breakout to new highs, and rest on a dip. Keep a stock below the last (or even the second last) swing low. But keep wide stops.

There are no targets for stocks moving into clear skies. If you are trading them, then consider exiting on a range expansion (Big move in your favor). If you are investing, hold on for a wild ride.


G.S.Dhillon said...

most of times targets and stop loss in shares and index are fibonacci levels. But we cant draw fibonaccai levels on stocks charts which r making new highs, so on such shares u can use fibonacci calculator to get targets. Put 5 day high n low in fibonacci calculator if u have software which provides daily charts. Then the calculator will give u the fibonacci levels as targets of new highs. The link of the calculator is http://www.mypivots.com/calculators/fibonacci-calculator.aspx
remember this is fibonaccai calculator, not pivot. I have used this method many times and the levels come true most of times

Saurabh said...

Respected Sukhani Sahab,

I think the author has captured it beautifully.




men said...

Dhillon, how do you fix the high/low for a stock making a new high/low, for eg. Jindal steel and power made a new high of 3200(approx), yesterday (30th) it made a low of 2900+, if the up move continues then v may see >3200, so when should u say this is MY NEW HIGH/LOW for calculation purposes?

men said...

Mr. Sudarshan, can you name one stock for my study only which one should avoid, on CNBC u gave Jindal Steel and Power and JSW Steel as good on the charts for trading and investment purpose, this is only to improve my TA. Thanks.

sandeep said...

i am daily blog reader.
and u r comments help me in market
u r best

G.S.Dhillon said...

dear men, i said use 5 day high low for calculations. Today on 31 july i have 5 day chart of jindal steel frm 26-31th, my software provides maximum only 5 day intraday chart. Suppose this is 29th july and u want to trade jindal steel. Take 5 day low n high of this stock. Frm Chart of last 5 days i.e 24th-28th july u take high n low. As i said said earlier now 24-25th prices arnt availble on my chart so u take high low of 3 days 26-28th i.e 2919-3119. Now put these values in calculator and u get 2869-2888-2900-3029-3042-3119-3140-3164-3200-3237-3279. Now see on 29th low was 2972 n high 3237. Here i write round numbers for simplicity while in actual calculator gave levels with decimals like 2869.80. Sorry for bad english, i hope u get me

men said...

Thanks Dhillon, for daily use for cash segment I found pivot points to be very good and camarilla formula for nifty works very well. AS I USED TO DO THE SAME COUNTER EVERYDAY, this helped me, here I never bothered of o/b or o/s positions, my previous days trade would decide what was to be done. This method has its own advantages and DISADVANTAGES , so be aware of these first before adopting.