Friday, July 10, 2009

Trend day after Infosys results?

My earlier post for today was Is a short term low in place - ask Infosys? . You may like to read it to get the context clear.

Infosys reports at 9 AM today. The markets are likely to respond strongly to Infosys guiidance, moving up or down. This means we could be seeing a trend day today. What are the signs of a trend day?
1. Gap. Up or down. This is one gap that could be a continuation gap.
2. The trend day is usually preceded by a narrow range contraction. Tuesday was a narrow range day and Wednesday saw a big down move. Again, yesterday, Thursday, the Nifty traded in a narrow range. Therefore, this condition is met.
3. The trend day is usually caused by some event - world markets, or news. Today, we have Infosys guidance.

How do we trade such days?
Once you are sure that the day is developing into a trend day, look for pullbacks to a moving average (20 period is good enough), or to the middle line of an oscillator. (for RSI it is 50, for the CCI it is zero). A consolidation can sometimes replace a pullback. These pullbacks will offer opportunities of picking up some points in the Market.

Take care because the markets are not predictable. What starts as a trend day may eventually end up as a choppy range, or, even as a reversal day. Taking profits at some point is a good idea. If the trend pesists, maybe you can reenter.


Pi said...

I dont agree with the last bit about getting out. A high % of trend days end at or near their day's high or low respectively. It always makes sense to hold onto to your position and infact carry them overnight too. At max if trend reverses one will get out with a small loss, else the gains will continue to pile up.

@ LIC Agent Noida - Stop trading in options sir. You will only end up losing money. Either have enough capital to commit to trading futures or resort to selling options rather than buying and holding them. Decay would eat up most of your gains on buying options, while selling it would add to your gains.


I dont know about Infosys guidance.But sudarshan Ji's guidance always helps us.

Best regards

Viral Rajnikant Dholakia said...

Dear Mr Sudarshan,

I feel you've given a bit too much stress on Infosys results in search of determining a market Trend.

I also feel, that Infosys no longer has as heavy a weightage on index as before. Same applies to IT sector as a whole which would, of course, mirror Infy trend for the day atleast.

However, it is quite possible that markets may move on the side of Infy trend. But that could be more of a co-incidence.

I am not criticizing you on tracking Infy results, but over-reliance on it to provide the markets a trend (for the day).

Again, it was justified when you waited for a bigger event like Budget to provide the markets a directional trend, but whether the same is justified with Infosys results, I doubt.

youngindiabiz said...

sudharshan ji

like ur analysing....

u r my dream analyser....

indian investors r very thankfull to u sir..

thank u sir.

garry dhillon said...

infy is stiil 2nd heavyweight in nifty mr viral rajnikant

TOOCOOL7610 said...

dear sudarshan ji

thank you for your valuable comments on my questions in last post regarding values taken in rsi,cci,stochastics etc, only thing still i didnt understand that how should we calculate cycle length in charts , kindly give a small example of how did u calculated for 5 min charts{93 as u said} also what does it mean by "oscillator settings should be half of the cycle length applicable for the instrument" my charting software shows default stochastic values as 5, 3, s, 3{%k period ,%k slow,%d type,%d period respectively} for cash charts { i dont have future chart in it} kindly explain what shud be my values then and when i shud relook to change them,when i will get future charts i will be applyin same on that charts.


Viral Rajnikant Dholakia said...

Dear Garry Dhillon,

The point I was trying to convey was that Infy has no more as much influence on Market 'Trend' as before.

There used to be a time (just few years back), when Results & future forecast of Infy had power to change market trend on the day or for that matter even for few session post-results.

What I meant to say was that yesterday (July 10), we saw Infy move up 3% for the day, but Nifty settling at 2% lower for the day. That in itself shows that the trading day (or for that matter even Trend) was not dictated by the influence of positive Infy results which gets reflected in its higher stock price for the day.

At those times, IT as a sector has a larger weightage on leading benchmark Indices. But, since Rupee/Dollar Equation turned negative for these IT companies 2-3 years ago, the sector no more holds large influence unless very fluctuating.

Anyways, my views could be erroneous in some aspect of its thinking. May be, Mr Sukhani would be able to provide a better ray of light on this aspect of IT sector vis-a-vis its influence on benchmark Indices.

Quite possibly, he might have been writing his posts based on SENTIMENTAL impact that the Infy results leaves via its Annual Guidance. Hopefully, we'll know soon from him.

LIC Agent Noida said...

Dear Sir,

I am beginner in trading, but i have a small confussion... doing trading with technical why do we talk about news and events.. we should always talk about the overall setimaent and Chart.. in your previous blog i read you were talking about berish head and shoulder breakout and it was sucessfull so i took a short position in nifty with a SL. Is this not a mix of technical and fundamental.... ??

Mohit Singhal