Monday, August 17, 2009

Trading Range Blues

Ft.com has this to say on the China recovery miracle:
The laws of economics appear to be suspended for the Chinese — but they are not. They just have “better” accountants — ones that would make Enron’s bean counters seem like dilettantes.
And...
But recently they(commodities) had a serious rebound on the hopes that Chinese economic growth would result in revival of demand for their goods. However, the fictional growth coming out of China is putting that hope to rest. If you own these stocks, you’ve been warned.

Well, that is frank opinion. At least for the past few days, the Chinese markets have also agreed to this viewpoint, falling 17.5%.

Compared to China, India may be a bubble
The Shanghai Index peaked out at 6124. It now trades at 2870. The Index is standing at 46.8% of the all time high. The Nifty had its all time high at 6357, now closed at 4387, is standing at 69.01% of the all time highs - much better Shanghai. Of course, such analysis may be too simplistic, but it does appear that the Nifty may be in for a sharp decline if world markets continue to fall.

But the main point is that the Nifty continues to be in a trading range. Such ranges will see alternate bouts of optimism and pessimism. When price are moving from support to resistance, things seems fine. When they begin moving back to support, a lot of pessimism comes in. While the Nifty remains inside this range, the market movement will alo appear volatile as the Index gets pushed between support and resistance. The big move will come when there is a range breakout.

2 comments:

wildeazoscar said...

But since you are of the view that Nifty bottomed out at 2200---- a breakdown of 3900 would hardly continue till 3250(if that support is breached,i do not think the perception of bottoming out at 2200 holds) . How can a move of 650 points be called big in comparison of a trading range of 830 points?
And what is the big move target if 4730 is broken on upside? At least an amount equivalent of the trading range? That should guarantee 5660 at least!!

VK said...

Hello Sudarshanji: I watch your comments and now also read your blogs. Thanks for your views. I also read the article regarding high speed computers etc. used in trading etc. My question is whether a stop loss order placed by a trader is picked up these computers and if there is any command given to honor all pending orders? Then in such a scenario sitting front of terminal is best option. What is your opinion?