Wednesday, September 23, 2009

'Liquidity' sell offs can be brisk

In my newsletter to our clients, as well as on CNBC, I have emphasized many times that this stage of the rally is all about momentum. We should not give attach any fundamental reason to the market's current strength. It is just the same old story of fear and greed. Past evidence would suggest in a market driven by notions of "liquidity"; sell offs can be rather brisk.

This is not to suggest that a sell-off is coming. But from this perspective, risk is rising. For this reason, Investment money should wait for a market correction. Investors who wish to participate in this rally should do so as traders. A trader will always keep a stop loss allowing him to take the least risk possible. An Investors puts his money on themes, has either a wide stop or does not have an exit strategy until the theme changes. For this reason, investing should always be done on dips to ensure the least damage if the theme changes.

How much time do you spend in searching for buy and sell calls? How much time do you spend in learning the tools of the trade?

Here is what you should do:

Give me six hours to chop down a tree and I will spend the first four sharpening the axe.~Abraham Lincoln

ORCHID chemicals may have reached at least a short term price target. The chart below explains why I think so.

I am giving a chart for Powergrid which explains how I search for swing trades. The tradng range is my favorite pattern! Questions on the chart are welcome. Since trading styles can and will be different, comments with criticsm will not be welcome.


amitkbaid1008 said...

Dear Sudarshan Sir

Very interesting to see the chart of POWERGRID. It really interesting and amazing how you successfully predict that It will give a breakout or not? Hats Off to you for predicting such breakout which stand strong even in today's dull market.

Sir I want to ask you one question (if you want to answer) Whether NIFTY SPOT given C9 reversal with 9 on EOD 17-09-2009

men said...

A clarification I want Mr. Sudarshan, are you anticipating a break out because of the last green candle? or becuase of a formation of the 2nd inverted h/s pattern? for power grid, also do volumes support your view. Thanks.

sandeep said...

dear sir,

i am sandeep from ahmednagar (maharashtra)
i am day vinayak user
and i read ur blog regularly, this is very useful for me

day vinayak gives very good result to me.
i have one question??
to earn 1,00,000 per month (or 12,00,000 for year) how should i invest. (excluding 88,000 of day vinayak)
i want to continue day vinayak for 1 year (but max period of day vinayak was 3 months!!!1)
but no problem i will renew day vinayak.
waiting for ur answer

p.s. u r such a fabulous TA.
u r my reacher and guru

Aurobindo said...

Hi Sudarshan,

I have a question on trend following system.

How can we reduce the risk using options in a trend following system. As price reaches certain moving average we see a change in direction. But before this change there are few whipsaws. Can we effectively reduce the risk by using a combination of options and futures? I googled a lot found few but nothing partticularly on trend-following-system + options.

Could you please share some strategies involving options in trend following system to reduce risk?

Viral Rajnikant Dholakia said...

Dear Sir,

What guidelines do u follow in determining A-B-C pattern & targets emerging from that formation?

piyush sharda said...

hi sudarshanji,

we (day V ) made 3.5 points in powergrid (112-108.5) but i have a doubt . as per text books we should either buy 1)near support ( near bottom of rectancle/ trading range) and place a stop below or 2)on breakout and place stop below resistance which becomes support or after breakout and on retracement close to resistance. did you anticipate breakout by ascending pattern in the last half of rectacgle or by some other indicator not mentioned.