Tuesday, October 27, 2009

Conversations October 27

Saket asks:

1.Stoplosses for buying on dips


My Notes: The actual numbers will depend on the charts you use - end of day, intra day, time period. The broad rules could be (for long positions, reverse for short):

a. Initial catastrophe stop: Below the nearest swing Low OR Below the 3 day Low OR below the one day Low. You should choose the stop where (a) risk is acceptable AND (b) Breaking he stop means that your trade becomes invalid, uncertain

b.Breakeven stop: Once the trade moves in your favor, move your stop as close as possible to breakeven. OR If you have more than 1 contract or share, then sell part of the position Look for bigger moves for the remaining.

c. Profitable Exits: On a trailing stop, target, or a reversal  pattern which changes the underlying trend. This may be a 20 day moving average, OR (a) above OR many other methods.

Saket again:

2. well i heard u today speaking about cairn being a great investment and can be a multibagger in next few years i had looked at its charts but didnt quite understand the reason behind u r hypothesis

My Notes:

For investing, I look at themes. CAIRN is a crude producer. Crude is a finite resource. So is Lignite. Therefore I like the idea of investing in CAIRN.
On the charts, the stock is near its life time hgihs. Above 300, it moves into unchartered area. Who knows where it may go. Big moves are possible in stocks which make life time highs. Remember, th Markets can do anything.

Saket:
3.when we are talking about investments or 2-3yrs do we look at weekly charts



My Notes: Yes, you should.

Men's question asked last week remains relevant:
Is it right to buy on dips now or is it different this time. A 38% retracement of the recent low to high is around 4870.


My Notes: I do not know if it is ever different. Same market, same process of greed and fear. But, the retracement is relevant only when prices stop and begin to consolidate near a retracement number.
We say: Prices are consolidating, maybe ready to move up, AND it also happens to be a Fib retacement area, so there is a high probability opportunity.
We Do NOT say: price has touched 4870 so let me buy. Never.
 
On my Guppy MMA chart, Sunnay has this suggestion:
 
why so confusing set up, If price is above 50sma, long term trend up, if adx green line is up, red down, and price abv 20 sma short term trend up.
 
My Notes: All roads lead to the same destination - go with the flow. So it is fine to use 50 an 20 MA and +DI nd -DI. The key is consistency.
 
 
AnshulTPT asks if it is possible to set in two stops - one is atomatically cancelled if the other one is triggered.
 
My Notes: On the trading software, I do not think this facility exists.
 
Saumil asks:
could you please advice me on shares to buy.just give me advice on few shares which you think is a good long term bet.



 
My Notes:
This is not a stock picking blog. But, I like the idea of holding CAIRN. You must wait for a correction before entering the market, even if it is for the long term.
 

7 comments:

Anonymous said...

On Extended Trading Hours... does it mean more whipsaws for nifty system traders ? The number of trends in a month is not likely to increase due to increase in market hours.. but more 5 min bars could mean more whipsaws, and thus lesser profits at the end of the month ?? As an extension to this idea, should time be a factor at all on our charts or should we trade tick charts for more accuracy ?

Saurabh

TOOCOOL7610 said...

dear sir

life time high for cairn is 343 on 21 may 2008 but you said that after 300 it will be in unchartered area please clear this confusion

regards

Ravi said...

Dear Mr.Sudarshan,
Thanks you for the recent replies and posts. I have a question that I'd like to ask. I've been trading in individual stock options recently particularly TATASteel and ICICIBank, making a premium from my prices. But I've noticed that the option prices after a point are not appreciating even though the stock price is falling and there are no trades happening on the options. How do I go about squaring off such an option (second month option)?

Again thank you for the regular and informative posts. And also thank you for the very informative presentation at the Bangalore session. Including the various indicator names in your presentation gives people options to explore in their learning path.

Best Regards,
Ravi.

tushki said...

sir plz suggest sum level for unitech...i bought it at rs 100 an 18000 shares

men said...

Mr. Sudarshan, yesterday you said we could see 4550 and today you said buy nifty @ 4800 for a PROBABLE target of 4925, how come change in view in one day, could you please clarify. Also hope you put up your charts when giving suggestion on cnbc, which seldom gives charts wrt ndtv. See if you could ask them to provide these when you come.
Thanks and anticipating your reply,
Regards,

men said...

Could you please clarify, the Guppy's MA's shows a bearish formation, while RSI is approaching o/s on daily charts what is one to do?

kk said...

I THINK SHORT TERM TRADING IS NOT THE WAY TO MAKE MONEY IN THE MARKETS LIKE INDIA.BECAUSE ACCORDING TO ME SHORT TERM TRADING MEANS BUYING FOR SELLING.GENERALLY MARKETS HAVE A TENDENCY TO MOVE UP AND IT MOVES UP.I HAVE BEEN LISTENING TO PEOPLE ,THEY SAYS NIFTY IS IN 2500-3000 RANGE ,BUT IT MOVES UP ,AGAIN SOMEBODY SAYS IT IS IN 4500-4800 ZONE ,IT DIDN'T HAPPEN AND RECENTLY 4900-5200 ZONE ALSO DISAPPEARS AND WHEN I PULL UP THE WEEKLY CHARTS NIFTY HAS BEEN RISING FOR THE LAST 10 WEEKS. I THINK NIFTY IS ALYWAYS TRENDING WHETHER IT'S UP OR DOWN ACCORDING TO ME IN THE NEXT 10-15 YEARS IT WILL BE TRENDING UP.SO BUY GOOD QUALITY STOCKS AND GO TO SLEEP.THAT'S THE WAY TO MAKE MOST OF MONEY.SIR PLEASE CORRECT ME IF I AM WRONG