Sunday, January 3, 2010

Understand the Context

The stock market does not give the same signals to all participants. A stock may be a buy for a long term investor, it may be an exit for an intermediate trend trader and could be a buy / sell for the swing trader. The context is important to understand when trying to use any advise that comes to you.

Reader men seems to track my utterances very carefully. He writes "On CNBC you said an investor should buy R power as you are expecting a bubble sometime in 2011is there any thing on the charts that such a thing is possible? U also said that if the market were to correct then this stock would also fall, then in such a case what should the stop loss be or is this a purely contrarian call."

My Notes: The Power generation sector is waking up after a long process of consolidation. RPower is a speculative stock which could well turn into a bubble if the sector were to begin a bull market.  Now, this and most other stocks will fall if the market does so. My statement to this affect was a warning to understand that RPower is not being suggested as 'THE' stock.


I respond to specific questions on stocks therefore it is neccessary to understand the context. For RPower as well as for RCom (mentioned below) the context were questions from viewers who generally said that they wished to invest in these stocks. If I perceive a bearish trend I would have said - please do not invest. RCom (like most other telecom stocks) is probably building a base, and, is justified as an investment.
Men writes:
"Also you have given a contrarian call on rcomm for an investor is this purely on fundamentals, and if so since when have you started investing purely on fundamentals, because if I remember correctly in one of your posts you have said you generally ignore fundamentals and go purely by the charts, at least in rcomm case then it MAY BE AN AVOID if one were to consider the momemtum.

On JSPL with a pe of >50 you have given an out performer, kindly suggest some levels to enter and exit."
 
My Notes: JSPL is a chart call. This is a stock that has been making new highs. In my dictionary, new highs are bullish. So, the PE may be unacceptable but that may mean that earnings will rise to match prices.  You really need to track the charts to determine your entry and exit levels. It also depends on your time frame - for an investor either a deep correction or a long consolidation are ideal points for entry.

Cheers.
 

5 comments:

vikram said...

Sir, wish you a very happy new year, i wanted to know if you also have any official website through which you advice and provide tips for day trade and long term trading, awaiting your reply eagerly

pranav.kulkarni said...

Dear Sir, I believe trading with the help of pivot points. But, as usual it gives whip saw signals sometimes. Is there any filter which I could use? Or is there any other indicator,which I should use along with pivot points?

Deepti said...

Dear Sudharshan,

I completely agree with you. You are doing a great job in giving your comments, as i feel you are one of the very few Analysts appearing on TV who actually says and does things in his own way, rather than just following the herd.

As for the people crucifying you on your statements, thats part of the game. One needs to understand the investment horizon and the strategy before they can actually start deriving meanings out of the statements. A long term investor is simply not bothered by falls in the market and perceives them as opportunities, at the same time a Short Term Trader, would like to make some money shorting stocks and indexes on a 1% fall in the market.
So its all about the VIEW POINT.

regards

men said...

Mr. Sudarshan when the nifty barely moves 1% on intraday basis, can you suggest how do we go about it?

suhas said...

Sir
Greetings to you.
I represent a global communications firm. We are currently conducting a worldwide online interview of bloggers on Online Trading and FOREX. I request you to be part of the interview. Kindly provide us with your contact information, to facilitate the interview.
Regards
Suhas Tadas
suhastadas@gmail.com