Monday, June 21, 2010

The Yuan Rally

An intention to float the Yuan (partially, within controlled limits) set off a large rally in equities on Monday, today. The rally was most pronounced in Asia, which is geographically close to China. Somehow, Europe and the USA do not seem to be impressed with this announcement.

They should not be. China's action was anticipated, to the extent that the whole world was demanding some action on its undervalued currency. Markets went up, mainly on excitement, and, the chances are they will cool down quickly.

What next?

The Nifty is within striking distance of crossing its current bull market high of 5400. We should remember a saying "There is many a slip between the cup and the lip". Two weeks ago, the Nifty was at 4970, within 20 points of breaking below a significant support level at 4950. I assumed the breakdown was sure. But, nothing is certain in the markets. Regular readers will remember my dismay on becoming 'sure'. Such is the way of the market. Now, we have the Nifty, almost ready to cross 5400. If the Nifty closes above 5400, this will be a sign of continued strength. Let it do so.

The trend is up. Most momentum and breadth indicators suggest the markets are in extreme zones, likely to see some correction / consolidation. When your chart setups give signals, the trade is to buy on dips.

Trading a Gap open

A big up gap in the morning was a problem to traders who wished to take on a long position. How do you enter? The answer lies in the 15 minute rule, referred to many times here. There is a lot of information on this rule inside this blog. Just do a google search using the search box in the right column.

2 comments:

Ishwinder Singh said...

Sir, just like the market tends to ignore good news when it is falling, it ignores the bad news when it is rising! While yuan revaluation will have some positive effect for the Indian economy, it can also have negative impact on Capital flows as Chinese investments would become more attractive. However, the rally today seems to have ignored that! Recent sharp market movements in both directions might scare away the retail investor who is increasingly heard complaining that the stock market has become a gambling den!

ANAS said...

RESPECTED SIR,
very often said by you , that the work of any TECHNICAL ANALYST is to follow the markets and NOT to forecast them.

I SALUTE YOU FOR YOUR VALUABLE GUIDANCE.

MY OBSERVATION IS......

on thursday(17/06/10),
RELIANCE MADE AN INTRADAY HIGH OF 1077 WHILE NIFTY MADE AN INTRADAY HIGH OF .5285.55

TODAY (21/06/10) RELIANCE MADE INTRADAY HIGH OF 1071.70 AND NIFTY MADE 5366.75

MY QUESTION IS.....

is reliance underperforming the markets??

due to the laggard nature of reliance, will it restrict nifty from easily overcoming the higher targets. (since it has the maximum weight in nifty and sensex)

should we avoid reliance completely, as according to my observation, IT IS SHOWING NO STRENGTH IN WEEKLY CHARTS (ADX<14> is trading below both DI's most of the time.)

and finally, the laggard nature in RELIANCE is an early indication of market topping out in due course.. and if that is true , will RELIANCE lead NIFTY in the DOWNFALL???.

THANKS ONCE AGAIN FOR STAYING IN TOUCH WITH US.


ANAS ELIAS BATLA.
anas_batla10@rediffmail.com
98300-22702