Saturday, October 2, 2010

Where is the bubble?

Rajv Malik is not happy with my bubble comments. He writes "for quite some time you and several others have been saying is that this is a bubble like situation and it will burst. but despite that the market has gone up by several hundred points and all those who took you and some other analysts very seriously missed the bus."

I have highlighted this comment since this probably reflects the thoughts of many traders.

I have said we are entering a bubble. I stand by this statement. My opinion is that investors should always enter on a correction. I have also suggested that traders can make the most money in bubbles, so they should ride it. We never know in advance when this will burst, so continue till it stops. So, when Rajv says he missed the boat, which boat is he talking about? If he is a trader, then there have been many opportunities. If he is n investor, then he would be well advised to wait for a correction. Dips do not come on demand. You need lot of patience to invest in a low risk environment.

This also means that we are not bearish. Far from it. The end game for a bull or bear market can continue for months. Traders should go with momentum, which is UP.

8 comments:

rajv malik said...

namaskar sukhani ji,

for addressing to my query and doubts. will keenly await for the dip that you are talking about, so that can invest in this market.

warm regards
rajiv malik
rajivhtc@gmail.com

S said...

sukhani sir,I am very happy with your views on bubble formation because since last 7 months i made money by writing calls-puts and unfortunately lost more than double what i earned when nifty crossed 5680 as i couldn't follow stop loss.
I am still short in nf, nifty can move above 6250 also but it will have to correct till 5900 or even lower.
Hope you will guide us as always.

Saurabh

rocky said...

Hi all,

Everybody seem to think and blame the analysts made them miss a gain or led them to a loss, but the fact is there are just two sides to a trade ..as simple as that, and if you are trader im sure everyone apply their own mind, a little different for investors though.Long term Investors dont need worry where the Nifty stands now, like always said investors are good buying on dips or a correction.

A bubble which is mostly led by a handful of people, will probably, burst as soon as enough retail enters.
just my 2 cents.

ANAS said...

Respected Sir, its me again..

First of all, we should follow anyone , only when we have full trust on that person..

Secondly, when we follow a person, then we should believe, carefully understand and correctly interpret , the sayings (teachings) of that person..

It is in fact true that you have been hinting on the bubble formation for the past few months, BUT, on each post (relating to the bubble formation.)
YOU HAVE ALWAYS MENTIONED THAT WE SHOULD GO BY THE MOMENTUM, AND IT IS A GOOD TRADING MARKET

NOW, i dont see how anyone can miss this rally.. as there were ample opportunities..

(UNFORTUNATELY BLAMING IS EASY!!!)

LASTLY, a few months before, you had started a blog with your track record.. Could you kindly , give us the link of that blog again....

THANK YOU .....

Yours
Anas Elias Batla.
Kolkata.
anas_batla10@rediffmai.com

Mind Without Fear said...

I would suggest every investor and trader to take responsibility of their own analysis and decisions, rather than depending on or blaming or thanking other analysts including Sudarshan whom I hold in very high esteem.

No analyst or analysis is going to be accurate at each instance; this ( particularly trading ) is a game of probability. Also, as Sudarshan himself has pointed out before, it is not possible to make simultaneous accurate predictions about price targets and time frame.

I am both a trader and an investor. The trader in me waited for the break out above 5550-5620. But the move was so swift that I missed putting in a long trade in a set up I am comfortable with. That may make me look stupid - not making money as a trader in this up move - but I am comfortable with that rather than making uncomfortable trading calls and losing money in the process. After all, I mind losing money more than losing a bit of my ego.

What about the investor in me? The investor in me knows that 10% upmove every month cannot continue for ever. So, I do two things.

ONE: the stock that I am holding since 2004 ( yes, that long !) I have encashed small portions 5-10% in them ( e.g. I have sold LT, SBI, Voltas, Asian Paint etc. but have held on to Canbk - one of my babies since 2004!) But I have not liquidated my entire positions. Now I am waiting for the dip with the cash. If the dip never comes, I am still OK. The rest 90% of my portfolio will do fine.

TWO: Here is a thought. Be stock specific. Have a list. Wait for at least 15% price correction from the 52 week high. Buy some then and then buy equal amounts at every further corrections of 10% from there ( set aside money appropriately ) . A simple argument will show that you will have to buy at most 10 times ( God forbid! ) and that you will miss the monthly or yearly swing low by at most 10%. What is the flip side? a.) you must buy into established stocks ( not Vishal Retail e.g.) and b. ) you need to wait may be two years three years to make 15-20% or even more profit per year on your investment.

But hey, this is investment -- not adrenaline rush after all.

In short, Patience needed in investing. Also in Trading but in a different way!

Krishna said...

Dear Sukhani Sir
& Rajiv Malik Ji

In recent past I have said on this forum through comments that-

My Comments in Recent Past-
"Stock market is what all about..??
Business or Emotions...??
At first sight it looks like tracking the business aspects of a company through FA is much wiser way.
But the fact is that stock market all about trading "emotions than business".
I take an example of AXIS Bank.
It was around 1000/- or so before 2008 crash and then during the crash it became 300 perhaps or even lower.Now this stock is again at its life time high at 1300/-.
So the big question is that what had actually happened to the balance sheet of AXIS Bank during the period when it crashed drastically.
Answer is nothing...it was just the "panic" which was driving its fall.
So it means that no one was bothered about its fundamental or business or future potential etc.
Emotions were just being traded....and that is the truth in stock markets.
Many experts have been studying even human psychology & behavior science to tackle the stock market through study of past data.
TA is nothing just a form of study of human behavior & subsequent reaction in past at certain price levels.
And the fact remains that in stock market "Emotions" are traded & not the "Business".
Regards"

Now I give you one more example-
Like all other stocks LML also has rallied with the market.
After making a low of around 5.25 in 2008 crash , it made a high of above 14 recently in july.

So any one who invested in this stock made a return of 3000%.

Now all of us know that LML is good for nothing.

Then what was driving stock upwards along with market.

Fact is ultimate driver is EMOTION else I myself wud have used brain and bought Tata Motors when ticker at TV screen kissed 99.

Regards
Krishna

rajv malik said...

namaskar sudarshan ji,

i hold you in very high esteem and follow you religiously both on the blog and on cnbc.

my bubble comment was in the spirit of intellectual interaction and not to blame you for anything. i and i suppose everyone else is responsible for what we do based on our understanding and perception of the market after following all the analysts/self study/tv channels etc.

@krishna ji

i think we have also to learn this art of how to follow the market tracking the emotions of people. would be good if sudarshan ji and others could comment on this.

warm regards
rajiv malik

scorching said...

Hi Sukhani,

I have been searching for you for past 2 weeks and atlast I found you here in this blog. I am a great fan of you and earnt lot of money following your views in cnbc and will sure miss u in cnbc. You are really a brilliant technical analyst. Without you I made some loss in last 2 weeks. Now I am very happy to see you here. Keep posting ur views as always.

Regards
Manju