iCharts Discussions

[ramtrade]

Hi All,

I owe most of my learning here in iChart and few of my close friends whom i chat regularly. With all due respect to my mentors i wish to present my view of this stock market direction from a economic point of view.

One of the biggest factor for the decline is the sudden increase in Inflation rate from 3.5% odd to more than 8% which had a big impact on the economy. This sudden rise in prices made informed investors to sit back and start to think if India will be able to sustain the high growth rate.

Taken from our P.M speech who has explained the reasons and rationale behind the fuel hikes and how bridge/gap is still left to be filled. I doubt if any other past P.M have explained so well in clear terms until now. Hat's off to our great P.M. If any one wishes to go thru the entire speech, here's the link. http://www.ndtv.com/convergence/ndtv/story.aspx?id=NEWEN20080052010.

The oil subsidy alone ( we have fertilizer subsidy too and what not) bill this time is around Rs 200,000 crores ( Rs 2 trillion). With this modest hike in fuel prices and cut in custom duty will foot Rs 20,000 crores and remaining Rs 180,000 crores is still borne by the govt. Where will the govt get this money? The current Income tax payers is already overburdned with the tax. This is putting tremendous pressure in the fiscal discipline of the govt. With the fuel hike the inflation rate is expected to touch 12% which and in turn bringing the GDP growth to less than 8%.

What is the cost of this subsidy? I leave it to you guys to find the facts of this.

The current Sensex is around Rs 934 around as per Nagesh sir calculations. The most matured markets like U.K, U.S, Singapore etc are valued at a forward P/E of 10. Taking into consideration of the fact that great India growth story, 1 billion population, so much to develop etc...etc...we were awarded a P/E of historic high of 20 to 23 levels which is what we were in Jan peak.

Now with this current year EPS, a more than resonable P/E of 15 gives us a level of 14010. That means we are still overvalued and have some more room to go below. We all know the FII's. They will invest in markets only if there is a potential of giving 20% to 40% annual returns.

With increased risk of Rupee depreciation, future oil shocks, widening fiscal deficits i would envisage a growth rate of 10% which gives us FY09 EPS of Rs 1027. Assuming P/E of 15 this gives us sensex level of 15405.

Now i leave it to you guys to do your own interpretation on where we are headed. Added to the list of risks, with this fuel price hike the political risk and uncertainity arising due to CPI and other friends withdrawing support resulting in early general elections......!!!!

Any +ve surprises in next quarter results is a + point and for sure we will continue our bull run. Until then in my opinion we still have some more pain to go thru.

I still believe in our growth story and strongly belive we come triumphant out of this uncertainity. At the end no matter what, we are still pround Indians who want to be successful in our lives and are willing to take our country forward.

Pardon me if i have become too senti....

Any comments, disagreements, counter arguments are welcome.
Thanks
Ramesh

[hdobhal]

Hello Friends,

Thanks Mr. R S Nagesh sir. I appreciate your encouragement and advice. Your advice will always be beneficial. However, I would request you to also contribute with your studies and possibly charts (particularly PE Ratios etc)

Thanks

Harish

[hdobhal]

Dear Friends, tonight I'll be updating with latest analysis. Hope you all will enjoy.

Also, I'm planning some options trading techniques to be shared here. Please keep visiting.

Tanks & Best Regards

Harish Dobhal

[hdobhal]

Dear Friends,

First my apologies for posting so late (I had promised to post yesterday).

As you all know, markets have been showing weakness most of the time and even a small attempt of recovery is getting sold. The current trend is definitely down since Jan this year.

Following is my analysis for Nifty based on trading till 6th June:

We have seen Nifty breaking some imp levels last week. We see it going to sub 4600 level, which was an important level for many traders.

In the attached chart, I have drawn several trend lines, some of which you are already familiar, and two new lines. Line 1 is the major downtrend line starting from Jan top. Line 2 is another downtrend line which I drew from the Feb intermediate top (4th Feb) joining the top of 27th Feb (this date is of very high importance to me, which I will share later). Line 3 is the well known last uptrend line, Line 4 is the current downtrend line and Line 5 is the support line joining the Jan low and Mar low.

Line 1 is holding there as the final frontier for bulls, which seems far far away now. Line 2 when extended has proved to be the resistance on 6th Jun, as we see Nifty touching it and falling from there.

Now, the case is there for bulls only when they can conquer the current downtrend line - Line4, which comes to around 4790-4800 mark for tomorrow. Also, it needs to go above the Line 2 which comes at around 4740-50. Interestingly, the two lines cross at around 4720, which should become a big resistance area for next 2-3 days.

My friend saikat suggested the final support line - Line 5, which is formed by joining the Jan low and Mar low. It comes at around 4500 for next few days. So looking at it, it looks like there is going to be fierce battle between bulls and bears near that level. Bulls will lose all hopes if that is broken. The fear factor for tomorrow is - Global Markets. The only thing that was not affecting Nifty too much for some time. In most probability, tomorrow can be a big day for bears.

Now coming to the importance of 27th Feb to me. Well, on 27th Feb, I saw a disturbing movement happening in US markets. That prompted me to utter a few words regarding stock markets in general and Indian markets in particular. On that evening I said in SB that bulls are going to suffer in the coming days. I know the hardcore bulls will argue that they were not troubled at all, but seeing the chart, it explains how bad the time has been for those who kept on clinging to upward movement hopes.

I conclude my analysis here and hope you will reply with your valuable comments.

My disclosure is just a repeat of previous one:

My analysis is just analysis in letter and spirit and not a trading recommendation. Trading in stock markets is full of risks and please consult professional advice before doing on a trade.

I wanted to post something about Options Trading but time constraint has made me postpone that. I promise all friends it will be there very soon. Hope you forgive me.

Thanks & Best Regards

Harish Dobhal

[VISHVPRAKASH]

[hdobhal]

Dear Friends,

I am really disappointed by the response. I certainly wanted at least few replies (this does not mean I wanted only good words ) which could be as a discussion of the analysis I produced.

Dear VISHVPRAKASH,

First my thanks for replying to the post, I really appreciate it. As for Eliot wave, the best I can say is I am a novice. There are some very good ellioticians in icharts - mayur, rocky, swaroop, eswar, marne.vivek, who can answer it. I request anyone who is reading this to kindly reply your query.

Thanks & Best Regards
Harish Dobhal

[hdobhal]

Dear Friends,

If you saw the chart in my previous post, and if you read my analysis, you will find that today Nifty closed exactly at the final support of Line 5 at 4500. What is interesting is it broke not only this trendline intraday, but also broke the earlier Jan low of 4448. I don't know much about the more intricate things, but it looked somewhat "managed" to me - the closing (just my feeling), as this closing has put both bears and bulls in contending position for tomorrow. If Nifty is up tomorrow, then it must close above 4720, to give bulls any real tonic. But that still looks too much, unless something really rosy is discovered by markets.

As for me, I will see the movement of Nifty on hourly chart and use combination of Moving Averages to initiate any new trade (I'm still carrying my shorts).

Some people like GUT FEELING but I don't prefer to state that. In my opinion, gut feeling should remain there (in the gut) only. And also, Gut Feeling may be mistaken for a trading call so can be dangerous for followers. One more thing to point out is that most of the times I have seen ppl's Gut Feeling a mere reflection of "WHAT THEY DESIRE". So, bottomline - no GUT FEELING in trading, see the signals and act accordingly, with proper SL and hedging.

[ramtrade]

Hi Harish,

Nice posting as always. I differ with you on the Gut feeling part.....if we were to just trade/invest by looking at the signals only...would'nt a automated trading system do a better job than us doing it. An automated system would do a good job. I guess at the end of the day, it's human element and emotional part that gives you the satisfaction if you get the trades right. What do you say...

Thanks
Ramesh

[hdobhal]

Dear Ramesh,

Human element is there when we "GET" signals, the "satisfaction" is also there when we know we achieved something, BUT gut feeling can't give that.

What is Gut Feeling? I think its a euphemism for guess. AND GUESSING IS CERTAINLY DANGEROUS.

As for the emotional part, If you are emotional during a trade, you ARE going to lose. A trader NEVER has emotions when he is trading.

My friend, its our choice to chose any system, but THERE HAS TO BE A SYSTEM. Gut Feelings should better be thrown into gutter, if one has to succeed.

JUST THINK ABOUT IT, DEEPLY, AND YOU WILL AGREE

I INVITE COMMENTS FROM OTHER MEMBERS ALSO ON THIS GUT FEELING THING

[hdobhal]

Dear Ramesh,

Human element is there when we "GET" signals, the "satisfaction" is also there when we know we achieved something, BUT gut feeling can't give that.

What is Gut Feeling? I think its a euphemism for guess. AND GUESSING IS CERTAINLY DANGEROUS.

As for the emotional part, If you are emotional during a trade, you ARE going to lose. A trader NEVER has emotions when he is trading.

My friend, its our choice to chose any system, but THERE HAS TO BE A SYSTEM. Gut Feelings should better be thrown into gutter, if one has to succeed.

JUST THINK ABOUT IT, DEEPLY, AND YOU WILL AGREE

I INVITE COMMENTS FROM OTHER MEMBERS ALSO ON THIS GUT FEELING THING

[gudd007]

GUTS look better inside the body.

[hdobhal]

GUDD , good one

[daytrader007]

hdo, i appreciate you TA topics. It would be good if you avoid such discussions like one you have written on guts. Also you could reorganize your languages a bit in the same topic.

regards
Swapan

[hdobhal]

Dear Swapan,

Thanks for replying here. It made one thing clear - you must have been reading this thread from beginning but the bad thing is you replied now. I expected you to post your reply at every update. Your valuable comments would certainly benefit me as well as the other readers here.

I have deliberately put this issue of "Gut Feeling" here. I strongly believe that emotions must be kept out of trading. Gut Feeling is just a manifestation of desire or wish and should be avoided with full force. I have seen so many good traders going bankrupt just because they "obeyed" their gut feelings. So I felt, I should contribute in the elimination of this unnecessary, dangerous and detrimental thing. However, if you think it is worth any value, kindly post your logic here.

Thanks & Best Regards
Harish

[shrii]

harish bhai, i am a novice in TA, hence all that i can say is thanks and keep up the good work. i ve been following your posts keenly and i request you to keep posting regularly as you have always been.