iCharts Discussions

[ajayhkaul]

Hi friends !

The Market Mastermind forum is a new thread being started with the following idea:

As traders and investors we are constantly looking for trading opportunities.

In the process we try to 'read' the market before and after we make our move and trade as per our strategy.

In my view every strategy works under specific set of signals(technical or fundamental or a combo) and over a time frame.That defines your edge.

Some traders work with co-relations of various data,ratios or indicators( gold/silver ratio or gold/platinum ratio/hi beta low beta stocks)

There are some 'exotic' readers also that use astrology/numerology/a specific number or other methods.

Beginners tend to be foxed when they approach the markets as they are unable to 'read' what the market is up to.

Reading the mind of the market can be a challenge albeit an interesting one.

So why not enjoy the ride to profits ?

Your contributions are solicited to this thread. Pls back them by data or charts or statistical probability etc wherever possible.No problem with gut feel ideas . The readers can verify these for themselves before they make a move.

There are no young geniuses in trading - not as yet ... but there are many veteran traders who have built up a set of data/signals etc to read the market /stock moves.

To begin , I am placing a recent post from my blog that refers to trading breakouts and reading what the market 'mind' is

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Market tells you a lot from the way breakouts work.-- aka Market Palmistry !!!

If breakouts do not have immediate follow through it indicates weak conviction. Many breakouts fade by end of the day.

Similarly if you see breakouts to new high getting sold , it indicates distribution by larger players.

If you see only late stage stocks breaking out it indicates tired market unlikely to make big move. This is the case currently - new leadership is lacking?

If you see large stocks breaking out and making moves it indicates funds are seeking safety. Large caps have been leading recently?

If you see beaten down stocks dominating breakout list it indicates lack of conviction and short term commitment by funds.

If you see stocks after stock that made big move in last 2 year getting in to trouble and having hard breakdowns, it indicates distribution.


In an environment like this unless you are a day trader your primary concern should be risk management.

Your total risk exposure to the market should be at level where if things turn sour you should be able to get out with minimum damage.

A real bull market lasts months and offers several opportunities. So if it shows up( a breakout traders edge) you will not have trouble finding setups and make big money if you have thought through your setups

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[ajayhkaul]

What will the market do if and when RBI starts to cut interest rates?

Here is a pitch , so traders can take a technical position based on the fundamental data :

.....Experts are almost unanimous in predicting the direction of interest rates for 2012. This is because of two major factors. First, barring unforeseen circumstances like a spike in the global crude oil prices, domestic inflation should come down. Second, economic growth has slowed drastically forcing the RBI to shift the focus from inflation to it. "The RBI will start cutting rates when inflation numbers improve to kickstart growth," says Sameer Kamdar, CEO & MD, ASK Investment Managers.

So, it might be a good time to invest in rate-sensitive sectors now, but don't do so blindly. "While rate-sensitive sectors should yield good 12-month results, they will face some tough times before they start reversal," says Kislay Kanth, senior director, research, MAPE Securities. This is because falling interest rates will reflect in the fundamentals of the company with a lag. For example, it takes a few quarters before the 'low interest rates' start reflecting as 'low interest costs' for the companies because the loans taken at higher interest rates need to be repriced.

So, investors should concentrate only on the stronger segments of the rate-sensitive sectors, which means avoiding infrastructure and real estate. Also, pick only large caps. This is because there are several other factors that will affect the market price of these stocks and falling rates is only one of them. For instance, the biggest worry facing the banking sector currently is the delinquency on its loan books, and these write-downs may continue for some more time even after the RBI starts reducing the rates. Here are our top picks.

Read more .....http://economictimes.indiatimes.com/markets/analysis/good-time-invest-in-rate-sensitive-stocks-like-tata-motors-mahindra-mahindra-hdfc-bank-bank-of-baroda/articleshow/11401421.cms

Paradox is that growth and inflation go together !
How is this going to effect Gold?

[ajayhkaul]

And now read this and interpret the mind of the market :

Increasing stock market volatility has turned investors cautious in India. The direct impact of this is visible in the falling cash market volumes. Today's chart of the day shows that the cash market volumes have started coming down. In 2011, cash volumes stood at Rs 34.5 trillion, which is nearly 32% down from the levels of 2010. In fact, these are the lowest volumes since 2006. Even in 2008, the volumes were high at Rs 45 trillion. Such dwindling volumes and the resultant investor wariness have led to major losses for the brokerage business. So much so that some of the smaller brokerage houses have had to shut shop in recent times.

[vinay28]

good beginning, ajay. there are also stocks that have insignificant debt and, in some case, good export earning too e.g. cipla, which is riding high for a few weeks.

One more factor. FIIs are slowly reducing their selling as dollar-rupee rate slowly falls. And they too are eying interest sensitive firms but with low debt/NPA.

Immediate worry is fall of euro though. I wonder how much hungarian currency will play a role, which has crashed last week to over 300 a dollar.

[rk_a2003]

Dollar index is rising from the past few days. Contrary to it the Indian rupee is rising against dollar displaying relative strength. This was not seen in recent days. In spite of dollar index gain the rise of Indian rupee suggests that there is a lot of buying in Indian rupee in the International market .It could be possibly by FII’s

By assessing the strength of the Indian rupee the funds flow could be around 200 – 250 millions. In Indian rupees it would be around 1000 – 1250 crores. If this trend continues we may assume that the flow is increasing. Where this money should end up? Either in the debt market or in the Equity market or may be in both.
So expect a possible rise in the Index at least for a short term.

The above text was typed by me in the morning and I was about to post it in the “Nifty view” Thread…And I lost my internet connection.

Now I found time to login again and saw this thread initiated by Ajayh and also a post by Vinay somewhat closer to my views.

[vinay28]

true rk but rs. is not rising because FIIs buy rs. They have no interst in rs. Mere buying in stock market, debt market and other FDI brings in dollars and strengths the rs.

[ajayhkaul]

Yes ... as Vinay says the fact that FII buy debt or equity is what causes the rupee to strengthen.

Anyway , the dollars are sold to buy rupees so the rupee gets stronger.

Here's data (actual)from Jan 1 to 6- 2012

FII net buy in Equity : Rs 1118 CRORE
FII net buy in Debt ; Rs 8390 CRORE

Our home grown funds were net sellers during this same period in equities
(- 135.1 crore) and they net bought debt 3840 crore.

For the whole year 2011 , FII net sold 3642 crore in equity, but they bought net 42597 crore in debt .

Now we are reading the mind of the market makers ie the FII !

[vinay28]

add to that recent permission by GOI to FIIs to invest in debt funds to an extent of 15B$, if my memory serves me right. Also, recently, when rs. went past 54, RBI sold dollars not directly, so as not to avoid attention, but through other banks.

The immediate result of rs. strengthening in the last 10 days is that FIIs can not sell since it is not profitable.

[rk_a2003]

[ajayhkaul]

I read it like this :

The FIIs came back beginning Jan 2012 and took positions on 3/4/5th . This is possibly in time for earnings announcements.

They haven't sold yet ... so I expect some bullish moves in coming days.
However they don't seem to be willing to commit too much since beaten down stocks are being bought ie they have a short term view only ie trading stance.

Lets see if they add to positions in the next few days or not ....

[vinay28]

I mean the same Vinay! And I believe that there can be some time lag…. Even day's lag in that. The action need not be instantaneous. Are you sure that it will be instantaneous deployment?[/quote]

assuming i have understood your question rk, deployment is as fast as you or I are required to pay for our purchases and it has immediate effect on currency rate, at the most a few hours' lag after payment

[rk_a2003]

Thanks! Vinay & Ajay

[rainbow]

Ajay:

Good Morning. all.

Ajay, wandered in here, saw something here that tickled the thinking bone. assuming i have one.
you have started a brilliant thread. great encapsulation.

I hope to start contributing to this thread when I get active here once again.

and Vinay, nice to see you on this thread, mate. alive and kicking.

and to those in the know, it appears that my chikmagalur assignment will be finished soon.

have a nice day, all.

Cheers
DJ

[ajayhkaul]

Hey Rainbow/DJ .... thanks for dropping by and see you soon with your contributions.

Cheers!

[vinay28]

I should have known that rainbow appears for Mumbai guys in monsoon only although it appears regularly in Bangalore!

Good to see you back.