Keep a watch on Punj Lloyd. Above 288-290 levels, this beauty can zoom.The stock has been discussed in the Mid cap Ideas.
As a disclosure some of my clients might be long in this stock.
Yesterday, I was exchanging emails with a potential client and he asked me-“Why do you stress so much on risk management? Just give me some good stock ideas and I think I will do well”
Risk management is a subject which is not given coverage in the press as it is not very “sexy” to talk about such a boring subject! Plus it might even discourage people from trading.So I will also not bore you but share a very recent incident which might tell you how it is very “critical” for success.
There are couple of people who take my “Stock Ideas” newsletter .They just need some good investing and trading ideas for their portfolio. Now many of these people are not aware of the risks they are taking and obviously I am also not aware of their actual portfolio.
On Thursday (futures expiry day), one such client contacted me because he was “stuck” in a stock. He had gone long in a stock future and now the stock had turned its back on him .Ideally, he should have gotten out of the stock on the previous day itself but he had held on to the stock on the “hope” that it will recover! Now he was feeling “confused” and “fearful” as he did not know what to do. This is not first time situation, infact this happens all the time!
So I gave a simple solution-GET OUT before your loss becomes too large to handle! Interestingly, what he couldn’t do himself, he did the same on my advice. Now I casually asked him about the other positions he is holding. To my surprise-he told me that on a trading capital of 5 lakhs he is trading 8-9 futures.Basically he was utilizing full margin!Now why was he trading full margin-because he was winning.He had grown his 4 lakh capital to 5 lakh in a month,so he was teeming with confidence (till that previous loss).That had made him aggressive in his trading.
I asked him a simple question-How will your account look like if tomorrow all the stocks you hold behave in the same manner(that is go down 6-8%) as the stock you have just cut ?
He immediately understood that he was taking “more risk” than he could handle.As a result he immediately cut all his positions and just kept two of them.
Now each one of us knows what happened last Friday. Had that person, carried all those positions, his account would have seen 60-80% loss in a single day! So 5 lakhs would have come down to 1.5-2 lakhs in a matter of hours!Imagine the pychologiocal effect such losses have on people.
I hope you understand “risk” now. I was fortunate to save this person a few bucks but many would not have been so lucky on Friday!
Infact, when people tell me that my products are “pricey”, I feel that probably people don’t fully understand their value 
Sometimes they might not make money for you but save you a lot of money!Sometimes it pays a lot to be part of team than trying to figure it out all alone.
Yesterday’s volatility was a little worrisome. Thankfully, US markets are showing some signs of stability although the initial session was very volatile.But one day might not be enough to calm the markets. Any bad news can rattle the markets.
I’d take a cautious approach, till the volatility subsides.This market might attempt to break the previous highs of 4650,if it consolidates at these levels.We might want the markets not to go up in a hurry.
Short term traders can watch out for 4530-4550 band.Till NIFTY crosses that short term trend is down.
Long term investors can slowly start accumulating the stocks they like .No aggressive purchases. It is better to be late in the markets than lose money!
On a day, when markets fell, one of our stock ideas-Bartronics India was up 5%-not bad! Check out the chart I had posted earlier in the mid cap ideas section.
INFOSYS- This stock is moving now in the 1900-2050 band. Expect no great movements on either side till this range is broken.
TCS- 1100 and 1050 are some good supports for the stock. You might want to use these levels for some countertrend trades
WIPRO- This has been one of our countertrend trade ideas. This is trading very close its support levels of 485-490 levels.
SATYAM – 440 remains a support while 500-510 remains a resistance. Again stuck in a range.
Markets are getting little more volatile. The name of the game is to play “great defence” now-especially for short term traders/investors!
I fear a “great fall” in US markets and if that happens no one shall be spared!
Play like a Dravid and not like a Dhoni or Sehwag. The playing conditions are getting “difficult”, so don’t go for a sixer, you might get out
Nifty is staging some recovery. What should we focus on?
Look for stocks making strong price recoveries. Look how market is lapping up BHEL ,L&T or REL. Look for the buying at lower levels in a Bharti or RCOM. Also observe the action in a CIPLA or a Tata Motor. These stocks have been left alone. They fell with the market correction but are not recovering. What does it tell you?
Similarly look how different stocks in the same sector are behaving, you can easily figure out the potential “winners”.
Here are the supports and resistances for banking stocks:
Kotak Mahindra bank- 680 and 650 remain good technical supports(possible entry points). 750 remains a resistance.
UTI bank- 595-600 and 550 remain two important supports. Upward resistance at 660 levels.
Karur Vysya bank- Support around 310 levels. Resistance in 350-360 zone.
SBI- 1470 is a good support/demand zone. 1630 remains a resistance/supply zone.
HDFC bank- 1140-1160 remains a good support zone. Resistance at 1250-1260 levels
ING Vysya Bank-245 remains a strong support. 275-280 is the resistance zone.
IDFC- 121 remains a good support for the stock.
IFCI- The stock might zoom again above 58 .49 is the support.
Bank of India -235 and 215 remain good supports. Resistance at 270-275 levels
ICICI Bank -1010 remains a resistance. 890-900 are strong support levels.
Let me know if you want me to expand the list!
Some technical supports for real estate stocks(possible entry points around these levels):
DLF- 585, 570 remains a decent support
HDIL- 535-545 range
Indiabulls Real Estate- 510, 450, 405
Sobha Developers -805 ,700
Unitech-545 ,485
Here are possible entry points for some stocks.(only for long term investors/traders). Where the stocks might find support around these levels,depends on general market direction.
This is just to give you some idea about possible areas of support.
ABB – 1050, 1020 and 950. Below 930, this stock can get into a sideways trend.
BHEL- 1600, 1550 and 1430
L&T-2360, 2200 and 2050
RCOM- 525, 500 and 480
Bharti -880, 830 and 780
Reliance Capital- 1150, 1070 and 1040
The markets are trying to find a base in the 4400-4450 band. Some buying at lower levels is helping NIFTY. To me it looks like a temporary phenomenon and people are feeling a little jittery about the global markets!
As I have said before, if you are a short term trader, you might want to use every rise till 4530 to go short .
For long term investors, this market is still bullish and if you want to add good stocks to your portfolio, this might be a good time. but this is not the time to add more junk to your portfolio or buy more of your losers!
Stick to the winners in your portfolio and add more of those only. Reliance, Bharti,RCOM and the usual suspects like ABB, BHEL etc. are good on long term charts. Also it might not be a bad idea to commit the money at regular intervals rather than in one go. Be aware of the possibility than this market can drift lower!
So markets finally ended deep in the red down almost 3.8%. Now a single day fall of around 4% is not a small thing! The most interesting thing is that there were no apparent reasons for correction. It is very easy to “correlate” it to fall in US markets because that helps us explain the fact. And most funny thing is that despite all the “economic problems” in the US,their markets fell by 2.3% whereas we fell by 4% for no “apparent” reason.
As I have been saying, a sharp correction had to come after a 500 point rally in NIFTY.But the timing of the correction can not be predicted, so one just had to be watchful and react to the correction. Although I had written yesterday that NIFTY might consolidate or correct sharply, I never knew it would correct and that too so soon. I feel markets are like this only-not for the faint hearted!
Now if you were carrying loads of stock futures positions or trading on margin, I am sure you will be having a very painful weekend.
If you are a short term trader and were able to get out around 4520 levels, then you would be ideally positioned to go short on NIFTY once it goes below 4425 levels.
If you are someone who invests/trades with a slightly longer term horizon , you might be seeing a lot of your profits being eaten by this one day move.But you have to remind yourself, that you are going to measure your results on a long term basis rather than being perturbed by these kind of fluctuations.At the same time you must have knowledge on when the long term trend in the stocks you hold has reversed.
Now will markets bounce back with vengeance on Monday or slip even further?
Though I feel, they might slip further but just for confirmation, we should watch the 4425 levels (today’s low) .Below this markets can easily slide to 4350 levels. If it is ‘V” like recovery, then markets have to open with an upward gap and show some stability at “higher levels” of 4500-4520.If you witness continuous bouts of “buying’ and “selling”, then the probability of a “big” fall can not be ruled out!
Has one day changed it “all”? I hope I am proved wrong!
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