Home > NIFTY Strategy > Are we ready for a bounce next week?

Are we ready for a bounce next week?

Saturday, August 18, 2007 Leave a comment Go to comments

This week was one of the worst for the Indian markets in last three months. And on top of that, the volatility and gap down openings brought more nightmares. US markets rebounded on Friday-thanks to Mr. Bernanke’s intervention in the US. The “yen carry trade” and “subprime woes” are still haunting the markets. FIIs are selling their investments and trying to reduce their risks. On the political front-Left is again threatening to pull the rug out of the UPA and on the economic front some of the growth figures are hitting new lows.

Considering all these- what can one see next week?

I feel-the only thing you might see is volatility. If Monday is up with IT stocks leading the rally, you might see a down day on Tuesday if another “hedge fund” reports problems in the credit markets. Wednesday again sees an “up day” when US Fed makes a statement or cuts rates to calm the markets !Thursday gets another “down day” when Yen rallies to a new high and international investors get jittery.Friday gets “up day” when Indian finance Minister steps in to say that “India is fundamentally good”.

With frequent bouts of “buying” and “selling” and lots of factors at work, it might get a little too “uncertain”. It might be a prudent strategy to hedge your portfolio against any downside risks. Timing the market might turn out to be a futile exercise as the volatility might take a toll on the short term traders.

This market is on ‘thin ice”. Any “bad news” can create a panic sell off while good news might be “discounted”.I am advising people to do “big ticket” buying only in case there is “panic selling” or the volatility subsides.

The medium and short term trend is still down .Aggressive traders can go short on “rallies” but be mindful of high volatility.Use wider stops to trade.

Those who are in “doubt” might do themselves a lot of good by staying out. At least you will be spared of “unnecessary” anxiety.Those who believe in “buying” a stock and then sleeping over it for next five years, they can definitely take a chance. But no one can guarantee them that when they wake up their stock has multiplied 10 fold or has been reduced to one tenth!

Here is the NIFTY chart for your reference.

nifty.jpg

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Categories: NIFTY Strategy
  1. sagecapital
    Saturday, August 18, 2007 at 8:01 pm

    Do not track.

  2. Shyam
    Saturday, August 18, 2007 at 6:39 pm

    Indian market can come down, but upto what extent ? 30 % , 40% , 50% ? at some point Fundamentals will come in focus, and trend reversal has to take place.
    I am talking about averaging the fundamentally strong stocks with good order book positions, and sectors with a growth potential.
    I think we cannot call them loosers ?
    You have been teaching us not to be ‘Gamblers’
    so I think the stratergy will work well if we strictly follow it ( compulsory buying at lower levels) without panicking.
    People sitting on cash ” Like Me ” will follow the downside, by averaging fundamentally strong stocks.
    I have considered maximum 40 % down side up to a maximum. (This is a hypothicated figure.)
    Till then by averaging what ever quantity comes in your hands. Wait for fundamentals to come in focus.
    Your stratergy of following the ” Trend ” will come into action when there is ‘normalsy’ and
    of cource ” SHANTI ” in the market.
    Up to then bottom averaging ?
    Please guide me if I am wrong.

  3. JK
    Saturday, August 18, 2007 at 6:19 pm

    what about other stocks?

  4. sagecapital
    Saturday, August 18, 2007 at 6:17 pm

    JK- RIL remains in an uptrend till 1500

  5. sagecapital
    Saturday, August 18, 2007 at 6:15 pm

    My strategy doesn’t include “averaging” the losers especially if one is highly leveraged.

    You might do well not to mix ‘fundamentals” and “trend following based on technicals”. If you trade on fundamentals, you can do so. But you must be ‘consistent” in the strategy.Otherwise it can be “confusing”.
    If you were following a fundamental strategy, you might have missed out the 4100-4650 move and also you might have bought every fall from 4600-4000 levels.
    You should also read about “Can Indian markets come down while remaining fundamentally good”. Let me know of your opinions on that.
    Important is not to feel “panic” and stick to your “strategy”.

  6. JK
    Saturday, August 18, 2007 at 6:01 pm

    for long term plz suggest whether long term trends are intact for
    reliance inds
    grasim
    birla corp
    jindal steel & power

  7. Shyam
    Saturday, August 18, 2007 at 5:45 pm

    I am sorry to state that instead of analysing and guiding us of the situation, you are creating a mess by writing such article. The time has come where we measure the risk and work out some stratergy to face the problem. i.e. Plan to go deep if the market falls, and still come out as winners in the medium to long run.
    Under the circumstances buying in blue chip shares 5 % at a time with a gap of every 3% fall and again further 10% at a time with a gap of every 1% fall( I have considered a max 40 % fall ) will average out the situation. We have to hypothicate a maximum fall as a dead line, and move accordingly to find the bottom. Even your article on past corrections has indicated an average of about 25 to 30 % fall, so that can be taken as a reference.
    I think averaging in blue chip shares with strong fundamentals and order books should be a wise thing.
    I understand you have been teaching us not to average any thing on the down side, but under the present circumstances this would be a wiser thing, only then we can be near the bottom, and wait for the upside of ‘ The Indian great story’
    Telecom, Power, Enginerring, and Capital goods those companies who have good amount of orders in hand can be averaged out, (I think there is no harm in averaging on the down side by above stratergy). May be I might be wrong, if I am so kindly forgive me and correct me.

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