Home > Education, Market View > A word of caution!

A word of caution!

Monday, November 19, 2007 Leave a comment Go to comments

It looks like market has suddenly caught fancy of low priced stocks ( sub 100 levels) and is taking them up to higher levels. Even an underperforming sector like paper and hotel is showing tremendous momentum.

The problem with these high fliers is that they reverse suddenly and many small investors are left with the stock bought at higher levels. Coupled with the tendency to avoid losses, one ends up “stuck” with these stocks.

So even if a Ballarpur looks good on the charts, I will give it a skip. Same is the case with a Leela Hotel. First people burnt their fingers in RNRL and RPL and now they are chasing Essar Oils and Essar Steels of the world.

One can always make good money out of these moves but without looking at your risks, you might just be plain greedy in entering these stocks. So know your entry and exits before you trade such rockets. Otherwise you might regret your decisions!Ask the guy who bought tons of RPL at 300 thinking that it is headed for 500 in a week.

The trick lies in making more money by taking minimum risks. Had that not been the case, one can always trade in NIFTY futures where you get 10 times leverage!So one can easily gain 100% and lose 100% in a week’s time.

FIIs are getting out and the local operator is getting in-this is what the market action is telling me.

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Categories: Education, Market View
  1. sagecapital
    Wednesday, November 21, 2007 at 9:22 am

    No significance -just an observation.You should not end of chasing “hot stocks” and burn your fingers!Most of these moves have been “news driven”or based on some “rumour”.
    FIIs have been indeed selling for past few days.

  2. anil bansal
    Wednesday, November 21, 2007 at 9:04 am

    I expect the FII’s to be selling rather than buying. The share holding pattern data will reveal in the near future provided they had holdings in these stocks. Thats their business and would book profits at these prices. I wonder what made the price rise so suddenly probably the public would be latching on to these for the momentum trade which you do recommend through this blog. Nothing unusual in this. The FII’s will buy back into these stocks when the bubble bursts or prices retract.
    how does it make a difference if the market manipulator is an FII or an Indian? What is the significance of your observation.
    I am more confused

  3. sagecapital
    Wednesday, November 21, 2007 at 8:56 am

    Anil- You don’t find FIIs chasing Essar Oils and Essar Steels of the world.
    Can you spot a pattern-all low value stocks are being pushed up at the same time? And that too 100%+ in a week’s time!
    And I am not sure if MFs or insurance guys are buying these stocks for long term.
    The locals not be able to match FIIs but many retail guys join the bandwagon when they see these giant moves!
    You don’t have to be confused- you just have to follow your own strategy without worrying about what market is doing.

  4. anil bansal
    Wednesday, November 21, 2007 at 8:48 am

    dear sage – I find your statement very interesting.
    “FIIs are getting out and the local operator is getting in-this is what the market action is telling me.”
    what signals did you base your observation on. Are these local operators old or new. if old were they not active earlier. can they match the financial might of the FII’s.
    I am confused.

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