Nifty for 12 Feb 07

These are my personal musings. These are not in any way meant to be trading advise. To view the full chart, right click and open in a new window.

When analysing the market, I hate to say “I told you so”, but from the messages I received today, it does seem that traders are hoping against hope that their investments will turn out positive. When a trading plan changes from hope to prayer, traders should know that they are in the wrong business, and trading is not for them.

However, if they are in the business of trading, then they should be hearing what the market is telling them, rather than try and beat the market. And the market is telling us that I am weak. It also tells us that such a sharp fall will be met with periodic profit booking of bears, which could push the market back up slightly. It also tells us, that bulls will be euphoric to see such a rise, and try and jump on the bandwagon once again, only to see their hopes dashed to the ground. Because, when we see a rise after such a drastic fall, bigger traders come out and tend to sell, which tends to depress prices further.

Does it mean that the Great Bull Run of the Indian stock market is over?

It does not seem so. Not as yet. It does seem that this fall is the start of a correction, and not the start of a bear market. It also seems that this correction could last till 20 to 23 Feb 07. Which brings us right into the time when the Railway Budget would be announced, and heightened speculation will increase volatility.

Therefore, at a time like this, when volatility is increasing, it also becomes imperative that trading should not be overleveraged and hedged at the same time.

Let wisdom prevail.