Nifty for 30 May 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.

As was suggested yesterday, “the chart also shows a long term psychological supply line which is extending short term resistance. Short term traders could do well by raising their stop to 4240, which is slightly below the previous historic peak.” The supply line seems to have had its effect today. There is nothing in today’s chart which suggests panic.

In fact, it was the media which was hyping the Shanghai effect. Whereas, if we just step back in time, we will see how the Shanghai Index has outperformed the Indian bourses. Here are some comparative charts, courtesy Yahoo!.

As usual, please right click on the charts, and open in a new window.

Here is a three month comparison, where the Shanghai Index is up in the high 55% region, whereas the Nifty has moved less than 20%.

Now take a look at the six months comparison. As they say, one picture is worth a thousand words.








But wait a moment, take a look at the next chart, over one year.

A whopping 150+%. And the media hypes a six percent fall.

Had it not been for the Capital Goods and the Consumer Durables sectors, the effect on the Indices would have been worse. Longer term traders could still maintain 4140 as their stop. The derivatives expiry will contribute to volatility, so partial hedging also may be advisable. Short term traders may decide their own level of comfort for absorbing a loss, but as oft repeated, a stop is a must.
Plan your trades and trade happy.