High 2,869.2000

Low 2,701.7500

Close 2,828.4500

Change -44.5500 (-1.55%)

A black body occurred (because prices closed lower than they opened). During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles. A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

NIFTY closed above the lower band by 33.5%. Bollinger Bands are 103.32% wider than normal. The large width of the bands suggest high volatility as compared to * S&P CNX NIFTY’s normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 14 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range. The current value for the 14 period RSI is 36.4886. The RSI and price are not diverging.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently below its 200 period moving average.

The close is currently below its 90 period moving average.

The close is currently below its 30 period moving average.

Nifty has corrected 14% since it faced the resistance at 3147 levels – to make a low of 2702 and closing at 2828 levels, recovering nearly 4.5% from the low. On weekly charts Nifty is indicating immediate resistance at 2860 but on the lower side Nifty is facing some support around 2740 levels on closing basis. One can expect some consolidation this week and Nifty could move in the range of 2700 – 2940 levels.

Trading Tip
Technical analysis helps you detect insider buying and selling. Charts reflect all trades by all market participants-even by the insiders. They leave their tracks on the charts just like everyone else- and it is your job as a technical analyst to follow them to the bank.

During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.

Bollinger Bands are 35.63% wider than normal. The current width of the bands (alone) does not suggest anything conclusive about the future volatility or movement of prices. * S&P CNX NIFTY closed above the lower band by 44.0%.

The RSI is not currently in a topping (above 70) or bottoming (below 30) range. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a Buy 5 period(s) Ago. The current value for the 14 period RSI is 42.1505.

Divergence

The RSI and price are not diverging.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently below its 200 period moving average.

The close is currently below its 90 period moving average.

The close is currently below its 30 period moving average.

Technically, for this week I m expecting nifty should test 3070 levels, (once again) If market sustains above mentioned level, can give spurt up to 3385 levels, otherwise it will correct & test these levels on the down side 2700-2580.

During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

S&P CNX NIFTY closed above the lower band by 29.5%. Bollinger Bands are 101.99% wider than normal. The large width of the bands suggests high volatility as compared to normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 15 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range.

The RSI is not currently in a topping (above 70) or bottoming (below 30) range. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a Buy 0 period(s) ago.

The current value for the 14 period RSI is 36.5287. The RSI has just reached its highest value in the last 14 period(s). This is bullish.

Divergence

The RSI has set a new 14-period high while the security price has not. This is a bullish divergence.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently Below it’s 200 period moving average.

The close is currently Below it’s 90 period moving average.

The close is currently Below it’s 30 period moving average.

Ø AS TECHNICALLY LAST WEEK WHAT I WAS EXPECTING,,,, IT HAPPENED (STRONG PULL BACK (Counter Rally) UPTO THE LEVELS: -2810-2930-3120

Ø FOR THIS WEEK 3070 LEVEL I M EXPECTING WITH HIGHER VOLATILITY AHEAD. SO BETTER TO BOOK PROFIT NEAR MENTIONED LEVEL N WAIT FOR CORRECTION TO RE-ENTER

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trend line, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.

During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

On 10/24/2008, * S&P CNX NIFTY closed below the lower band by 23.7%. This combined with the steep downtrend suggests that the downward trend in prices has a good chance of continuing. However, a short-term pull-back inside the bands is likely.

Making the picture somewhat unclear is the fact that Bollinger Bands are 103.75% wider than normal. The large width of the bands suggest high volatility as compared to * S&P CNX NIFTY’s normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 2 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range.

The recent price action around the bands compared to the action of the Relative Strength Index (RSI) does not suggest any trading opportunities at this time. The current value for the 14 period RSI is 18.3375. The RSI has just reached its lowest value in the last 14 period(s). This is bearish.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently Below it’s 200 period moving average.

The close is currently Below it’s 90 period moving average.

The close is currently Below it’s 30 period moving average.

FUTURE & OPTIONS EXPIRY WEEK AHEAD, TECHNICALLY I AM EXPECTING STRONG PULL BACK (Counter Rally) UPTO THE LEVELS: -2810-2930-3120

Warren Buffet on the financial crisis and his outlook for equities

_ A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

And most certainly, fear is now Widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak

competitive positions. But fears regarding the long-term prosperity of the

These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

_ I’ll follow the lead of a restaurant that opened in an empty bank building

and then advertised: “Put your mouth where your money was.” Today my

money and my mouth both say equities. nation’s many sound companies make no sense.

During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

<p>* S&P CNX NIFTY closed below the lower band by 13.7%. This combined with the steep downtrend suggests that the downward trend in prices has a good chance of continuing. However, a short-term pull-back inside the bands is likely.

Making the picture somewhat unclear is the fact that Bollinger Bands are 45.49% wider than normal. The large width of the bands suggest high volatility as compared to * S&P CNX NIFTY’s normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 1 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range.

The recent price action around the bands compared to the action of the Relative Strength Index (RSI) does not suggest any trading opportunities at this time. The current value for the 14 period RSI is 21.79.</p>

The current trend is down and all orders on the short side may be considered. Market activity analysis suggests that short trades put on outside of the +S+ focus zone have a lower probability of success than those placed in those zones highlighted on the expert ribbon. The current market price activity is Strongly Bearish and suggests favorable trade opportunities on the short side.

If already holding short positions, we would look to take partial profits at any retracement to 4,110. Traders with remaining short positions after profit taking should consider placing exit stops in the region of 4,224. Be prepared for a potential short term price pull back to the 3,830.area.

Suggested standing placement of fail-safe stops…

Theory: One should buy panics.

Which panic – Monday panic or Wednesday panic. What are the chances that it may arrest here? Every day – new problems are coming on the surface and it seems the world is in fire fighting mode. This is the first time in financial markets history that the entire world is feeling the pain.

Investors and traders need to understand the enormity of the problem. This is not a panic because one institution has gone bankrupt. There is crisis of confidence. No one wants to lend to each other, and no one wants to believe that the other party is financially sound to do business with. In such circumstances, one rumour is good enough to make some one go out of business.

We are staring at systemic problem which has shaken up the foundations on which business is done. This is not the time to be brave and become hero. One analyst has described the situation – “Market is exhibiting poison” and buying the current panic is like consuming the poison. I guess a feeling needs to develop among broader community – This market will never go up again. I guess that’s the sort of sentiment one should wait for. Right now, there is still lot of HOPE.

The best way to approach the market = OBSERVE. Let the market find its own feet. The bailouts are not working and it’s clear now that getting excited by Government intervention is recipe for disaster. I guess the theory of “Buy the panic”, as the world knows it, needs to bust.

Be not a bull, nor a bear, but Realist

A bear is not a permanent pessimist. Nor should a bull always be an optimist, if he is wise. You should be able to change from a bull to a bear or a bear to a bull, as conditions change, and not be the least inconsistent. Some people are permanent bears and give the symbol a bad name. Permanent bears often have a puritan ideology that sees prosperity and bullishness as some kind of original sin.

Likewise, many people are always bullish, obviously without sufficient justification. The almost bull market from 2002 to January 2008 has made most people permanent bulls. It has been impossible for them to accept that any downturn is more than a short-term correction. But in any market the flexible realist is the winner. So, let it be crystal clear that a proper bear is someone who used to be a bull but become a bear as conditions changed.

What causes a Recession?

Depression or Recession is caused by basic economic changes of supply or demand or credit. What leasers say about circumstances cannot in itself help or hurt the situation, except perhaps for a few days. If an apple is rotten, the art of saying so will not make it ripe. If its ripe and someone calls it rotten, it will not turn rotten on the spot just because of this characterization, talk just doesn’t matter. One basic approach was defined by Charles H Dow. That premise still holds today. He called it “The Great Law of Action and Reaction”. “It is a remarkable fact in speculation that both average price of a number of stocks and the price of individual stock show strong tendencies, both in rallies and relapses, to reach one half of all the primary movement. When a stock falls 10 points in a comparatively direct move, it is extremely likely to rally as much as 5 points from the lowest. It often rallies or relapses more than half of the original swing, but it is generally safe to wait for about half. “ A comparison of the Averages shows how regularly this movement occurs. When a recovery does not come near being one half of a decline, it generally means that the primary movement has not been completed and that a new low quotation will be made.”

Tools to help you recognize and survive a bear market The beauty of Technical Analysis is that it is “scam proof”. It relies on your ability to read the charts and the price data, not on public or insider information. With the technical Approach, you know that, what you know about a specific index reading is all there is to know. It involves methods of measuring the various
things in the stock market deemed worth measuring. The stock market is probably the toughest field in the world because the keenest minds are in it, in competition with you. Thus, how you use you tools or weapons may well determine how you fare. Note: – a number of the indicators mentioned below can be obtained on a daily basis form various online services.

? Advance Decline Ratio: - By subtracting the daily number of advances from declines (or declines from advance) and subtracting (or adding) that difference from a running cumulative total from an arbitrary starting figure), you measure what the great mass of the market is doing. This is surely the most basic and important tool.

? New Highs – New Lows: – Total the last 5 days of the daily new highs, divide by 5. that’s the 5-day moving average. Do the same for the lows chart the highs in Green, the lows in Red. Observe whether the highs remain on top during a reaction that has interrupted a major upswing (if not, it’s usually fatal to the upswing) and vice versa. Note whether each successive peak of highs or lows is higher than the previous one as a guide to the soundness of primary trend. Also compare highs with highs, lows with lows.

You may wonder why I recommended a 5-day moving average but there are no laws in this field. You can create and mold or alter to suit yourself. Also, the size of your moving average may depend on whether you are a daily trader, a short-term trader or long term trader, or some or each. The longer term you are, the broader time period you will usually want to measure.

? Volume: – Bear market cycles begin on reduced volume, as the major (downtrend) phase develops, volume increases and this phase ends in a selling climax on heavy volume. The ensuing rally (corrective phase) is accomplished by declining volume, which dwindles until the rally loses momentum completely, and the major trend is resumed in a new bear cycle. Bear market rallies start out of active selling climaxes”

The single most important key or guide to remember in this area of using technical tools for buy or sell clues in this. The success of the technical approach can be realized only when the indicators are heavily weighted in you favor. The trick in the stock market has never been what stock to buy or sell but when. That’s where charts come to the rescue. Charts will guide you in both. Once you have used a chart to buy a stock, it usually gives you a sell target and vice versa.

The beauty of charts is their capability (based on interpretative ability) to tell both when to buy and when to sell precisely with logical rationale. Listen to your charts. If they say buy or sell, don’t argue. Charts follow the money, so follow the charts.

Hedging is a two-step process. A gain or loss in the cash position due to changes in price levels will be countered by changes in the value of a futures position. For instance, a wheat farmer can sell wheat futures to protect the value of his crop prior to harvest. If there is a fall in price, the loss in the cash market position will be countered by a gain in futures position.

How hedging is done

In this type of transaction, the hedger tries to fix the price at a certain level with the objective of ensuring certainty in the cost of production or revenue of sale.

The futures market also has substantial participation by speculators who take positions based on the price movement and bet upon it. Also, there are arbitrageurs who use this market to pocket profits whenever there are inefficiencies in the prices. However, they ensure that the prices of spot and futures remain correlated.

Example – case of steel

An automobile manufacturer purchases huge quantities of steel as raw material for automobile production. The automobile manufacturer enters into a contractual agreement to export automobiles three months hence to dealers in the East European market. This presupposes that the contractual obligation has been fixed at the time of signing the contractual agreement for exports. The automobile manufacturer is now exposed to risk in the form of increasing steel prices. In order to hedge against price risk, the automobile manufacturer can buy steel futures contracts, which would mature three months hence. In case of increasing or decreasing steel prices, the automobile manufacturer is protected. Let us analyze the different
scenarios:

Increasing steel prices

If steel prices increase, this would result in increase in the value of the futures contracts, which the automobile manufacturer has bought. Hence, he makes profit in the futures transaction. But the automobile manufacturer needs to buy steel in the physical market to meet his export obligation. This means that he faces a corresponding loss in the physical market. But this loss is offset by his gains in the futures market. Finally, at the time of purchasing steel in the physical market, the automobile manufacturer can square off his position in the futures market by selling the steel futures contract, for which he has an open position.

Decreasing steel prices

If steel prices decrease, this would result in a decrease in the value of the futures contracts, which the automobile manufacturer has bought. Hence, he makes losses in the futures transaction. But the automobile manufacturer needs to buy steel in the physical market to meet his export obligation. This means that he faces a corresponding gain in the physical market. The loss in the futures market is offset by his gains in the physical market. Finally, at the time of purchasing steel in the physical market, the automobile manufacturer can square off his position in the futures market by selling the steel futures contract, for which he has an open position.

This results in a perfect hedge to lock the profits and protect from increase or decrease in raw material prices. It also provides the added advantage of just-in time inventory management for the automobile manufacturer. Understanding the meaning of buying/long hedge A buying hedge is also called a long hedge. Buying hedge means buying a futures contract to hedge a cash position. Dealers, consumers, fabricators, etc, who have taken or intend to take an exposure in the physical market and want to lock- in prices, use the buying hedge strategy.

Benefits of buying hedge strategy:
• To replace inventory at a lower prevailing cost.
• To protect uncovered forward sale of finished products.

The purpose of entering into a buying hedge is to protect the buyer against price increase of a commodity in the spot market that has already been sold at a specific price but not purchased as yet. It is very common among exporters and importers to sell commodities at an agreed-upon price for forward delivery. If the commodity is not yet in possession, the forward delivery is considered uncovered. Long hedgers are traders and processors who have made formal commitments to deliver a specified quantity of raw material or
processed goods at a later date, at a price currently agreed upon and who do not have the stocks of the raw material necessary to fulfill their forward commitment.

Understanding the meaning of selling/short hedge

A selling hedge is also called a short hedge. Selling hedge means selling a futures contract to hedge.

Uses of selling hedge strategy. • To cover the price of finished products.
• To protect inventory not covered by forward sales.
• To cover the prices of estimated production of finished products.

Short hedgers are merchants and processors who acquire inventories of the commodity in the spot market and who simultaneously sell an equivalent amount or less in the futures market. The hedgers in this case are said to be long in their spot transactions and short in the futures transactions.

Understanding the basis

Usually, in the business of buying or selling a commodity, the spot price is different from the price quoted in the futures market. The futures price is the spot price adjusted for costs like freight, handling, storage and quality, along with the impact of supply and demand factors. The price difference between the spot and futures keeps on changing regularly. This price difference (spot – futures price) is known as the basis and the risk arising out of the difference is defined as basis risk. A situation in which the difference between spot and futures prices reduces (either negative or positive) is defined as narrowing of the basis. A narrowing of the basis benefits the short hedger and a widening of the basis benefits the long hedger in a market characterized by contango – when futures price is higher than spot price. In a market characterized by backwardation – when futures quote at a discount to spot price – a narrowing of the basis benefits the long hedger and a widening of the basis benefits the short hedger.

However, if the difference between spot and futures prices increases (either on negative or positive side) it is defined as widening of the basis. The impact of this movement is opposite to that as in the case of narrowing.

It is said that upto 90% of the traders remains on the loosing side of the stock market. Even those who make their living from trading, particularly the brokers, who you would expect to have a detailed knowledge of the causes & effects in their chosen field, very often know little about how the markets work. In most of the cases, Big players create an imbalance between supply & demand and that leads to a trend depending on the conditions prevailing in the market.

“Technical Analysis” is the close study of actions & reactions of specialists & market makers, which gives an idea about the future market behavior. A deep understanding of human psychology is must for a technical analyst, which derives decision being taken in the market. A professional trader is very good at deciding which of the listed shares are worth buying & vice versa. He tries to hit the right emotion at the right time as per his benefit.

We all have heard of the term “Resistance”, but actually what does it mean? “Resistance” to any up move is caused by somebody selling the stock as soon as any rally starts. In other words, professional trader tries to remove the floating supply without any significant up move in the price against his own buying level.

Most traders new to the market become a weak trader, as they avoid accepting losses with the fear of losing their capital. A weak trader is the one who get locked in at higher levels as market starts behaving against their expectations. They can only hope & pray that market come back to their entry level.

A bull phase in the market takes place when stocks are substantially transferred in the hands of strong trader from a weak trader at the loss of weak trader & vice versa. There are two principles working in the stock market, which causes turns in the market. These principles work with varying intensities causing larger or smaller moves.

· Principal one: -When you hear about panic after substantial falls & prepare yourself to sell on bunch of bad news. Just ask yourself: – Are the trading syndicates & market makers all set to absorb the panic at these price levels? If the answer is Yes then it is clear indication of “Strength” in the market.

· Principal two: -When you hear about substantial rise & start feeling annoyed on missing up moves and waiting for a good news to have a long position. Just ask yourself: -Are the trading syndicates & market makers are selling in this bull market? If the answer is Yes, then it is the clear indication of “Weakness” in the market.

All the important facts around the world are collected and presented in front of you in the most interesting, entertaining & easily assimilated form over a cup of Tea. All these are very interesting till the time you decide to trade in the market. Trading in the market is exposing yourself to risk, in order to get returns. You enter into the arena where your skills as a trader are going to be tested severely. News is no longer entertaining but rather become a worry for you. When you come to know a story that may affect your interests, just ask your self-3 questions: -
· What does this story mean (if it is True) in the overall context of my prior analysis of the market?
· How others can use this story?
· How can I use it to make my position better?

*WEALTH WARNING: - It has been determined that believing to the news may prove to be injurious for your wealth.

To become a professional, you have to think and act like the one. You have to turn away from running with the herd & become a predator, buying on great opportunities caused by a variety of ‘bad news’. As you need to buy on bad news, which has produced a ‘shakeout’ in the market and sell on good news after you have already seen a substantial bull market. One should never forget that market makers & specialists never miss any moneymaking opportunities. This unfavorable news provides the best opportunities as they help to shake weak traders out of the market.

Big players play with the news as with the help of media, they come out with good or bad news, as per their benefit. Moreover that news is made public mostly over a weekend or on holidays. As by marking the market either up or down late in the evening session on Friday or the day before a holiday commences. Media have to create a reason for the move. As a result, a weak trader spends the weekend in a dilemma, about his position. This impels weak trader to create panic and take impulsive decisions on next trading session.

Most persons want to become full time trader but the problem is that it is very easy to be wiped out during the learning process. Some lucky people have the skills to make money from the stock market. This is because they are skilled at money management & taking risks.

The stock market by its very nature is designed for a weak trader to loose money. The constant rallies & reactions ensure this process at work constantly. The market behaves this way because the weak have to perish so that the strong can survive. Professional traders are fully aware of weakness in traders under stress & will capitalize on this at every opportunity.

A professional analyst can provide you with some recommendations or tips, but you have to be your own judge & decide upon your limits. As two traders can never be alike, their resources & needs may differ in numerous manners. In the market you are like a cat with nine lives, may be you have lost two, but you still have seven others to live for. In using your system you must not only Accept losses but also Expect them.

To overcome these problems you need to develop a disciplined trading system for yourself. A system must be based on some form of sound reasoning & logic. A system strictly followed avoids emotion because like the trained soldier you have already done all the thinking before the problems arrives. This should then force you to act correctly even when you are under stress.