The Big Fight at 4800

Bulls and bears are having an awesome fight at Nifty 4800 levels. The bears are not letting the Nifty cross 4800. Its an interesting and crucial battle.

Volatility has increased as demonstrated by the VIX. This is a critical part as the mood is now changing from bullish to bearish. The next few days are very interesting. Enjoy!

Nifty rangebound...sharp move expected

Nifty has been rangebound for few weeks now...traders have been getting stopped on both sides....Generally such a convergence/consolidation is followed by a sharp breakout or breakdown...who is going to take control this time bulls or bears? Probability favours the bears...

Bear Rally?

The Nifty has rallied smartly in the past few weeks from a low of 2525 on 6 March to 3687 on May 16. The media is glorifying this by saying this is a 46% increase. A few points regarding this:

1) If something falls from a high like say 6000 to 2200 any rise above that from 2200 will be a huge percentage gain. But it is still a huge drop from the 6000 levels
2) There are very few "lucky souls" who bought at 2200 levels when the market was gripped with fear
3)So is this the start of a bull amrket. if one were to do a simple Fibonacci Retracement Analysis from the high of jan 2008 to the fall to 2228 on 27 October 2008 one will observe that 3800 levels is a 38.2% retracement of the fall.

A bear market is characterised by strong rallies. 30-40% up moves are very common from the lows. Only time will tell whether this is a bull market starting or a bear market rally. As a day trader, frankly I don't care. But my advise to traders and investors is to be careful and always have your stops in place.

The market is a beast

Someone once said the objective of a bull market is to advance as far as possible without any people getting in. A bear market falls as low as possible without many people getting out. The typical investor gets interested in the market at the top of every bull trend and get scared out at the bottoms. Also at the beginning of a bull market most people are traders. At the top they were all investors.

This is the reason 95% of people lose money in the market.

Buy-and-hold doesn't work except for a lucky few.

Question: How do we make money then?
Answer: Short term momentum trading using Technical Analysis

Two sides, two opinions - we'll make profits both ways

Stock market Bulls are thumping their chests, convinced we’ve reached a turning point for the economy.

With interest rates low, … bailouts, stimulus packages , recovery is almost here. And since the market always moves up ahead the economy, the time to buy is now.

But the Bears are equally convinced that we haven’t seen the worst — for the economy or the market — just quite yet.
They point to soaring job losses, corporate profits falling like a rock and sour consumer confidence as proof that now is not the time to buy.

Frankly, I don’t know which side is right, and I don’t care.

The diversity of opinions — coupled with all the uncertainty about the economy — virtually guarantees continued volatility in the stock market.

And I will trade the volatility on both sides of the market to make myself — and members of my services — a whole lot richer.

Trend-following vs Trend-prediction

Most of us like to be leaders...predict tops and bottoms....put on any business channel and everyone is trying to predict the market bottom ...attempting to beat the market. What we fail to realise is that the Market is all-knowing, all-supreme. It reflects the views of all the participants - bulls, bears, fundamentalists, technicians, fund managers, brokers, operators, TV experts, insiders, Investment Bankers, Fed, PM, FM, CEOs, uncle who is a stock market expert and also your milkman. So for once try and be a trend follower rather than a trend predictor. Observe what the market is saying. Trade with the trend. Make the market your friend and not your opponent. Am 100% sure you will be pleasantly surprised with the results.