The behaviour of our markets along with global indices confirm that now we are experiencing prolonged bear markets, and the cuts in prices of stocks will be still sharper in the months to come, as the macro economy developments, political uncertainities, raising interest rates & inflation, help bears to make merry on dalal street. The fall from all time top made in January'2008 on both Nifty and Sensex is already around 40% and indices are struggling to close above 5DSMA itself on rallies confirms this view.
The huge discount on Nifty futures month after month hovering around 60 points help bears to press further sales on any small negative news, and today no body speaks of forward valuations, growth stories etc., Any small rally is immediately sold into by the trapped investors, who are preferring to stay in cash. Because in these times, staying cash and if one is professional trader, having technical knowledge of stocks and indices, can be a nimble trader, to make small profits.
Having experienced long term bear markets from 1990 to 2003, indian investors, funds have not recognised the on set of bull market initially, and by the time everyone realised, always 'buy on dips was a successful theme' which helped investors to make huge profits till January' 2008. Since then, every correction was bought into by funds and investors, with the hope that once the highs made in January 2008 is surpassed they will make huge profits. But, unfortunately, as the idiom goes "People think that it is a correction in bull market, where it is on set of a bear market, and by the time one realises, enough damage must have been done already'. Same thing happened now during this year so far, so it is better one realises not to average the stocks, portfolios, but sell on rallies and keep cash levels high, may be invested in dividend yieling stocks or other asset classes, till the confirmation of ending of bear market is known.
How deep the markets can fall? The answer is little disturbing...as they can fall 55% from the top...Sensex can come down to 9543.05 or even 9914.20 which is 61.8% retracement level of entire bull rally commenced from 2934. Corresponding levels on Nifty are 2860.70 and 3006.67.
According to my reading the raising gaps created in this multi year bull run at 8929.44 to 9092.16 on 15.06.2006 need to be filled, from where an upward journey can begin. Similar raising gap created on Nifty at 2632.80 to 2634.10 on 15.06.2006 need to be filled in the downward journey. These are very scary figures, but facts, as growth slows down due to spiralling inflation, higher commodity prices, especially crude disagreeing to cool down. The gloom and doom situation shall continue atleast till the end of June 2009, thus, exiting profitable stock positions and increasing cash levels on rallies, shall help investors to churn their portfolios intune with fall in indices.
11 comments:
you should sell 3800 put if market comes it at this strike to minimize your loss in call
Thanks for the suggestion.
bkvrkrao
As per my exp. multiple lots in calls doesn't work(but puts work) in bearish or sideways market and sometimes in bull market also.You have selected 4 lots of calls instead of you had selected 2 puts +1 call + 1 short call.
Rao sir,
as far as i know, your strategies are always good. based on minimal loss approach.i could not make out what strategy the anonymous above referring to in his 2 comments?may be something different we had not thought of.
for me i have few calls at 4100,4200. is it prudent to keep those ? at which level i should close that?in nutshull what is the maximum market can go up in this uptrend?
sorry the above comment was mine.
saba
You are right perfectly. I will be undertaking number of trades intraday, which I am not in a position to record continuously, on the blog.
However, I feel that the loss might be reduced or recovered in the current outstanding contract too, as this is a very long settlement ending on the last day of the month 31.07.2008.
Ofcourse, one can employ the stoploss too, owing to his/her risk perception, while buying naked options.
Currently the stoplosses get triggered easily as the markets have high volatility.
bkvrkrao
sir,
i mean the fifth comment is mine.since i had not put my name I informed that.
the earlier ones are not mine. but can you explain what he means by that?
continued..
the anonymous above can easily tell things becos time pass by. market movement is on. this should have been told earlier with reasoning also.
i like you to record ur intra day trades also in addition to these positions to enrich our knowledge.
saba
Dear readers/viewers/followers of the blog,
Please leave ur name at the end of your comment, so that u can be addressed specifically, though you would like to be anonymous, not furnishing the mail ID etc., in future.
I understand that beginners to professionals are all viewing the blog, which is quite encouraging for me.
As suggested, I will be recording all strategies, intra day too, shortly from 01.08.2008 or so., once, I make few necessary adjustments at my end, in terms of infrastructure etc., for the benefit of all.
Well, the person enquiring about what to do with 4100 & 4200 calls can exit if nifty is unable to clear 4132.12 on closing basis during this week. If this level is cleared Nifty can rally upto 4320 to 4450 range too!
We are into most uncertain times, thus, keep ur stop loss on all postiions, owing to risk perception you have!
Thanking all who have taken time to read and post comments.
Happy trading!
bkvrkrao
Hi all
My name is deeapk and 1st and 3rd comments are of mine.
As per indian scenario and my exp options should be played with correct timing(don't do intraday everyday) and correct strike and should have a selling strategy(specially on nifty) and as calls does hurt more that puts in options one should try to sell it
with correct strike and timing and also avoid multiple lots in calls in single strike i.e. today is a good day to sell some calls and buy puts as this run is not a indication of bull until DOW closes above 11600
hi deepak,
fine.
it is good that you share some strategy. If you dont mind could you do that in the way(by way fo blog) how Mr.Rao is doing. Iam sure Mr.Rao wont mind it if you want to share it here. do u have any blogs?
i feel this sharing will help us.
saba
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