Nifty loses leadership.
NIFTY lost its supremacy in the
world order, ranks 3rd, falling next to NASDAQ and S&P. After
completing 6 months in non-trend zone, it is showing no signs of getting out of
range. Support is yet to be clearly established, but chances of breaching 5000
is will happen in all likeliness. PSU BANKS along with Metals and
Infrastructure got massacred last week. With almost all the stocks that were
trending bullish have lost ground. Almost all of them closing with a loss,
though managed to get out with minimum losses, there has been a damage caused.
How to trade a non trending market?
Trend following will not work in
the present markets. A trader, to make
profit from a ranged market should search for value trades. Get in at the best
of strength and get out on the first indication of weakness. Stock selection
becomes a challenging issue, with repeated searches not throwing a big list of
stocks to find trades. If home work is done perfectly, not get impulsive, wait
for opportunities to throw up. There are big opportunities available even now.
An example for such good stocks was in AMBUJACEM, which was a strong stock in
spite of big weakness on the broad indices. This stock returned 2 times risk
exposed on a trade that came up last week.
FMCG & PHARMA are leaders.
Markets move in economic cycles
and so does human life. We become hungry, have food to satiate our hungry, and
then go over board because, when we become too hungry, we forget our limits.
Hence attract diseases. Once got cleared of what has come to us, we learn some
lessons and repeat the process again and again. In between we need clothing,
shelter, communication, conveyance, utilities and luxuries.
This pattern follows in the
markets too. After a full blown recession, there is lull, hunger for growth, mines
minerals and chemicals the mother earth provides to us are used to produce machinery
and processes which goes ahead to produce our needs like food, clothing and
shelter. At first the burning hunger is met and then slowly spills over into
excess, which attracts diseases and we need medical aid. For human beings to
live and the earth to evolve food is essential. So, when in the last phase of
the cycles still food and medicine is needed for survival.
This is what we are seeing now,
and it repeats time and again. Still all the companies in this area do not
require to be churning out extraordinary profits because the markets at present
need only them. Among them there are few gems that have planned well and are organized
to the best of practices, so that they generate extra ordinary profits than
their peers. Identifying them is simple, their stock prices and their balance
sheets will show them out.
Jubilant Food Works, Hindustan Unilever, ITC, and Godrej Consumer
are the leaders in the FMCG sector. Divi’s Lab and Lupin are the leaders in the Pharma
Industry. Among them Jubilant and Hindustan Unilever have given tremendous
opportunities for profitable long trades in the past 7 months of this year.
Funds are pulling out of the market.
Institutional investors both
Foreign as well as domestic have been net sellers this week. After weeks of
buying, this week we have the FII’s too liquidating the markets, giving clear
indications that all is not well for investors at the moment. When every other
person is exiting the market place, it makes no sense to hold on to longs.
Traders, who are in the futures market, shorting stocks, would have taken their
position well in advance making a big chunk of profits from the current fall.
Now it is a sign for them to book profits or add on to shorts on rallies.
Stock markets provide money to traders on both sides.
Among all investment vehicles
available in the world, stock markets are the only option that provides its
traders with profits even while it is falling. A trader can make profits like
buying and holding to sell at higher levels as well as sell short stocks that
are above value to buy back when they become undervalued and pocket the gains.
Risk is a double edged sword and so it the stock market in providing profits on
both sides of its move. To know more about shorting stocks and making money in
bear markets write to admin@bravisatempletree.com.
Have a happy trading week.
“Here is the basic
rule for winning success. Let’s mark it in the mind and remember it. The rule
is: Success depends on the support of the other people. The only hurdle between
you and what you want to be is the support of other people.”
-David Joseph
Schwartz
Team BraViSa.
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