The Setup

Those who dont know about fractals or if you missed my earlier call on the same, please go and read the fractal call I made in September before the big plunge -> GO

Okay now coming to situation now...I have posted the chart with the fractal outline below. Its self explanatory and it should be fairly easy to see if the moves are playing out as forecasted. Till date I was looking at the fractal but still the moves were not clear enough but with recent price action, I think we are close. 

 

The other thing I find worth to mention here is when we hit the recent bottom last week, I would have covered but I was looking for lower since the fractal suggested the same...Unfortunately market always acts the way that is least expected. So shorts are now squeezed and retail and TV analysts seem to have gotten bullish again. I think we are very close to another short term top right here. I will be watching today's and tomorrow's action closely.

The Bottom Line - Until we go above 3150, I will remain bearish.

Best.

Amateur Guitar!

:-) 

Here is a song by Green Day...Good Riddance...Played by Moi...

I am a beginner so bear with me!

Comments welcome.

Best.

Introspection

When I started this performance and trade tracking business a couple of weeks back, I said it was going to be more of an experiment than anything else...And I also mentioned my intentions with this...i.e...not to start any kind of stupid trading calls service...But instead to serve as a performance tracker in case I do eventually get to do my dream job - be a fund manager.

Now after 2 weeks in this, I have to say, this thing is affecting my judgement, leading to unwanted stress and overall is hampering my performance. I say this comparing recent performance to that from a few months back. I think more than anything ego and stress is coming into play and these are things that should be avoided for sure in trading...

I know of several people who did something similar to this over here in the US..And I saw similar things happen to them also...They were outstanding at first but then just tapered off as more people began to follow them...Granted its too early to say for sure for me...But I think it is wise for me as a trader to make a call to shut this thing down.

I have had this nagging thought in the back of my mind for long...I have also thought about this for a long time yesterday and today....And have made my decision.

Trade sheet is updated with all the latest...I will leave this here for a day before taking it down.

Overall since I started, booked shows 11% and unbooked+booked will show around 6% profit.

For records purpose, let it be 6% and assume that all positions are closed and I am flat when I take this down.

I am sorry guys...to those who liked this new thing....but I have to think of my trades, my performance...and in the end, if my performance is getting affected, then what is the point?

Regd the market, I still think we are in a topping process and retail seems to be bulled up again...I think all rallies should be shorted from now on...FWIW.

Best.

More Adjustments

Okay here is what I did...Closed 3000 Calls(hedge) at approx 50.5

Entered 2900 Calls(as a hedge) size 2000 at approx 85...

Enter 2700 Puts size 1000 at approx 98...

As always all updated in sheet above..I saw some Qs asking about the trades..I dont see what is

so difficult to understand here..Whatever trades I take goes to 'open' and whatever I close, goes to 'closed'...Whats so difficult to understand? Comeon guys do some research on your own.

I know I know..Their is a good chance this trade will be a loser eventually..But as always I have to play the odds...I have to play my system and my gut feel..

Best.

20/20

No not a cricket match :) ... I am talking about hindsight here...Its funny how that works...Hindsight is always 20/20...What does that mean? It means looking back, we always know the exact points in time where we should have done something...And looking back now, I realize I should have covered shorts and probably sat out this current upmove.

Some of you readers might think I am a fool for letting this profit go by...But again the hindsight thing comes into mind...

I do not have much concern over here as I think this is just an oversold bounce in a very badly damaged market. In the bigger scheme of things, its not a big deal. I know I was in decent profits last Friday and after today's close overall position is in a small loss...I admit this is psychologically draining to see what was a profit go into a loss...But I follow the Jesse Livermore maxim...Sometimes in a trade, you just have to sit tight and wait for the BIG ONE...And that is what I am waiting for here...Might have to take some more pain but the payoff could be big.

The other thing I am feeling now is...after starting this new position updates thing on the blog, it has increased the pressure on me several times over...The pressure to not get into bad trades...The pressure to keep on winning...I guess this is why almost no one will do something like this...I am however going to tough it out and see how it goes...If I feel my performance is getting impacted, I will decide to stop the same...After all that is more important to me. Right now its quite too early to say for sure...But I am keeping a close eye on it.

Coming to the markets...Ok we got a good rally...Next area is 2805-2860 resistance bundle or wall...It would be very tough for the market to go over this...But if it does, we will challenge 2920-2950 range....As of now I dont have a clear plan on this trade if this happens...But I will see when we get there...Break 2720 on the downside and I think the downmove will continue in earnest to 2500 odd. Right now its a toss up and cant say for sure what the short term move will be...Intermediate term..i.e over next 2-3 months, I am very confident we shall see 2200 area and lower again. In the meantime, some pain is bound to be there.

If I get some time later, I will post charts with the counts I think we are in now.

Comments welcome.

Best.

Took OFF some of the Hedge

Just repositioning...You can see the details above.

Best.

Weekly Update - Chop Chop

My thoughts for the week...It will be short as there is nothing much to report. Expect the chop to continue...I think we shall get a good chance to cover shorts someday this week. Based on global markets, it looks like we bounce today...Shorting at around 2860 might be a good strategy.

See below chart...red and blue lines show possibilities short term. I think we are still finishing off wave 4 before wave 5 opens down.

Very simply speaking, we should see 2525-2550 area first (after going up today)...Then we should see around 2860-2960 range....Then the final move down. I will post these counts later...

For today I might do nothing in my trades...Short term taking some pain but we will see how it plays out.

Best.

10000 Hours

Funny title? Well that is the amount of time it takes anyone to become a master in any particular thing...Be it trading....or be it singing..or be it playing the guitar...Thats what it takes to be an expert in any field.

I read a blog article a few days back and cant find a link anymore but basically what it says is...For anyone to become a master in something, he or she needs to spend 10000hrs in that particular thing...

So lets look at trading...lets say you spend on average 5 hrs a day....so it will take you approximately 2000 days or 6-8 years to become a professional...This is assuming ofcourse you are fully dedicated and do spend 5 hrs a day...

Now statistics say that out of all traders maybe only 3-5% at a best guesstimate actually make profits consistently and over the long run...Why? Because most people give up after a year or 2...They either get frustrated or disillusioned or the market kicks them out...the great bear market of 2008 would have done that to a lot of people...If you remember, I once wrote about this...How I started out with few of my friends in this business and in the end only I am left...Not that I am very successful..Only that I do realize that I need to put in effort and lots of effort...I realize there is no free lunch...And we need to work for it..Now more than ever..Which is why I find it laughable that people tune in for tips and free calls...

I occasionally dab a little bit in guitar and music...Maybe I would have spent around 1000 hrs on and off...I can play a bit but I got fed up in between and stopped...Now I started this up again...I think I shall persist this time until I can play good enough...Maybe I will post some of my songs here some day..But my point again is that NO PAIN...NO GAIN...

Do your due diligence folks...Work toward those 10000 hrs...

Will post some thoughts for the week a little later.

Best.

Adding some more

Adding a little bit more...Now I am in full position...

500 NF added at 2685

2000 NF full position avg of 2777

EDIT: Setup I am watching says there is a good chance we break the 2680 support and start a waterfall decline....We can tag lower support area of 2540-2600 range and start an upward rally from there :) 

However its all speculation and usual disclaimers apply...we shall see how it turns out..I am remaining short for now.

Best.

Status Quo

After watching the tape for the past 1hr or so, I am making a decision here not to do anything on the positions. I still think we shall bounce but still there are times when a trader has to make a decision on a position on whether to take profits on a position or let it run in the hope of getting a bigger profit...In other words letting profits run...Ofcourse downside here is that a decent profit can turn to a small profit..or worse a small loss...But thats the game....

If you are a risk averse trader, take profits now and try to reshort higher...I remain short for now.

If we go higher over next few days, I will increase short allocation and reduce the calls allocation.

We shall see. As always its a game of odds and I need to trust my instincts.

Best.

Possibilities Possibilities....

So US market finally makes a spectacular rally from a very oversold condition. In the bigger scheme of things, I see this as a bounce or short term rally....short covering rally or scorch...as I call them...So what happens to us?

I think we shall maybe whip around a bit today, form a base and also do a rally attempt for next few days. 

So whats my plan? Likely I will cover today at best prices I can get...And go flat...Not going long for this swing...My mind is saying not to... :) Let it rally...I shall short higher if situation is right.

A Note here - A warning to all late to the party bears - be careful...scorches like what we had here in US markets can happen in India too...I saw comments and questions on late shorts..let me say...timing is damn important...My thought process and entry points are all chronicled in this blog on a real time basis...Please dont ask me for more information on trades or when you can take trades etc etc...I am not an advisor...I dont want that on my head...If you simply follow my trades, thats up to you...However I am sorry...I cannot and will not offer any person specific advice on trading positions..(let me give an example - lee, can i short at 2720....or lee, i shorted at 2700 level, when should i cover...)..It is just too stressful and dangerous for me to offer any advice of this kind and I will not do so...If you see my position and deem it wise to do something, then go ahead...You are on your own...Sorry to be harsh...But I have to say this before things get out of hand.

However - If you need any help on technicals, fundamentals or anything else related to the market( or anything else! :) ), let me know as always...I will be glad to help as I have been helping others over past weeks and months...

Cheers 

Adding....

...to shorts here...Feb NF 500 more at 2756

Hedge Options Feb 2900 Calls....1000 at 103

I am not very confident on this one...But trying it out...

Increasing hedge ratio, as bounce possibility is higher over next few days.

I will update the trade sheet above shortly.

Trade safe.

Cheers,

Lee

Tough Call

Tough call on the market direction next. I see different possibilities out there but lets take it one day at a time. See the reliance chart below with comments. You can see my thought process on this one.

Broader market...Well...2750 and then 2700 area remain most important on downside and 2860 on upside. There are so many other resistances on upside...it will be tough for market to move up...I want to see a wash out in the market but I am not seeing that...They still continue to buy the dips! Amazing is what I call it...Give up already...Well I just see more pain ahead but enough of my rant...Lets see how it plays out...There is a significant rally coming soon but from which level is the big big question? .. So well..lets just play it as we see it.

Trade update - My positions and latest prices are updated above as usual. Yesterday I had an urge to close and reshort higher...also to add more shorts at a higher level...but in the end just decided to maintain status quo. The reliance chart posted above should be studied closely. Its looks very important to me. 

Best

Lee

Zurich Axioms

Here is a link for another book I think every trader should read - GO

Its a fantastic book for any trader....Rules...Understanding risk etc...Enjoy!

I will post something on market views a little later.

Best,

Lee

Who were the Turtles?

In mid-1983 famous commodities trader Richard Dennis was having an ongoing dispute with his long-time friend Bill Eckhardt about whether great traders were born or made. Dennis believed that he could teach people to become great traders. Eckhardt thought genetics were the determining factor.

In order to settle the matter, Dennis suggested that they recruit and train some traders and give them actual accounts to trade to see which one of them was correct.

They took out a large ad advertising positions for trading apprentices in Barron's, the Wall Street Journal and the New York Times. The ad stated that after a brief training session, the trainees would be supplied with an account to trade.

This group was invited to Chicago and trained for two weeks at the end of December, 1983. They began trading small accounts at the beginning of January. After they proved themselves, Dennis funded most of the trainees with $1 million in February.

"The students were called the 'Turtles.' (Mr. Dennis, who says he had just returned from Asia when he started the program, explains that he described it to someone by saying, 'We are going to grow traders just like they grow turtles in Singapore.')" - Stanley W. Angrist, Wall Street Journal 09/05/1989

The Turtles became the most famous experiment in trading history because over the next four years, they earned an aggregate sum of over $100 million dollars.

Richard Dennis proved that with a simple set of rules, he could take people with little or no trading experience and make them excellent traders.

==================================================================================

To download and read this book go here - Link

Kpls 20day swing is a variation of the Turtles base system. Worth a study.

Best.

Short NF 2833

Shorting NF(Feb) 2833...Size 1000...Starting position. Will add later.

Hedge with 3000 Calls(Feb)...Size 1500...

As I said before, if market goes up, I will roll up the options to 

higher strikes and also add onto shorts. We shall see how 

much energy this market has and decide accordingly.

EDIT - Let me just say here, even in the bearish case, there is a 

very good possibility for Nifty to rally upto the 2960-3040 area

and still remain bearish. For me, if this happens, I will continue

to add shorts. So far so good.

The 20day swing will be reversed only above 3150..So as you

can see, its quite a tough trade but lets not overthink this

and trade each day as it comes.

-> Short term is bullish but can turn very quickly.

-> Medium term and long term are bearish.

Best.

The Coming Week and My Thoughts

Dont miss my earlier post on the past week and the trades I did...What went wrong and what went right...Will be a good read for all traders novices and experts alike.... :)

In this post, I will touch upon the week ahead, we will look at some charts, try to find some possible setups and also try to formulate a trading plan.

First coming to the sensex weekly. Comments on chart.

 

Nifty Daily. Agains comments on the chart.

Those who want to read more on Kpls 20d swing - Go to these links:

http://www.vfmdirect.com/forums/show.cgi?topicid=1231450596

http://vfmdirect.com/kplswing/

Its a very simple yet very elegant and effective trade system. I dont think many traders will have the mental fortitude(guts) and patience to use this system.  But it is something worth paying attention to. Its a variation of the Turtle Trading System...I will touch upon this in some other post in the future.

Okay coming back to market, either case I am inclined to start shorting...From Monday with hedges and then see how it goes...I will likely add up all the way to 3050 area provided we get there...And while I am adding I will keep rolling the hedge strike higher up. Its a plan but we shall see how I execute it tonight. I think there is good chance market will continue upward for next 5-7 trading days but eventual resolution should be down. So we are at 2828 now...2860 is resistance. And above this the 2920-2960 band is strong resistance. 3040-3080 even stronger resistance. I will be surprised if market goes that high...But then market always has a tendency to surprise us...So we shall see...I will update trades and entries if I do any today.

Again - Dont miss the post below this! :)

Comments and thoughts welcome.

Cheers.

Trades and the Week that passed - Post Mortem

I promised a post looking into the week that just passed us by and the trades that I did..What went right and what went wrong...

First the trade - Going into the week, I was short...From approx 2920 area and covered almost perfectly at the 2700 area. Watched for a bit and went long - It was almost a near to perfect entry and sure the market went on to rally 130 points from there...But still the trade turned out to be a dud. Why? Because the trade was over hedged. 

Now dont get me wrong..I had an inkling this might happen but still I allowed myself to be over hedged...Why? Because I was scared to take the long - And so in the end what COULD have been a nice short term trade bombed. I realized my mistake early in the day on Friday and wanted to get out...I tried to time it so that I could minimize the loss and VOILA market throws me a curveball..All minor corrections started running upward :D And to add insult to injury, my stupid trading platform went down...haha...all in all a frustrating trading day...Not really because the trades went wrong but because it was my own mentality that caused it...And ofcourse Murphys Law came true for me then...What CAN go WRONG...WILL go WRONG :)

All in all...I learnt some lessons...

- First thing...Never overhedge...If not confident, dont take the trade. Better setups will come.

- For a short term scalp, its better to keep the hedges very small.

- Watch the IV closely when taking the hedge. Also the discount vs. premium on the futures. Overall 3 reasons played against me...Overall it resulted in a bad trade. But still just small loss.

- Heavy hedges come into play only if its a trade lasting 2-3 weeks where the power to roll over to a higher strike comes into play. Its tricky figuring this out but well as I said before, I am also learning this...So bear with me!

Now, next, why did I cover at 2706 and go long. First, this area was tested 2 times and held, so it looked to me like a good place to get long....Second, daily and hourly was terribly oversold...So some sort of bounce was expected. Third, fade the gap...Its a profitable strategy more than often. Last and not least my any means, Sentiment...I could see on message boards, CNBS(cn bc is the correct term...cnbs coz its just bs(bullsh*t)) that everyone had turned bearish...Operators love turning these kind of situations into SCORCHES(=short covering rally). Simply said, odds were in favour of a good rally.

Now looking at the comment I got from Prashant in the earlier post...Where he really hit the nail on the head and my comment after that -

 Prashanth said...

Consider the following,

Your Delta (for Hedge) was 1.10 (which means you over-hedged)

IV was around 57 at time of initiation which dropped down yesterday.

Yesterday, we also saw discount btw Futures and Spot getting reduced.

I feel that for extreme short term, market is still up. If you had held onto position, loss may have been minimized since your Delta for hedge was not 0.70 and a 50 move on Nifty may have given you break-even or small profit.

TI :)

January 16, 2009 7:36 PM

 Lee said...

Hey Prashanth...

You are 100% correct!(Almost 3 different reasons played against me at the same time..I saw it happening realtime and just wanted to cut and run on my trades)...I realized this early yesterday even though I did not quantify it as you have over here...And in an effort to correct the mistake, I made some other small mistakes and probably worsened the situation(but small mistakes and so small fees - we gotta pay our dues to MISS MARKET lol)..but again I am not too worried about that...maybe 2 yrs back I would have been very upset...but in the effort to become more professional, I have tried to distance myself from the trades...hmmnn..donno if thats good or bad thing...lol...but you would know more about that! :)

Okay, I do intend to do some post mortem of the markets and mainly my trades over weekend...but in meantime if you have some links I can maybe read on the hedging dilemma(to HEDGE or NOT to HEDGE?) and Deltas, I would really appreciate it..I do know the idea and basic concept from my trading and experience..but I do not know the theory if you know what I mean...

Thanks Prashanth for you comments and time..I appreciate it.

Others also, I would appreciate it if you can offer comments on similar situations you might have faced..or any thoughts at all...

More thoughts and debates tomorrow.

Cheers and have a good weekend all!
Lee

So there you have it..For those who dont know...Prashant is a very astute and clear headed trader/analyst from the Technical Investor Yahoo group...

Next post will be for the coming week and my trade plan.

Cheers All

Lee

Closed NF and HEDGE

EDIT: DUMPED HEDGE ALSO. Going to sleep and dont want to keep this open. What makes me feel bad about this trade is that the futures buy was almost a perfect entry yesterday but the trade got messed up due to the hedge..I learnt a lesson but will share more over weekend.

Overall a bad trade. Oh well still a good week. The hedges were not properly done on this trade. I know why now but will post this and more thoughts over the weekend. Going flat for the weekend...We will see more next week.... 

Sheet also updated above. Have a good weekend all...

===================================================================

Close Nifty Futures at 2755. Hedge(PUTS) are still open. The way I hedged this was all wrong..Even though the trade entry was really good, the hedge was too large to make the trade effective. I will try to rebalance this trade today....Watch here for updates.

Later tomorrow I will write more on the hedge and what went wrong. I am also learning and experimenting in this.

Best.

Trade Updates

Closed short from 2963 at 2704

Close Hedge from 102 at 31

Opened Long at 2706

Opened Hedge at 102

All positions updated in sheet above.

This 'long' trade is a short term trade. Please avoid if risk averse!

Edit: The reason being I am not very confident on this trade since daily trend is firmly down.

Cheers.

Market Updates

Well got the bounce...On quite weak volumes...But globals are in deep red now...So looks like we can retest the lows and maybe slightly lower. If so, I will likely take profits on short positions and go flat. And look to reshort higher. Will update positions if I do this.

Chart and comments below.

Dont miss the couple of posts below this explaining the new position update feature on the blog.

Best.

Trade Methodology

Got some questions on the trades so thought I will outline some stuff here...

First of all the PE option mentioned above was actually CE being a hedge. I have fixed that - It was my mistake. I have also updated all the figures with latest values. I will do this every end of day or if I do take a new position.

Now about the positions - I am not the kind of trader who trades daily. Only positional. Now I might 'manage' the position and the hedges some days but mostly will let them be. Coming to above positions, it was a double short position before but I covered half of it at 2740 which is what you can see above the open trades - did this since I was expecting a nice bounce which we did get. The other half is still running - I will decide when to close this based on market moves. Whenever I do this, I will update the sheet and also post a blog entry mentioning the exit. Once this is done, overall profit figure will be updated and the trade will move to closed trades.

Then regarding the hedge, why do I have double the futures position? Well most of the time, I try to make it delta neutral especially if I am not fully confident and then I will manage the hedge positions depending on my assessment of the risk in the trade. See the simple idea is that futures will move much faster than options...So if I profit, I am cutting down on profit with the hedge but it will be a profit...On the other hand, if position moves against me, I have protection against account blowup. I have written a good deal on this a few posts below this one - And why exactly I follow this method of risk management vs. hard stops.

Now coming to following these trades. Since these are already open, I would not recommend trading them. If I do new ones, you can try but remember its totally your decision and your risk..In fact, I would feel much more comfortable if people inclined to trade this first paper trade and then follow if at all you need to...Best always is to trade using your own analysis and use mine for confirmation!

I will post market thoughts and updates a little later today.

Best.

Some Updates

Well faithful readers on this blog....You would have noticed that I have added a spreadsheet on top which essentially shows my trade performance since the beginning of this year...

Some notes: 

- The detail on the left shows details on the actual trades I have taken. I think the tabs are self explanatory.

- On the right hand side, you can see the details of the profits/losses which I booked so far and the positions still open and unrealized P&L. It also shows the performance record till date since beginning of year.

Some thoughts here:

- Why am I doing this? - 2 reasons. One is to act as a trading journal for me. I was already doing this - Now its public for all to see...Thats all.

2nd reason...Well this one is a bit more entrepreneurial in nature in that I want my performance to be recorded in case I ever become a money manager...Now I must confess..This is one of my ambitions...Well whether it comes true or not...I want to do this...

Okay...So how can you use this?...Well whenever I trade, I have already made clear before, I take hedges to protect myself...You can see this for yourself in above trades. Be very careful IF you try to follow my trades...usual disclaimers apply.

I would like to hear comments on my new venture and ideas..So dont be shy...let the comments flow...I am willing to consider any changes if valid and needed.

And also, if any one of you have ideas on what it will take to be a money/fund manager, please let me know or get in contact with me at my email id. 

EDIT:

Now you can see all the details on the sheet..I have adjusted a bit..Please do note that options are just a hedge for my main position... Also dont take any positions until I take new positions..I will update when I do this and also do a blog update.

If you want to, you can click on the right hand side icon of the spreadsheet to open in a new window and see everything in detail.

Again I stress..Do not take positions based off this just like that. Follow strict money management rules as I do...And as always disclaimers apply.

Best.

Position Update

No charts. Just a quick update on trades and the market. 

Some bounce is possible to relieve the oversold levels...So I took off some more of my short positions but still holding core position with hedges. If market rallies to 2900-2950 area, I will add back to shorts and also close my hedges - we will see when we get there. The caveat is that the daily trend is now firmly down...So any rallies might be weak...Which is exactly why I am not playing this long but keeping core short position. 

As always its a game of odds. Trade Safe.

Best.

Update - Some charts and quick thoughts

Charts on top...Some market thoughts and comments below all charts. Also comments added in each chart.

SENSEX WEEKLY WITH COMMENTS

NIFTY WEEKLY WITH COMMENTS
NIFTY DAILY WITH COMMENTS
NIFTY FRACTAL UPDATE

Some things here...When you trade, what determines your success above all is some sort of money and risk management. This you will need to develop on your own...I have explained my method already above...It can be stops, it can be hedges..can be a combination of this and position sizing management...

This past trade I am in now was in my opinion a very bad trade because of the area I started adding shorts from...The only reason my account did not blow up was due to proper risk management. 

Trade Update...I covered 30% of my shorts yesterday at 2800-2830 area and holding the rest. I also hedged the shorts at 2840 with 2900 calls...If market bounces next week/or crashes below 2800, I will likely close them off. But need to reevaluate that. Either way my thoughts and preferred paths are outlined in charts and posts above.

Probably no update for some time until I see some change in the scenario.

Have a good weekend all! Cheers :)

Best.

India's Enron

Thats what CNBC is calling this whole debacle and a very apt name too. Well not much of a surprise to me and I stand vindicated on my positions in the market. Not to thump my chest or anything like that...And I truly feel sad and sorry that this is what the corporate world has become. But it was only a matter of time in my opinion.

First we will look at charts and then I will write some other thoughts mostly in answer to some of the questions in earlier comments. I admit this was one of the toughest trading positions I have held getting whipsawed in different directions...But still held on and it paid off...I will touch on some of my thoughts and ideas after we go through the charts.

First the sensex setup chart I have been posting in the past few posts...You can see my comments on the chart. Setup still very much valid.

Next the Nifty daily...Comments on the chart. Nothing more to say except it looks to me we are going to new lows...within 5-7 weeks....Below or around 2000 and I will start looking at longer term cash positions again - IF we do get there.

This was the post I made a while back calling for a fractal move...It would be a good idea to go through this again and refresh :)

http://theindianmarketblog.blogspot.com/2008/12/range-and-some-very-interesting-charts.html

The Nifty weekly...Again comments on chart.

Now coming to actual trading. I understand and agree that this was one of the toughest trades ever if anyone did stay through. I am very sure all the weak hands in the market were first wiped out by the end of day short covering rallies...And once all the shorts are out, the market goes down...

I got questions on how to avoid this...Or how to even trade this...Well there is no easy answer but I feel there are 2 rough ways to actually trade this...For example the recent move up....we know 3080 was the ideal postion to cover shorts...or should have been a good stop loss for any short positions. So once price went above this, we should have covered and then shorted again when price broke 3080 again yesterday. I think looking at yesterdays price action, it was not too difficult to actually do this...Why was 3080 important? Well see the nifty daily chart above and you can see why. Charts are the only way to trade like this...Identify support and resistance points and trade accordingly...Now the caveat here is that to trade like this, you need to be IN the market...closely monitoring all the time....In other words it should be your full time job...If not, forget about it....

The 2nd way...What I do...This is probably not as efficient but I do this because I cannot be IN the market all the time....I am hardly there for 3 hrs of actual market time and that too sacrificing on some of my sleep...So what I do is enter a position and take a hedge in the opposite direction...What this does is I never blow up my account...And also sleep fine :)

Some experience in needed in this also to determine how much to hedge...Which strike to use...etc  etc...For example...Short Nifty 3000...And Long Nifty Calls strike 3100...Now the ratio of the call options should be higher compared to the futures...Then only will it be efficient...As options will not move like futures...

The advantage of this kind of trading is...It give more leeway to me...And I can use my exit plans and I can trade over a larger timeframe...Which brings us to another important point...Timeframe...What is the timeframe you trade?...Decide that...A day trader cannot trade off the weekly charts...I use the weekly to trade...And dailys to fine tune and the hourlies to do even more finer tuning....So I trade positions on a weekly scale...bigger stops...bigger targets and much more leeway...Also it suits my style and the amount of time I can spend in the markets..

Trading is a tough business...Agreed...Experience is the most important thing that we should build in the market...Dont feel bad if you missed out on a move...More moves will come...Markets will still be around...Protection of capital should be the focus of any trader. Profits will follow.

One site you can look at for good support and resistance levels is Ilango's blog :

http://tradeinniftyonly.blogspot.com/

Also I would recommend reading this again - A post I made early last year on my thoughts on TA and trading and what is actually important to a trader. A good read for all traders...Dont miss it.

http://theindianmarketblog.blogspot.com/2008/05/how-important-is-ta-in-your-trading-or.html

Next Possible Moves & Trade Setup

Coming to the market and the next trade setup...I think we will continue down for some more time...And a bounce should hopefully materialize from 2800-2850 area....If we get this bounce from here into 2920-2960-3000, then a good short trade can be done with stop as earlier high...Again watch the lines in the nifty daily and enter accordingly. 

Best.

The Setup - Followup

Main setup I am watching now...Chart is same as posted before...Watch next 2 days closely...Short with tight stops or hedged with calls looks like a good risk-reward play..

Market did not go down as far as 2650 but still the direction of this fractal remains the same as outlined in earlier posts...But we are very close to invalidating this...So a close watch looks to be prudent.

Best.

2008 - What A Year!

Its the end of the year and looking back on this year, I am sure that no one would have expected what played out. Not to this extent. I expected some kind of top at 5800 and sold out on all my long positions and went flat....Market continued upward without me but I was content since we can never expect to catch the last 10% of any big move...Not unless you are very nimble. 

The end of the bull run was marked by the famous Reliance Power IPO...Retail went crazy at the time this one came out and even though I warned all my friends not to put any money in this they still went ahead...loosing most of their money in the process. The day the IPO came out marked the bull market top and never looked back. Has retail learned their lesson? I think not. They still listen to the CNBC clowns - even now. Folks its not a bottom. Their is no such thing as a V bottom. It will take time.

So what do I expect 2009 to bring? It will be bittersweet for sure. The first half is bound to be bad..I expect we shall see new lows...Then after this one super bear market rally. Again pundits will come out calling a new bull market....Will it be? Maybe...But lets take it one step at a time...We will surely go through a basing process over the next 12-18 months...Ups and downs...But there will be super rallies to play...Lets be a trader for some more time and try to catch these big moves before turning on our investment mentality again. 2010-2011 may be the time another bull market starts. Now this is all speculation...But this is my expectation.

Okay enough of raving...Lets go the charts and more closer stuff...Chart with comments attached below. In the post below this one, I mentioned it was good to short at those levels since we were close to the upper area of the channel. Its in good profits right now...What next? My expectations and comments are on the chart. Enjoy.

Once we set this important low in Feb-Mar 2009 timeframe, I expect we shall get a huge rally from the lows...which may be around 1800-2000 on Nifty...this rally should happen into late 2009...maybe a 100% rally also...But let us see that when we get there.

Best and Wish you all a very Happy and Prosperous New Year!

Range and some very interesting charts

Well folks...I got some free time now...so did some analysis and am putting up some charts here with comments...This is very interesting stuff...Dont miss to go through the comments and the studies...If this call plays out, it will be quite an amazing move...!

First the sensex chart I posted in earlier post updated now.

Nifty log...Is this a wedge? Not clear enough to call.

Now the main chart...All comments here...Study closely and leave comments if you like it! :)

Cheers and All the Best!

Merry Christmas!

Well guys this bear market rally has continued much more than I expected and I feel quite drained..I am however still medium term bearish...Even though tired and exhausted with this market...Being year end and Christmas, I am taking a few days break from the markets..I am leaving some short positions still on but not trading around them anymore...I leave you with some good long term charts for your study...I have not added much comments but you can check them out...see the important t-lines and price areas of importance I have marked on the charts..Anyone with basic TA knowledge can make out what I am trying to say here :-) 

Enjoy...

First Chart - Monthly Sensex Very Long Term....Still in a nice bullish channel. Will we test the bottom area of the channel in 2009?

A closer look of same chart but on a weekly scale. 

An even more closer look. Notice the area of importance price is now approaching. Good short point with appropriate stops.

Stay safe out there and Wish you all a Merry Christmas and A Happy New Year!

Best.

When sudden realization sets in....

When the music stops, who will be left holding the bag? 

To me the past few days look like distribution than anything else. Optimism is back. The public is being trained to buy the dips. 

FIIs are buying again...So it seems. Hasnt anything changed fundamentally? Has it become better?

I think IT is showing whats in store for the broader market....very soon...

Chart of Infy first -

Same charts of nifty as I posted before...but updated..and latest comments...Has anything changed?

Log chart...Same story here also.

Best,

A very bearish Lee.

Resolution Time?

Sorry guys..I know long time since a post...Well to tell the truth I have been busy..very busy past few days...Its that time of the year when all projects start rolling out...And well the markets to tell the truth, I have been frustrated by the moves..I did not get any good entries for my shorts...Some of them I have are under water...I did short a ton of 2900 Nifty calls and so some sort of pay back in them...

But I hope some of you stayed sane and out of trouble coz of my last post where I clearly mentioned thats its not wise to be long in this market..We are not at a bottom..Yet.

And still I was apalled again at some bloggers and gurus still calling for bullishness...The market obliged and created a bull trap by breaking above 2860...And then gapping below it today...

So what next...2860 remains the pivot...Longs should not exist below this level. Above this also, try shorting with stops...I remain bearish until I see signs of real capitulation.

Charts for your review - (As SS(Mr Timamo) adviced, I am adding charts with a closer look)

More to follow later. Stay safe out there. 

Best.

Whipsaw City

Covered all shorts today and went flat...Pretty decent profits and I do not want to let it go..I might be early but the market is displaying some strength by holding onto support levels. Will reshort at higher levels if a good bounce comes in else remaining flat...Not going long at all for now. As I said before, I dont like this market. Its whipsaw city and I'm not so sure anymore on direction!  :(

Charts to follow later.

Stay Nimble!

Best.

More to come

As I said last week, market was looking very dangerous. I was apalled at some bullish views coming in from various forums and blogs I frequent. To me it was clear that something dangerous was brewing and lot of small players will get caught on the wrong foot again. I sincerely hope that some of my readers took precautions with what they read here and did not go long yet.

Well as mentioned in my earlier update, I was looking for possible reversal points. I kept adding shorts as we went higher because it was clear that there was a buyers strike and bad things would come soon. Yesterday the market confirmed that with a strong rejection at the 2830 resistance/pivot area. Now back at support...2630 should break today giving way to the 2520 support area. I think this also will break sooner than later and we should go on to test earlier lows and new lows. Dec mid timeframe is where I will be looking for some sort of turn - This is also a bradley turn date. We will see when we get there. Till then enjoy the fall and these charts with comments on them.

Also my sincere wishes and prayers are with all involved in the nasty incident in Mumbai. I dont want to say anything more here but that I am really saddened by several things...The violence, the ineptness of our security forces and above all our politicians and media. Sickening to say the least. I will continue to hope for better times for India as a whole...Will it ever come?

Best.

Possible Reversal Points

Well 2520 turned out to be strong support and market bounced back from that area. I am totally flat now and looking to see if I can short at higher areas. Its risky business as market has some momentum now as is clearly evident from US markets today...BUT I still dont trust this upmove. Not yet. I want to see one more bottom...If its a higher bottom, it kinda seals the deal.

Chart below showing some possible paths and where I am going to be looking to short at. 

Its self explanatory...Short at your own risk however...!..Market has momentum now!  :)

Best.

Some Charts and EWT counts

Been a while since I posted some charts...But I have been mentioning here that I am more bearish than bullish and what I think would happen. Posting some charts here to substantiate this view and also show what I was seeing and why I became bearish. 

Below are 2 charts which show 2 different ewt counts and what is happening now. Either way we go down to test the lows and maybe more. But lets see how market negotiates 2520 and then 2250. 

EWT Count1

EWT Count2

Next here is the weekly chart. Comments on it. Overall things dont look good. I hope some people benefitted from my caution messages over the past few days. A reversal will happen but from which level? Its anyones guess. For me the market looks sick...And there is a buyers strike out there. Sentiment needs to turn before we can start some sort of rally.

Best.

Exit Longs and Going Short for next few days

Yesterday I exited all longs and went short around 2760 Nifty....I am hedged so will continue to hold even if we go higher.

Best.

Quick Update

Buying weakness yesterday worked but I am not so sure anymore. Today I will get rid of my longs and my hedge positions and go into cash for a few weeks..I think its a good idea to be out of the market next few weeks since moves either side are dangerous and can kill a positional trader. Day traders...well enjoy the volatility while it lasts.

Best.

Buying Opportunity

This week could be a good time to start slowly buying into the market...I will start buying back in small amounts daily...Essentially buying back what I sold at around 3200. These are tough markets to time and trade but I think we are close to some kind of value levels...Market even though going down, is not really crashing now. I say lets evaluate the moves today and buy for a good swing up. We are now holding inbetween the 61.8%-50% retracement levels. If market breaks the 2730 area, we can go down to 2640. This area should offer some excellent support going forward.

Will post again after a few days.

Cheers.

BOOM!

Well got the big selloff...Morning started with a 1-1.5% down and I used this area to get rid of almost all my longs and also shorted 3100 Nifty. 

6.66% down...When I got up today and saw this on the screen, I thought to myself...Man thats not a good omen!...Hmmnn...let us see...

So what next? Some bouncing about in a range is possible before we head a bit lower. But remember this is all part of the bottoming process and I also think we are finishing the last 5th wave of C. Today 2860-2850 needs to hold for some kind of rally to develop. If not, well God help the bulls. I will probably cover shorts today and just wait it out....Not going long here because of the uncertainty...Will again try to go short higher...But lets see that as we go along.

See this post I made some time back -

http://theindianmarketblog.blogspot.com/2008/11/rapidly-approaching-strong-confluence.html

We are still playing out this scenario...I am looking for one more major low in the next few weeks. Maybe December.

Updated Daily Chart for your study.

Best.

Are we done?

Is the rally over? Or close to over? For some time I am having this nagging thought in the back of my mind. The earlier decline held to the 38.2% retrace at 2860 and bounced back nicely. But now it could face very strong resistance to the upmove at around this 3180-3250 area. If it breaks out of this, there could be another quick 200 point upmove. But somehow I dont think we will break out above 3250 also very easily. 

Now, even though I said what I have said above, we still can have more rallies and I am open to that possibility. But let it be. We can afford miss out on the last 10% of the rally as long we get out safely...Retest of the lows is quite possible from here...There are some other important things here but I will talk more about that in next post. 

So, I am going to sell my cash longs today on any rally pops and maybe build some small shorts. Its not a good day to do this because there might not be a big rally today but I will see what rallies I can get so I can sell into it...

Charts to follow later.

Best.

Bingo!

Well I got the selloff I was looking for...Should continue for ATLEAST some part today too. I hope you also noted that Reliance cratered and took the market along with it...Dont I deserve a star? LOL!!

Give SS one too...That was an amazing chart and call idea from him - check timamo.blogspot.com

Well anyways joke apart, I am not sure now if this is a sharp corrective selloff with more recovery highs to follow or if it is part of an initiation move that should go on to test the market lows at 2250 and probably lower at 2000 odd. Any thoughts? I am not sure.

I will most probably cover some of my shorts today...Hedge puts against cash longs will remain.

Comments, ideas, thoughts etc welcome. The forum I used to post for ideas VFM has become a noisy and useless place due to some new elements posting and spamming there now. Comments can be posted here also...Will be welcome..And hopefully some kind of healthy debate can emerge.

Best.

And the Beat goes on!

Well today was quite bullish...More than my expectations...Looks to me like some short covering and some panic buying by those who missed the bottom. Well, I am still seeing a decent pullback over next few days.

Some things I saw today and yesterday....Reliance was weak...Visit SS's site - timamo - for more on this...While Nifty continued to rally...If we take this as a sign of things to come, Nifty can get weaker over the next few days after the late to the party retail crowd gets bullish. One other thing I noted today is that all the so called financial advisors on TV have turned bullish. Where the hell were they when we were at 2250?

Well pullback is coming for sure...From where I do not know..But lets watch 3160 and 3250 areas closely for more clues. It might not be a big selloff and I think this one should be bought. I started some small shorts yesterday...Its underwater...And I am hedged. Will look to add some more today. I am not looking for a big selloff and I will also look to buy the dips ofcourse after seeing the character of the same.

Best.

Rapidly Approaching Strong Confluence of Resistance

From the title of this post, you might have guessed, I am looking for some weakness going forward..Some kind of pullback only because we have run up too much too fast and we have also kind of reverted to the mean after all the recent market mayhem. Some pullback is possible..And will also be good for the market.

After this pullback, can we rally again? Definitely. We need to see the nature of the pullback first ofcourse. I believe the market will build an important low and base in the market over the next few months. Dont be surprised if we do not go anywhere in next few months. We can go down some, then go up some and then one final low around 2100-2000 area which should give up a multimonth rally...I am still long but I have some hedges in place and will also look at building some very short term shorts in Futures today. Longs are in cash stocks.

Some charts for your study below.

Comments welcome and urged...Confusing times. Trade Safe.

Best.

Thoughts for the Weekend

Well guys first I must say thanks to all who came forward to offer me support as I was having second thoughts about continuing with the blog...I have added more on this in the comments in the post below this. Reading all the comments in the post and on the shoutbox, I cannot bring myself to close the blog...So I will not. I will however outline some concerns I have and why I thought about closing the blog...

THE WHY?

- Trading is tough...Mentally exhausting...Emotionally draining....Reasearch and Analysis also takes a lot of time....In addition to that blogging takes even more out of you...Putting your own ideas out in public for everyone to see them and act on them...And probably even go wrong more than often puts a lot of pressure on you in case the readers of this blog did not know...

- Ideas are out here. Trades are not. Does anyone know how I trade? Do I go long without any cover? Do I hedge? Where do I hedge? What do I use to hedge? If its puts, what is the ratio to longs that should be maintained, whats the strike so that the portfolio is delta neutral? Am I making sense? What I am trying to say is I am NOT a financial advisor...This blog presents ideas..Unless someone understands the risk vs. reward, do not enter a trade. I get sad seeing suckers everywhere looking for 'calls'. I have said this before and will say it again - Do your due diligence...I read 100s of blogs and ideas from other...Why do I do it? To get ideas..Not trades..I will collate this information and try to see how I can use it in my analysis. Sometimes I find useful stuff...Sometimes not...But in the end my own ideas and chart reads will come through...So my sincere advice to all...Use this blog for ideas NOT for calls or trades...I dont want that on my concience. And also understand basic ideas of risk and money management. This is what will make you successful in the long run.

- Few days back a sucker commented in one of the posts below that I am consistently wrong and that Nifty is going to 1800...Remember he posted when it was at 2250...I knew we had a bottom in place there...That comment is still there for those interested to check it out...It was an anonymous comment but I wonder if that loser is still short 700 nifty points above. While I was not much bothered about his comment because I knew he was wrong about short term..Medium term still can go lower but then its all about playing odds...Right now its buy the dips vs. sell the rallies...And so keep buying the dips.

We also had another sucker on VFM saying that India and China is going to war he had RAW intelligence...And so on...Another sure indication of the bottom... :) Read that in case you missed it...It was one of the most hilarious posts on VFM. When nifty goes back down to test the lows, I am sure he will post again...Buy blindly then...lol.

Coming to markets...Charts and more detailed analysis will follow later but in short what I think is the current configuration is still buy the dips but something is still nagging in the back on my mind that we need 1 more low....Till then we might just chop chop. This low can be a higher low also but we need to see that when we get there...I cannot count the waves properly..It looks like one more 5th wave low is needed and we might remain in a complex 4th wave for some time. At the moment I am confused at how long this uptrend will last and if we will even get much of a selloff later. I will analyse some more in the next post.

Cheers.

Lee