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Friday, 8 March 2013

Why is market moving up – Understanding the Psychology

Dear Readers
Why is our market moving up continuously. All sectors are participating in this rally. If you remember, we had a catastrophic fall on the budget day and everyone was negative about the future. What changed now ?

Reason is simple. Lot of people went short in big numbers on the day of budget, thinking that it is the end of the world and Indian economy. Those who were wise bought the bottom on the budget day. Shorters are now trapped.

From that day SLs are triggering for the bears and this is keeping markets up. Shorters are trying to exit every downmove and that is more than enough to support this market at this point in time.

Again, I warn my readers not to trade based on a news. I had also written that markets will stabilize only in 2-3 days after budget and trend will emerge. This applies to all major news events.

As as example, if you look at L&T chart, lot of people went short on the budget day. The stock started moving up from next day and one by one, their SL levels are taken off and this is moving the stock  up. Some of the bears turned bulls, thinking that they can now make up for the loss if they reverse the position.

Nifty vs Dow

Nifty has a very good correlation with Dow historically. But several weeks before the budget, Nifty is not moving in tandem with Dow. While Dow is making historic highs now, Nifty is not. Bulls think that there is a catch up left for Nifty with respect to Dow. This is another reason for the upmove.

Friends, it is important to understand the basic psychology so that we do not get mislead by the wrong guidance from different analysts who just give calls after the downmove or upmove has started. I got several queries from readers on how and when to exit their shorts made on budget day. I strongly recommend my readers NOT to make trades on such knee jerk reactions based on news.

Read my interesting posts on news based trades here. I am sure after reading these, you will stop trading based on news !!


Dear Sir,
I may not be as good analyst like you, but I want to make some points on this topic.As we know till the budgets, DIIs were the net sellers & FIIs were the net buyers.
On the budget day both gone on rampage in plea of TRC ,GARR &c followed by the midcap carnage. In my view,they were supposed to be the low priced buyers,forget about some smalltime shorters like us.Now Data shows the same thing, DII net sellers & FIIs are net buyers & market galloping forward.Again FIIs are getting it in cheaper prices & retail investors fearing another bubble burst.Our economy or industries have not done great things in FY 12 which will reflect in index from 4700 to 5900 odd.What about IT, Metal ,Telecom, Banks,realty majority have very dismal performance & the woes will not end after Q4.Stock market is mostly based on speculations & in the hands of FIIs who can give every desired shape to it.They have shown their might on the budget day & balance is finished by promoters &people like us, only to be puppets in their hands now.

Mark Faber is seeing a US bubble burst by June or July 13.So FIIs may take our market to new highs by march end & April,then may dump & rest will be finished by DII. At the same time rupee will appreciate to give them a safe passage , who are taking much pain in investing during rupee depreciation period, bad economy & worst growth phase. Market will come back to square one, may be to 4000 levels.Honestly,small investors have not earned a penny though index has come up more than 25%. FIIs & DIIs,Brokers have reaped a good harvest during this period. After all, whose money is this, the earnings are not from the bonuses the companies have issued who are also in the worst shape now. You are a boarder of Rediffmail money, you can see how many investors are praying, literally crying about their stock futures.We have to start afresh when our economy will start to give green signals in form of activity not rosy cosy as shown by media & politicians
In my view, This is only a mad bull run :relentless, restless, directionless making holes (GAPS)in its run up ,only to fill it in its return back journey (as per some analysts GAP FILLINGS).For the time being, Nifty bull has only on job;create gaps & later to fill it.Is it .....

Dear Sir, I was a science student & my Economics is very bad.Here I gave my point of view which may not be right.
I am following your blog astutely for one month regularly in my quest for TA silently.It is different from mass which they maintain as Trade Secrets.Though I am communicating directly with you for the first time, I appreciate your work,intention & mission. At first,I had a little difficulty in getting into technicals & now somewhat easy.Your analyses like entry & exit for day traders are very methodical which may not be easy for every one who only want targets.(Give them only target .... GO & DIE IN THE WORLD WAR & CALL THE TIPPER A DOG NEXT DAY).
Today, I traded in CIPLA & ONGC for handsome profit,
Thanks for it & earlier successful tradings except one failure in Tata Steel which was my mistake( Buy in Budget day & escaped with minor loss by using your levels which bitten dust on that day)& for your valuable guidance in form of real trade situations.
I check yours blog every night as a routine.
Thank you again Sir. And GN.

Hi, Thanks for the interesting insights about the market. I agree with you and there will be some big falls later this year. But we cannot predict when it will happen. I do not do much of fundamental analysis, but mostly technical. Once I see divergences in both Nity, Dow and world markets, I look for a down fall. But as of now, I think Dow is slated to move up for some more time. Again, I do not carry any positions overnight, so I am focussed only on daily and hourly trends. One thing for sure, when analysts and brokers start giving sensex targets 20,000,21,000,23000 etc that is the time to watch out for a big fall.
Also, very glad to know that you are able to follow my guidance in your daily trades, keep posting your suggestions for improvement.

Thank u for your comment,Sir.Your very presence on the board is very encouraging & your trading lessons are simply exemplary.

My above long response was towards your observation of the Budget day shorting by some people,in no way prove you wrong.FIIs had taken off Rs 4500Cr on that day which is about 25% their total investment on filmsy ground.It was theirs money,they could but only to prove their mettle,that I unable to took into. Our DIIs have already become Cashless,spineless features & not more than Intradayers.I think they are shorting everyday only to buy at higher to only to show Govt their losses.Or these are BLACK MONEY intended to make white.
But our youths are very aggressive now.Retail investors will play a major role in near future.I salute your effort in this direction. I am a little bit disappointed when you mentioned that you are a technical rather than fundamental person.We require both at the same time & in one of your post you have mentioned that Intradayers can not know the beginning or the end of things. i support your view fully.

I resorted to Intraday only to cover some of my losses made in earlier investments in this market.So I want to take my sweet revenge with better preparedness this time & with your help, OF COURSE. Thanks & GN. Nishikanta


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