Profit From SHORT Trades! But How????

There is something I don’t like about Indian markets. They seem to be lop sided. In fact most of us our sub consciously forced to look for longs even if the overall trend is down. We the retailers are not allowed to short in cash and carry our shorts overnight (shorting in cash is allowed only for intra day and has to be covered by 3 p.m.). So even if we our very sure of our short trade we have two choices;

1. Play those shorts in intraday and risk getting stopped out or whipsawed and close them by the end of day and thank our lucky stars if we have made money. Start over again the next day, short and again cover by 3 p.m. and continue to trade this way, till we see a reversal in our daily chart that shorting is no longer fruitful.
2. Play those shorts in FNO (provided the scrip you have decided to short is there in the fno segment). Short futures or sell calls or buy puts whatever.

Here lies the catch you see. We always advise the new traders to stay away from day trading and avoiding leveraged trades. So you either need a very sound money management system coupled with through knowledge of TA and iron discipline or very deep pockets to withstand margin calls as and when required. Assuming that we are going to enter into a bear market, then this has a very devastating effect on the new traders or small traders;

• If they avoid day trading and Futures & Options trading they wont be able to profit from the short side of the market. If at all they decide otherwise, then FNO and leveraged trading will wipe them off because most of them operate with meager accounts (this is what happened in January, the fall was accentuated when suddenly the brokerages started squaring of clients’ positions for want of margin money!).
• The other is to go long in delivery stocks. This again is not a simple thing because to choose the long trades when overall market is bearish is like finding a needle in haystack.

In the end it all boils down to;

1. Fight against odds and go long in bear markets!

2. Play only intraday shorts and cover by 3 p.m. every day!

3. Cross your heart and hope to die (eventually that’s what will happen to you!) and plunge into the FNO trades.

All of the above three are going to kill you! So what do we do? Where do we run? Just HOW DO WE TRADE??????

If any of my fellow readers have experienced the same dilemma then please do come forth with your suggestions and share your views!

Nifty Recap For The Day !!!

We had a gap down today; this was expected since we had closed yesterday at the bottom of the intra day range. Plus the overnight cues from the Dow and the Asian markets were also pretty bad! Yesterday I had mentioned that 4620 is very crucial for the time being and we might witness some volatility there. Nifty opened gap down proceeded to make new lows. By the time Europe opened we were finished with making our base and started our laborious journey towards closing the gap. We finished the day with a little hammer on our hands. I would attribute this to short covering and not any fresh bargain buying. It looks like, now we have 4600 and 4800 levels, marked for play. Both need to be taken out decisively to further decide the direction of the trend. Index trading is becoming a little difficult, wiser would be to keep an eye on sector rotation and look to go longs in strong sectors.

"Problems cannot be solved at the same level of awareness that created them."

Albert Einstein

Hmm we need to go below 4620 to resolve that 4800 was no real support, or we need to go to 5000 to resolve that 4800 was indeed a strong support! I am saying this just because Einstien said we cant have same level of awareness!

Nifty Recap For The Day !!!

Wham bam thanks mam ..oops I meant thanks Nifty! We opened alright but then decided the way up is not for us. With a little help shove from the politicos, rest was easy; we fell on our own weight. With most of the triggers having dried up, all we needed was a threat to the ruling coalition and an uncertainty of early elections. Adding to the woes was a weak opening in Europe; the rest as they say is history (nevertheless a fantastic and a clean short in intra day play). I had advocated a small long at 4840 levels with a very tight; I repeat very tight stop loss a wee below 4800. It was better to be wrong and safe than to be wrong and sorry. On the hindsight 4800 now looked like a mirage; a false hope. It was just not expected that 4800 would break for a song. On the daily chart, 4600/4620 seems to be the only hope for the bulls. We might witness harsher volatility there, because below that, the bottom looks endless with the first halt at January lows. Like I said earlier we have run out of all triggers now we would be moving solely on basis of global cues or on our government efforts in trying to make better sense of economics while keeping the coalition intact. Anyway these are just explanations to keep one self happy. In throes of our irrational exuberance we fail to see the underlying internals of the market. The bitter truth is also that if you view weekly charts of some of the indexes and heavy weights, you would see most of them are in the process of making HSP tops. Well as the saying goes “when in doubt stay out”; maybe this is really the time to stay out and let the dust settle a bit. Damn…this is the hardest thing to do….I wonder why we are so allergic to keep cash in hand? In fact these are the times when we not only loose the cash we loose the hand too! I am myself tryin2control THE URGE!!!

"Shoot for the moon. Even if you miss, you'll land among the stars."

Les Brown

this sounds cool to me, if I fail as a trader, maybe I will get a job of being a star analyst on CNBC!!!

Divis Laboratories!!!

DIVIS on the 60 minute chart looks like to have broken out of a triangle. Though the price is on the upper channel, and hinting at some kind of pull back towards the ema for a perfect entry. On the daily and weekly chart we seemed to have formed an inverse head and shoulder pattern (see the circled area). 1550 looks like good resistance, breaking it with volumes will give the target of 1700+. This looks possible, because as of now pharma is performing vis a vis other sectors.

SBI....Looking For A Quick Pullback!!!

The above picture is of SBI daily/60 minute and weekly charts. On the weekly (extreme right) we have strong support at 1400 on the rising multi year trend line. On the daily and the hourly charts we are making positive divergence. This can give a very nice pull back trade. As further shorting here won’t yield good returns. The price is already near the bottom channel and far away from the value area (the moving averages). If one is already short then it’s the signal to book profits and wait for higher levels to short again if the technicals permit.