Lessons On Trading From The Movie KUNG FU PANDA!

Last three evenings I am watching the same movie in the night, Kung Fu Panda, can’t help it the kids want to watch it before they go to bed. Nice movie with lot of philosophy thrown with animation. What struck me was that the message of the movie is very apt to our trading psychology!

In one of the scenes under a peach tree the wise old man Oogway tells his student master Chifu to let go the ILLUSION of control and start BELEIVING(Chifu has serious doubts that the big fat panda can make a dragon warrior). He says that things don’t happen as we wish but they happen on their own and take their own time. Same with good trade setups we should WAIT to let them happen and don’t try to preempt them! All we can do is nurture our trade and believe in it!

In the second instance in the movie when the Panda becomes the dragon warrior, and open the centuries old scroll to read the secret, he finds it blank with only his reflection on the scroll. Dejected by not seeing anything on the scroll he assumes that after all he wasn’t the true dragon warrior. Realization dawns on him later when his father the noodle soup seller tells him the secret ingredient in his secret ingredient noodle soup is NOTHING! Yeah he say there isn’t any secret ingredient and to create something special one needs to believe in that you are special. Bingo! There is no secret indicator or method to play the markets….Its only about you and your beliefs in your system. A nice lesson in trading I must say. I would suggest that you should watch this movie with your kids and enjoy it. I guarantee it will be money and time well spent. Enjoy!!!

I BELIEVE THEREFORE I AM!!!

LIC's Jeevan Aastha: Look before you leap!!!

A friend of mine Mansukh recently bought to my notice an article on Jeewan Asthaa, a new policy by LIC which is creating a buzz in the market. He says that I should put it in my blog, so many a friends who would have missed the story can benefit from it.

Sandeep Shanbhag writes: It is in school that we are taught the basic difference between simple and compound interest. We are taught the fundamental principle that compound interest and not simple interest is the effective rate of return on any investment.

However, it increasingly seems to me that this is a lesson that is either not learnt well or is forgotten way too early. How else does one explain people falling over each other to invest in what essentially is a fixed deposit that, depending upon the age of the investor, offers at best 7.32% per annum (p.a.) and at worst a 4.32% p.a. return?

Interested? Well continue to read the entire story here!

Nifty Recap For The Day!!!

On Monday I had spoken about a technical bounce not ruled out, and that is what we have achieved so far (just about managed 23.6% retracement from the lows). Much of it was attributed to the rumors about the out of court settlement between the feuding Ambani brothers which led to the entire Reliance pack leading the rally! Now talking technicals the daily chart below shows that Nifty is trying to lunge at the falling 50 periods MA(at approx 2880) and also going to test the broken trend line (the blue line). The earlier spoken level of 2700/2750 held fort till now. Another important 2780 now joins the battle for the beleaguered bulls. The resistances remain the same 2880/2920 and a real mean one at 2950/60. Therefore the new range we have of about 150 odd points. A break on either side would result in a min 150 point move. If broken on the upside it would work as Viagra for the bulls and immediately signal the reversal of this trend. On the other hand if we break on the downside then things become very very nasty because then testing the closing low of 2500 is THE TARGET!

The hourly chart below illustrates a few important points we have already discussed earlier. The price had overstretched form its MA’s so a pullback was in order. The 38.2% and the 50 periods MA are both at 2880 near about (remember our resistance 2880). What’s interesting is that there is a Hidden Bearish Divergence on the cards (yeah yeah here I go again about Divergence!)! Any one who doesn’t understand what I am talking about can got to my Divergence post to get an idea of what I am talking about. And before someone kills me for spreading panic lemme just put it in writing that Divergences are JUST WARNINGS! The real trade comes into practice ONLY and ONLY with the confirmation from PRICE. In this case break below 2780 con confirm this one!

At the time of writing this post DOW was in dumps (down about 180 points), so a gap down is a certainty, if Dow doesn’t do any magic overnight. These are trying times for the traders, and gap down if sustains 2750 is good buy for swift intraday trades (it will be very volatile, if you aint the one with nimble fingers…stay out)!

"The only thing that ever sat its way to success was a hen." Sarah Brown

Nifty Recap For The Day!!!

Nope I wasn’t stuck in Satyam! Neither was I delving deeper into the causes and effects of this sordid affair, which has left many a souls poor and more importantly cheated and violated. I was busy with my primary business, as these winter months are important for me, it’s my season time! Secondly my full time maid has left us after almost 5 years, so I am a lil busy with kid and helping my wife around (both of us are working parents). Third if any one is from DELHI, he will realize what a nightmare it is to get your child admitted into nursery. Yeah it sucks…so far I have filled in 25 applications and done 8 interviews, still waiting for that elusive admission letter Anyways won’t bore you guys with my problems, its back to analysis again, I might be lil rusty. You know, it will take a day or two to get back into the groove again.

Last week when everybody thought we were getting a reversal of sorts, the SATYAM fiasco gave the much needed opportunity to the Bears to strike back with full force. Life above 50 EMA (not drawn in my chart below) doesn’t suit Nifty I suppose. The Nifty chart below shows the 20 periods SMA (green) is above the 50 periods SMA (blue), 20 needs to have a bearish crossover with 50 to signal real weakness. Supports? I believe none exist…its just that they are points where Nifty takes a breather before continuing the journey! Still one mustn’t be so pessimist, therefore we shall presume 2750 and 2700 to hold fort. Remember the famous line “Innocent till proven Guilty”! Resistances? Hmmm here there is no confusion, for starters how about 2815/2880 and 2920?

The Hourly below shows that we are a bit oversold so a technical bounce is not ruled out, the DT shown on the hourly looks more sinister(yeah its there on the daily but on the hourly the effect is more scary)! The price is too far stretched from the MA’s overhead, so an alignment of sorts is in the offing. Its not that the Price will snap back towards the MA, sometimes it just meanders sideways to enable the MA to come down to a strikeable distance!

"Get busy living or get busy dying." Stephen King

Weekend Views On Nifty!!!

AH! The year comes to the end, and time starts to make new trading resolutions. Resolutions which we might eventually break! Anyway time to start again with a clean slate, time to look forward and learn from the mistakes from the past. Well I for starters have RESOLVED to TRADE LESS TRADE SMART (may the Market give me strength to keep my sanity). Wishful thinking? Yups.

And now let’s see how Miss Nifty began the New Year, no nasty surprises on the first two days, is it cautious optimism? Maybe! We have had a stimulus package(Viagra?) announced by our government plus the all important Uncle DOW also gave a nice start to the year, and cousin Nikkei aint doing bad either! This is bound to bring in some exuberance on Monday. Then we have quarterly results coming in from next week which will influence to some extent. Yes they will be bad, the world knows, no secrets there. But what’s important is How BAD?

The first chart below is the monthly chart, just to give you the feel of the broader picture. There has been Price contraction happening for the last two months as can be envisaged by the two consecutive IB’s (Inside Bars). For all practical purposes we need to see how the break of 3110 pans out and how 2950/2885 holds out!

The weekly chart has shown once again a reversal bar, the MACD histogram is showing strength, the RSI is broken above its falling trend line. A break above 3110 can lead to fishing of short stops and resulting momentum can lead Price to 3150/60. Talking about 3250, I would wait first to see how this week unfolds itself.

The daily chart has 20 and 50 periods simple MA’s crossing at approximately 2885/90 so this becomes a support of sorts. If you use the EMA’s then you will notice that the latest NR bar (this also qualifies as NR4) we made on Friday sits right at the 50 EMA from where it had earlier reacted downwards. We have the indicators moving to the OB areas (especially the hourly), warranting some caution. Any intra day dip to 3010 is a welcome buy if it shows support there. The daily structure has been of lower highs and higher lows (contraction? you bet it is). Nifty needs to break 3250 convincingly, and trade above it, to create a higher high. This move will then confirm the December price action as the Higher Low and would act as sorts of intermediate trend reversal.

"The secret of success is constancy to purpose." Benjamin Disraeli