Tuesday, March 19, 2013

Reasons May Vary, But Markets Follow Technicals

Ever since the 23rd of January, when the Nifty was trading at around 6050, I predicted a deep correction in the markets. When other analysts were predicting that the markets may correct a bit and come down to 5950, I went ahead and gave a target of 4300. Crazy, wouldn't you call me? Call me whatever you may, I write what I feel about the markets. I don't care what effect it has on the sentiments of the people, I don't care what my readers will think about me, I just write what I feel. I know some will love me, and some will hate me, but nobody can ignore me. But let me ask you a question. If you were holding large positions in stocks and I tell you that we may go down to 5950, you may probably continue to hold on to your positions. At 5950, if I tell you we may go to 5800, you may probably still hold on and then I tell you that we may go to 5600, you might consider exiting your positions. But by that time you have already lost 300 points in the Nifty, and if you were holding small caps or mid caps then, God save you (because they are the first ones to come down). Wouldn't it be better that I tell you early on that such a scenario may exist so that you can exit your positions there only? You tell me what is better?


Try and understand, this was the time when Nifty had not yet touched it's recent high of 6111.80 (which it touched later on 29th Jan 2013). Just to give you an idea what other analysts were saying about the markets at that time, I have attached a snapshot of the moneycontrol.com page on that day. 


I had made a similar prediction in June 2008 when the Nifty was trading at 4600 that the Nifty may come down to 2600. And you all remember what the Nifty was 4 months later (2200). Then also everybody thought I was crazy. But the markets proved me right that time. And hopefully I'll be proven right this time too. I just heard on CNBC where Mr. Udayan Mukherjee and Mr, Sudarshan Sukhani were discussing the market scenario. Mr. Sukhani suggested that the Nifty could slide down to 5500 too in the near future (which was in accordance with my yesterday's target of 5528). When asked if Nifty would find support there or does he see a deeper correction, Mr. Sukhani suggested that we could go much lower than 5500. But why give a target now when the Nifty has already come 360 points off its highs?

Anyways, if we talk about today, the market fell down by 89 points today closing at 5745. Today, the market fell on account of various bad news. One, that the DMK withdrew its support from the UPA government, two, the FII money may be taken out as a result of what happened in Cyprus and three, as a result of summons sent to Mr. Sunil Mittal of Bharti Telecom and Mr. Ravi Ruia of Essar in the 2G spectrum case. The RBI policy also announced a 25 basis points rate cut today, which was expected by the markets and it failed to change the sentiments of the markets. Well, I always say that scenarios may emerge later or news may develop later or fundamentals may change later but technical analysis gives an indication about the direction of the markets much in advance. Today it was these 3 issues which nobody had anticipated, in 2008 it was the bankruptcy of American Banks and financial institutions, again which were not anticipated despite all the negative news USA was surrounded with. 

It does make sense to follow technical analysis, it helps you to make predictions and trade well in advance. If you want to learn Technical Analysis properly, get back to me and I'll give you all the help I can. 

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Happy trading!!!

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