Dear All,
I know that the subject line reads “Play it safe” but that does not mean that you do not play at all in the markets. I write this because I know for a matter of fact that most of the traders & investors on this list stayed away from buying in the markets yesterday even after we suggesting a strategy to invest in this market. The strategy of 10%x10 was for the weak hearted and you should modify this strategy based on your risk taking abilities. Everyone who shied away from the market at 8000 or lower levels on the Sensex was repenting all through 2009 & finally when you came to the party by late October/November the prices had already sky rocketed. Remember that every dip in this market is actually a long term buying opportunity.
We have a major advise for you’ll i.e. first define if you want to be traders in the market or rather be investors in the market. Here are a few thoughts that will help you decide your stand in the market.
- Investors do not back out of stocks with just a 10% gain as against a trader who is happy with even a 1% gain off the stock
- Investors think long term (beyond 6 months at the very least) and are willing to average at lower levels if the stock falls in price as against a trader who get out of the stock if the price falls below his stop loss levels. A trader is mostly unwilling to average the stock he purchases.
- Investors play it safe and buy stocks with good fundamentals & research as against traders who are more than willing to buy anything that will show them the money.
- Traders play on small profits but multiply them with large number of buys & sells as against investors who generate fewer buys & sells but play it for larger profit %s. For e.g. a trader would have bought Reliance / Reliance Infra / SBI and several other stocks had at least a 1% gain opportunity within the day itself as against an investor who would have either averaged his stock or triggered a new buy.
Hope these points give you enough to decide your stance and in the market and make your life simpler in deciding when to enter as well as when to exit the market.
Getting back to our markets, we believe that there is heavy selling pressure hitting all the markets globally. Any company posting a bad result is getting badly sold off in the market; L&T being the case in study (10% wiped off in 2 days). Even companies that meet the analysts expectations are being sold off majorly; Google being the case in study(5% sell off in 1 day after results were announced). Money is being poured back into bonds after selling off in the equity & commodities markets making the dollar rise and everything else (crude, oil, base metals, shares, stocks) fall globally. Having said this the next question would be if the blood bath has ended. According to me, not yet. I believe that there is still some down side left in the market & we set the Nifty (CMP 5036) target at 5000 / 4972 & 4960. As far as our stock picks for the week go we have
· Areva T&D – CMP 283.5
o Target 1/2/3 – 286/293/297
o Stop loss 272
· Educomp – CMP 716.6
o Target 1/2/3 – 725/730/738
o Stop loss 700
· Hindustan Uniliver – CMP 257.8
o Target 1/2/3 – 260/263/267
o Stop loss 251
These are all high risk calls since I am expecting almost every alternate stock in the BSE A group to fall by at least over 1% on or before 28th of January 2010. I have a lot of short calls in the market if anyone is interested, then do drop me an email before 4pm. Also, I am heading out of town today at 7pm and will be back on the 27th so till then I will not be available for your stock queries.
This week is going to be tough for all you bulls / long only players out there. For all you bears out there is a minimum of 30% on margin money to be made on every alternate stock in the BSE A Group segment so play it wise and enjoy minting money.
PS: One of you had asked me if they could buy ABAN at 1460+ levels where we had advised you to wait. We still advise you to wait before buying it even at 1330 levels.
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