The 2% Ledger

[sridhga]

• Voltas was in the buy mode since 1st June. Some consolidation seems to be taking place now and it can take off in any direction. Wait for the breakout. Direction not yet confirmed.
• DrReddy seemed to have a false breakout on the lower side and has now corrected to the upper side. My earlier reading was only to trade up side and it may move further up today.
• TechM has been on a strong bull run since the beginning of June. However October has been a month of consolidation. It may break out in any direction
• JindalStel has fallen from mid-Aug, but has recovered back some of those losses since mid Sept. It seems to be ready for a new break out. Is this the resumption of the uprun that began in early June? Wait for the breakout.
• Hindalco is similar to JindalStel in pattern formation.
• Glenmark has been sideways since Aug. Look for some breakout from the range
• CadilaHC upswing since Mid-Sept and then a pullback. Now again resumption in the offing? Wait for the breakout
• Biocon has fallen below the lower Bollinger Band. Now will it recover and retrace towards the central band or will it hug the lower band for days?
• BalkrisInd has now come closer to the lower Bollinger Band. Will it bounce up ?
• Lalpathlabs crossed the upside of the band twice. Not likely to be a perfect M, but could be a sideways move? I may not trade any upwards breakout here atleast for now.
• Ipcalabs had a large breakout. Maybe pullback time?
• CholaFin after breakout will it move towards the upperband?

In the above, JindalStel, Voltas, BalkrisInd, moved up during the first half of the day and gave a good trading opportunity to go long. During the second half they receeded and JindalStel and Voltas ended in the red.
The dangerous part was that almost all of them spiked before they fell down. That is the issue here. Predicting volatility can lead to false breakouts/ breakdowns.

Among the other list noted yesterday, CastrolInd gave good break on the upwards and enabled a trade It did not collapse so badly but did give up some of its profits.

Overall market has impacted these breakouts.

 

[sridhga]

Marico did better on results but not so much as to move the markets. Results came in after trading hours. Overall the trend is down for global markets. But yesterday's momentum in Marico may throw some trading opportunities. The share is undergoing range expansion. It gave false breakdown on 26th.

 

[sridhga]

I have this risk management principle that I have been following for long time on intra-day trades. Trade just as many shares in any individual scrip as an adverse excursion of 4% in the share price can at the max lose me a total of 1% of my trading capital. I am sure I would wake up much before a 4% adverse move unless it is too swift like the Gujarat Election result day. The impact of this has been that my profits are low since my lot sizes are limited. But I have less to lose in adverse conditions.


The best I can do to the above rule is to double the lot size in stable markets and be vigilant to 2% adverse move. But a 2% move can and does happen often. This 2% rule in such cases still keeps my loss within 1%.

Another add-on to the above rules that I follow is that under no circumstances more than 1/3 of the trading capital is allocated to a single scrip irrespective of the 4% or 2% bandwidth. This is another check.

I do not trade more than 3 shares simultaneously. In fact most often it is just 1 or 2. What if all of them go adverse at the same time? Actually the rules mentioned in the above paras provide enough scope to trade almost 10 shares! But no way I am capable of monitoring them.

I do not know if this is the best way to do it. Seniors, please suggest.

 

[sridhga]

I do not know how many do this. If I am not trading any day, or, if my trading for the day is over, or, if I missed out, and, I have time before the screen, I just look at some charts and make a prediction where the price will go and just buy/sell 1 share to see if my theory is correct. Sometimes the share costs just Rs. 200. I am fine as long as my chart reading worked.

Maybe someone else does paper trading in such circumstances, but I like to do this.

 

[sridhga]

There was a discussion on Bank Nifty direction elsewhere.

This is my view.

Indices go up unless there is a reason to go down. Now let us look at the top constituents of Bank Nifty.
1. HDFC Bank
2. ICICI Bank
3. Kotak Bank
4. Axis Bank
5. SBI
6. IndusInd Bank


Let us look at the fundamentals of these companies.
The first 4 of them had given very good results and are on a roll. Today ICICI gave a good result. So there is no problem with the sector. Now look if they are over priced. All the results have been priced already except that of ICICI Bank. There in lies the problem.

The index was subdued because of the SC case going on. But the Central Govt. has given clarity and those problems are factored in.

Technically, The index started moving up from 25th Sept in a two legged up move. This move is now complete on 27th Oct. After this up move,, the index is sideways during the last two sessions. This also broke the support line of the upmove. This sideways could be consolidation and possibly it could move further up. Again, global markets consolidated during the past week. This weighed on our indices too.
I still think the index has to go up by Nov expiry. US elections weigh on the markets. But clear election results could be positive for all the markets.
Historically, if a sitting republican lost an election the markets tanked big time. Further, Trump is good for the markets. These factors have put the indices in a dilemma.

I do not think Europe lockdowns impact the markets. That is because if the markets plunge for that reason, we saw how swiftly they go back up. Many investors would exploit that opportunity.

This way, I believe this week could be dicey. On Daily charts Bollinger Bands are suggesting the possibility of a steep drop as well. The index has already dropped to the middle band. Any further drop may result in a plunge. But during the last up move it has not even touched the previous swing high of 25200. That is also an issue.

 

[siddhant4u]

Are we to factor in potential NPA due to lockdown? Prev history shows banks don’t do enough provisions for NPA and this time around its fair to assume more than 10-15% of people who have asked for moratorium extension will default on loans after end of Morat period.

 

[sridhga]

Are we to factor in potential NPA due to lockdown? Prev history shows banks don’t do enough provisions for NPA and this time around its fair to assume more than 10-15% of people who have asked for moratorium extension will default on loans after end of Morat period.

This could be possible. Let us try to find the direction untill this month end. We do not know about long run. Let us try to understand uptill Nov expiry.

 

[siddhant4u]

I believe banking sector will be known only after Jan (Q3 results) since banks can’t declare accts after feb as NPA. They have three more months. Unless rbi extends this “hide npa” game like in power sector

 

[travi]

I believe banking sector will be known only after Jan (Q3 results) since banks can’t declare accts after feb as NPA. They have three more months. Unless rbi extends this “hide npa” game like in power sector

This Qtr, they already had over-provisioning.
I don't fully agree.

Until a person is dead, Dr can only say chances are slim, not write an obituary.

 

[siddhant4u]

This Qtr, they already had over-provisioning.
I don't fully agree.

Until a person is dead, Dr can only say chances are slim, not write an obituary.

For last 10 years indian banks are keeping provisions for npa and it was never sufficient (specially govt banks). As of now only kotak and hdfc banks are ok. How far they could take BN? May be soon hdfc bank will have 50% weightage in BN...