Some shocking facts on Trading

Marmara · #1 28th December 2007, 09:25 AM

For those who are feeling excited about the prospects of the stock market, here is a sobering fact:

If you look at the Sensex chart from 1998 onwards, every time that the 50 day EMA has diverged from the 200 day EMA by a large margin, the market had corrected sharply. The last time it happened was in August 2007. (Those who were smart or fortunate to enter the market in the 3rd week of August are sitting on 50% plus profits in 4 months!!)

We are faced with a similar situation now - with a wide gap between the 50 day and 200 day EMA. So there is every possibility of a sharp correction which can take the market all the way down to the 200 day EMA level of 16,500.

With the US market still reeling under the sub-prime mess, the chances of a global correction are also very high.

I would suggest extreme caution about entering the market at this point. Those who are sitting on good profits, should take some of it home and put it in a liquid fund or a savings account. Even if the market doesn't tank to the 16,500 levels, a fall to around 18000 level is very probable. That would be a good time to enter the market.

MiLiNDOnline · #2 28th December 2007, 09:58 AM

Quote:

Originally Posted by Marmara

For those who are feeling excited about the prospects of the stock market, here is a sobering fact:

If you look at the Sensex chart from 1998 onwards, every time that the 50 day EMA has diverged from the 200 day EMA by a large margin, the market had corrected sharply. The last time it happened was in August 2007. (Those who were smart or fortunate to enter the market in the 3rd week of August are sitting on 50% plus profits in 4 months!!)

We are faced with a similar situation now - with a wide gap between the 50 day and 200 day EMA. So there is every possibility of a sharp correction which can take the market all the way down to the 200 day EMA level of 16,500.

With the US market still reeling under the sub-prime mess, the chances of a global correction are also very high.

I would suggest extreme caution about entering the market at this point. Those who are sitting on good profits, should take some of it home and put it in a liquid fund or a savings account. Even if the market doesn't tank to the 16,500 levels, a fall to around 18000 level is very probable. That would be a good time to enter the market.

Hi,

Is there any strong supportive info. for this? As per my knowledge traditionally Jan and Feb are good months for the Market to rise, and with the ongoing events in and across India, does not give any kind of deadly intimation about the market fall..

I will appreciate if you can put some more light on what you have specified above, which may be helpful to other board memebers as well as Market Rise and Market fall are very keen issues, on which everybody keeps a close Eye

Thanks.

Marmara · #3 28th December 2007, 11:33 AM

Dear Milind,

It is a technical view, u can look at the charts for sensex even from 2002 with 50 & 200 day EMA on it, if it still doesn't make any sense to u, than tis high time you stopped scratchin ur head & start readin some good books as has already been recommended to u.

No one has twisted ur arm to subscribe to it

sunil saranjame · #4 28th December 2007, 11:46 AM

Just because there is a wide gap between the 50 and 200 dma, is not a reason for a fall. One possibility is that markets may hover around current levels untill the 200 dma "catches" up with the price and /or the 50 dma, thus reducing the "gap".

ss

Marmara · #5 28th December 2007, 11:57 AM

Quote:

Originally Posted by sunil saranjame

Just because there is a wide gap between the 50 and 200 dma, is not a reason for a fall. One possibility is that markets may hover around current levels untill the 200 dma "catches" up with the price and /or the 50 dma, thus reducing the "gap".

ss

Thanx for the "pep" sunil, but if you'll see the charts it has corrected everytime there's a gap

tuxian · #6 28th December 2007, 12:21 PM

yup me also waitin for correction 2 take place

MiLiNDOnline · #7 28th December 2007, 12:28 PM

Quote:

Originally Posted by Marmara

Dear Milind,

It is a technical view, u can look at the charts for sensex even from 2002 with 50 & 200 day EMA on it, if it still doesn't make any sense to u, than tis high time you stopped scratchin ur head & start readin some good books as has already been recommended to u.

No one has twisted ur arm to subscribe to it

Hi,

I am not clear with what you said here - No one has twisted ur arm to subscribe to it

BTW, in case of correction for how many points you think it will happen, and when it is likely to begin?

Thanks.

prabhjeetrana · #8 28th December 2007, 01:06 PM

Quote:

Originally Posted by Marmara

Dear Milind,

It is a technical view, u can look at the charts for sensex even from 2002 with 50 & 200 day EMA on it, if it still doesn't make any sense to u, than tis high time you stopped scratchin ur head & start readin some good books as has already been recommended to u.

No one has twisted ur arm to subscribe to it

First of all let me tell you Marmara this is the worst way of answering to somebody's query, if he doesnot know technical analysis it does not mean that he will never earn anything in stock market, utterly wrong

Secondly, its again the case of trying tell the market what it should do rather then listining what it wants to do.

If you have studied the NIFTY charts carefully then try to notice what happened at the 4600 levels on 19th September , Nifty was in the upper band of range that it has been following right from 2002, so technicals suggested that it should have corrected and everybody was feeling bearish but what did market do - it gave us a blow off rally which confused all the pundits and those who didnt hear what markets wanted to tell lost money.
It was later clear that market is now trying to settle itself in new trading range.

At the current time we are just undergoing consolidation and nobody knows where will it head and let me tell you if we keep on thinking that market will oblige us with a correction, it seldom does.

So take out any bias for correction, just follow the market, there is huge money to be made in these Euphoric moves but with caution always as chief weapon

Regards

MiLiNDOnline · #9 28th December 2007, 01:26 PM

Quote:

Originally Posted by prabhjeetrana

First of all let me tell you Marmara this is the worst way of answering to somebody's query, if he doesnot know technical analysis it does not mean that he will never earn anything in stock market, utterly wrong

Secondly, its again the case of trying tell the market what it should do rather then listining what it wants to do.

If you have studied the NIFTY charts carefully then try to notice what happened at the 4600 levels on 19th September , Nifty was in the upper band of range that it has been following right from 2002, so technicals suggested that it should have corrected and everybody was feeling bearish but what did market do - it gave us a blow off rally which confused all the pundits and those who didnt hear what markets wanted to tell lost money.
It was later clear that market is now trying to settle itself in new trading range.

At the current time we are just undergoing consolidation and nobody knows where will it head and let me tell you if we keep on thinking that market will oblige us with a correction, it seldom does.

So take out any bias for correction, just follow the market, there is huge money to be made in these Euphoric moves but with caution always as chief weapon

Regards

Hi P,

Thank you for your kind words and considering that I am not an FA or TA person but an engineer.

I hope now Marmara will be more kind in his reply with soft and such words which everybody on this board will understand

I mainly raised the question to him is - how many points fall or correction he forsees and on which fundas? P- if you could answer in more details it will be helpful.

I also think that on this board there are many non-TA/FA kind of peoples who seeks help and guidence from senior Pros like you!

Good Stuff!

Keep it up..

Thanks.

pkjha30 · #10 28th December 2007, 01:35 PM

Quote:

Originally Posted by prabhjeetrana

First of all let me tell you Marmara this is the worst way of answering to somebody's query, if he doesnot know technical analysis it does not mean that he will never earn anything in stock market, utterly wrong

Secondly, its again the case of trying tell the market what it should do rather then listining what it wants to do.

Hi
I agree with prabhjeet. It is not the way to reply.I hope maramara understands this well.Second point is also well taken.

however I feel one should discuss the interpretation given by maramara rather than dismissing it outright.

there may be many ways to look at a chart.His interpretation is one. Others may share their point of view.

I am just attaching a chart with 50/200 EMA. of Nifty from 2003 till date and to my plain eye it looks like maramara is correct.
Nifty will have to play catching game sooner or later else...
may be others would help in coming to a conclusion.
pankaj