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#1
2nd December 2006, 10:09 PM
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SBIN - what next?
Hi,
I am learning technical analysis for the last 2-3 months and I wanted some help understanding SBIN chart. I am getting mixed signals and would like to get opinion from experienced technical analsyts. Here is what I have from SBIN's chart and indicators 1. ADX extremely high at 60 (not seen in the stocks 3 year history) 2. ADX well above +DI and -DI 3. Stock moving up on average volumes 4. MACD at extreme high (and above signal line) 5. Slow stochastic at overbough range (85+) 6. RSI at 94 (again extreme high but seen twice in 2003) 7. William %R (again extreme high at -2.95) 8. On Balance Volume in uptrend Most of this makes me believe that SBIN will top/reverse direction soon. I tried shorting it last week (buying puts). It made another significant move on Friday and needless to say I am holding the puts at a loss now. I am inclined to wait for another week before liquidating and booking my loss. I would like to understand from experienced TA what their opinion is about this stock. Thanks Nitin 
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#2
3rd December 2006, 08:07 AM
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Re: SBIN - what next?
To be successful in trading you have to use a method that gives you a statistical edge. This edge must come from the tendency of stock prices to trend. In the long term you can make money only by trading in synch with these trends. Thus, when prices are trending up, you should only buy. When prices are trending down, you should only sell.
While this important principle is well-known, traders violate it surprisingly often. They are looking for bargains so they prefer to try to buy at the very bottom or sell at the very top before new trends become established. To be a successful trader, you have to wait until a trend is confirmed before taking a position consistent with that trend. Your problem here was that you were trying to predict the move in SBI. This is a trap that nearly all traders fall into. They look at the trading problem and conclude that the way to be successful is to learn how to predict where markets will go in the future.
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