Markets are very volatile since last week. The reason is quite simple; there is a continuous fight between bulls and the bears in the market. There is continuous fear in the market as investors are confused, is the economy really picking up or is it going to simply turn and start falling again? Is the question asked by everyone. During fear desperate trades are made to recover all the losses made in the last year. If you have made losses and I mean huge losses then do not be in the rush to recover everything at one go, because I assure you one thing that you wont be able to do that. You will end up adding up your losses rather than making money. I know it is a hard truth to accept that investors have made losses in the past and the best thing to do right now is to simply accept the mistakes of the past and trade now with certain discipline and at a very slow pace. It is quite disturbing to know that even in these good markets investors are still making losses. If the markets have fallen down to such extents that it wiped out wealth’s of investors then I can guarantee one thing that it wont give you back that wealth so easily. That is the basic rule of nature and basic rule of market. It is better to learn from our mistakes of the past rather than making the same mistake again.
Rains have entered the country with some decent showers. Though people have been complaining that the arrivals of rains are late, but people skip the fact that the world is facing climate change and this phenomenon is going to be very common now. If we look back in the past years then the summers in the country are getting hotter and the winters are getting very cold. The only reason is global warming and that is resulting in climate change. People have to get used to this fact and stop worrying about it. The media has been scaring the people every minute that the rains are bad there is going to be shortage of water in the country, agriculture will be affected. Why speculate so much rather than wait till the end of July and then gauge if the rains are actually deficient. I have strong feeling that by the end of July the rains will be sufficient enough to satisfy the people and as well the news channels. When I switch on the TV today I am really amazed by the number of news channels in the market and all of them giving the same news of rain shortfall every 15 minutes. This itself creates a panic among everyone.
Rains form the backbone of the agriculture in India and if the rains fail the government will be in deep trouble handling the economy. The government is aware of these things and it will create artificial rains and save the crops. It is completely possible and India has done it in the past. This time the government cannot take the chances of risking its hold of power in the centre. The agri commodities are also getting a bit risky to trade right now. No major trends can be set for next 15 days to come in the market. The agri commodities are at the mercy of the rains and I will be seriously concerned if any of the investors are trading big quantities of agri commodities in the markets. You have to calculate your risks prior to taking any positions and it will be wise enough if you take the advice of people who have the experience of investing in the commodity markets.
In this week’s article I only intent to give you this message that you trade in a disciplined manner and make money from the market. Think of it as a hen giving golden eggs but do not kill the hen to have the maximum. Small calculated profits are always better then big losses. I am not giving any analysis in this week’s article because how much ever I try to predict the market at this point of time Mother Nature will be against my prediction. Rather than misleading my investors into taking wrong positions I would rather wait for the monsoon to give me the answers for the questions that I have for predicting the market.
As far as gold and silver is concerned there are high speculations in the market and the prices are being held up artificially for reasons well known to the people who are holding the prices. If I refer to my previous article, I had mentioned that with the economy starting to recover, Dow Jones recovering, our own markets are recovering there is no reason why would anyone be investing in gold? I am convinced that at these levels new shorts are being created in the market in the background. There is no possibility that gold is going to be bullish until it closes above $1015 for one week continuously. At that point of time even if the prices are high there is no harm in buying gold as an investment. The gold prices are overvalued in India even considering the rupee value. With the gold prices at these levels the right price of gold should be around Rs. 13900 levels and below Rs.14000.
If you can really hold on for sometime then my advice to investors is to wait and watch and you will see it yourself how the markets change their course without even a warning. Have a nice week and a profitable week.
Friday, June 26, 2009
Tuesday, June 23, 2009
ELECTIONS OVER..TIME TO CHANGE THE FORMULA
Inflation calculation had been a joke since the very beginning. The government has used this tool so easily to mislead the common people. Last week the inflation or I should say the deflation was -1.61%. This has been the second time that India is facing deflation since 1977. On 21st Aug 2008 inflation was at the high of 12.63%. I have been stressing in many of my articles in the past that the inflation calculation system is completely flawed. I seriously fail to understand the joke played by the government of tactfully changing the basic rules for inflation calculation. They simply keep jumping from one commodity to the other and replacing them with so ease that a common man is simply unaware of it. How can it be possible that crude prices are at $70, petroleum minister talking of increasing the prices of petrol and the country facing deflation? Are you seriously convinced that such a thing is possible?? The government is still not ready for free market price discovery system as yet. The government is so scared of even futures trading that it has still not taken the decision on options trading in commodities market. Commodity futures markets are still in experimentation stage to be very true.
There are very serious reasons for it. India is an agricultural country and with agriculture ruling most of the parts of India, the government has to keep the farmers happy to keep their vote banks full all the time. The commodity markets claim that they are a free market price discovery system, then why do they ban certain commodities? Take the example of wheat, when they were sure that the prices of wheat will go up due to shortage of crops they banned trading in it, because- now read this carefully “wheat was one of the components in inflation trading”, which obviously was removed from the inflation basket later saying that common man cannot afford to buy wheat so remove it from the inflation basket. The other best example is of the recent ban of sugar futures. Two months back sugar prices were rising as if there was not tomorrow saying that the crops are going to be less. But as soon as they realized they were wrong in their estimates that the crops are going to be huge they banned it fearing that the prices will fall and hurt the market which again hurts their vote banks. Now do you really feel there exists the concept of “free market discovery”. Sugar again is a part of inflation calculation basket, or not now you simply don’t know. The government has simply not been consistent of the basket of commodities forming the basis of inflation calculation.
The equity markets used to react with the inflation figures so the government changed the time that the inflation figures come in. initially the figures used to come in the afternoon during market trading hours then they changed it to the evening so that the equity index do not take ugly turns during the day because of the inflation figures. Now they are talking about changing it to monthly rather than weekly. It will be really good if the government does not give out the inflation figures at all. I guess that the common people have become smart enough to guess the inflation figures with the prices that pay in the supermarkets now.
The rains have been delayed this year, which I don’t think so is cause of worry for the time being. Of course the city of Mumbai is scared because then we face the shortage of water supply. As far as the farming sector is concerned there is no worry as the rains are setting in this month itself. The MET department has been saying that the rains would be coming in by 25th of this month, which I feel is going to be earlier than that. The satellite images show a strong probability of rains by this week itself before 25th. I am talking about Maharashtra so by the end of month Gujarat too will be having rains coming in with a bang.
This week my focus is going to be on base metals. Right now base metals are at such a turning point that it will the last stage of their corrections. What I am trying to say that very soon the fall in base metal prices will start getting over and they will turn to start their new runs very soon. Now I do not want you to be mislead by my saying that the prices will shoot up in a very short period of time. They will go up systematically and at their own pace. All I will say that there won’t be a mad rush in the demand nor supplies but they would be balanced to much of the extent. So the climb will not be steep but stable returns can be guaranteed in holding long positions. Do not make the mistake of buying them now as they will still take more than a month to give their first confirmations of getting into the bullish phase. The reason is very simple and is very much visible in the market. I have been quoting this in my previous articles and also this time I would like to say that “the American economy is getting better day by day” and in no time soon we are seeing that the economy is getting better and that is quite visible with the stabilized Dow Jones. Dow jones has risen from the low of 6469 to the high of 8877 within 14 weeks continuously without a break. If you can have a look at the weekly chart of dow jones then it is clearly visible. Now do expect some correction in the index which is not a concern of panic anyways. It will be a normal correction for a new stabilized rally. The same is the scene with the Indian markets too. If you look at the weekly chart of BSE sensex too then the markets have risen from the low of 8047 to the high of 15599 in 14 weeks again. Now that is quite a similarity in both the markets. There is a gap in the weekly chart as far as the sensex is concerned so I do not rule out the possibility of sensex reaching somewhere close to 12300. The fall that we are experiencing now is just a correction. Lots of people have missed the opportunity to buy at the lowest levels as there was constant fear in the markets that the rise may not sustain. New investments will start coming in soon in the recent correction and it is also very much visible with the mutual funds coming out with new issues in the markets. The SEBI has even scrapped the entry load fees on mutual fund investment which is also going to help the investor save some investment cost. I do not know if you had observed it or not the brokerage house have again started off with their advertisement on the TV which was not visible during the market fall period. Don’t be surprised that in the near future American economy comes out with interest rates hike. job layoffs have come down and may companies have started hiring back new staff, though they have not being making the same mistake of over-staffing but they are filling up the spaces now. As the demand starts picking up in the market the base metal demand will also see a stable rise. There won’t be any mad rush by china anymore for metals as they have over stocked their quota of metals. So do not expect china to come in the market now and buy as they won’t make the mistake of buying at rising prices. Then the concept of cheap Chinese goods does not hold strong. I would suggest that you need to keep an eye on base metals prices now, as this will be the last stage that you will be seeing a correction in the prices. They will be stabilized in a month or so and then they will start rising.
There are very serious reasons for it. India is an agricultural country and with agriculture ruling most of the parts of India, the government has to keep the farmers happy to keep their vote banks full all the time. The commodity markets claim that they are a free market price discovery system, then why do they ban certain commodities? Take the example of wheat, when they were sure that the prices of wheat will go up due to shortage of crops they banned trading in it, because- now read this carefully “wheat was one of the components in inflation trading”, which obviously was removed from the inflation basket later saying that common man cannot afford to buy wheat so remove it from the inflation basket. The other best example is of the recent ban of sugar futures. Two months back sugar prices were rising as if there was not tomorrow saying that the crops are going to be less. But as soon as they realized they were wrong in their estimates that the crops are going to be huge they banned it fearing that the prices will fall and hurt the market which again hurts their vote banks. Now do you really feel there exists the concept of “free market discovery”. Sugar again is a part of inflation calculation basket, or not now you simply don’t know. The government has simply not been consistent of the basket of commodities forming the basis of inflation calculation.
The equity markets used to react with the inflation figures so the government changed the time that the inflation figures come in. initially the figures used to come in the afternoon during market trading hours then they changed it to the evening so that the equity index do not take ugly turns during the day because of the inflation figures. Now they are talking about changing it to monthly rather than weekly. It will be really good if the government does not give out the inflation figures at all. I guess that the common people have become smart enough to guess the inflation figures with the prices that pay in the supermarkets now.
The rains have been delayed this year, which I don’t think so is cause of worry for the time being. Of course the city of Mumbai is scared because then we face the shortage of water supply. As far as the farming sector is concerned there is no worry as the rains are setting in this month itself. The MET department has been saying that the rains would be coming in by 25th of this month, which I feel is going to be earlier than that. The satellite images show a strong probability of rains by this week itself before 25th. I am talking about Maharashtra so by the end of month Gujarat too will be having rains coming in with a bang.
This week my focus is going to be on base metals. Right now base metals are at such a turning point that it will the last stage of their corrections. What I am trying to say that very soon the fall in base metal prices will start getting over and they will turn to start their new runs very soon. Now I do not want you to be mislead by my saying that the prices will shoot up in a very short period of time. They will go up systematically and at their own pace. All I will say that there won’t be a mad rush in the demand nor supplies but they would be balanced to much of the extent. So the climb will not be steep but stable returns can be guaranteed in holding long positions. Do not make the mistake of buying them now as they will still take more than a month to give their first confirmations of getting into the bullish phase. The reason is very simple and is very much visible in the market. I have been quoting this in my previous articles and also this time I would like to say that “the American economy is getting better day by day” and in no time soon we are seeing that the economy is getting better and that is quite visible with the stabilized Dow Jones. Dow jones has risen from the low of 6469 to the high of 8877 within 14 weeks continuously without a break. If you can have a look at the weekly chart of dow jones then it is clearly visible. Now do expect some correction in the index which is not a concern of panic anyways. It will be a normal correction for a new stabilized rally. The same is the scene with the Indian markets too. If you look at the weekly chart of BSE sensex too then the markets have risen from the low of 8047 to the high of 15599 in 14 weeks again. Now that is quite a similarity in both the markets. There is a gap in the weekly chart as far as the sensex is concerned so I do not rule out the possibility of sensex reaching somewhere close to 12300. The fall that we are experiencing now is just a correction. Lots of people have missed the opportunity to buy at the lowest levels as there was constant fear in the markets that the rise may not sustain. New investments will start coming in soon in the recent correction and it is also very much visible with the mutual funds coming out with new issues in the markets. The SEBI has even scrapped the entry load fees on mutual fund investment which is also going to help the investor save some investment cost. I do not know if you had observed it or not the brokerage house have again started off with their advertisement on the TV which was not visible during the market fall period. Don’t be surprised that in the near future American economy comes out with interest rates hike. job layoffs have come down and may companies have started hiring back new staff, though they have not being making the same mistake of over-staffing but they are filling up the spaces now. As the demand starts picking up in the market the base metal demand will also see a stable rise. There won’t be any mad rush by china anymore for metals as they have over stocked their quota of metals. So do not expect china to come in the market now and buy as they won’t make the mistake of buying at rising prices. Then the concept of cheap Chinese goods does not hold strong. I would suggest that you need to keep an eye on base metals prices now, as this will be the last stage that you will be seeing a correction in the prices. They will be stabilized in a month or so and then they will start rising.
Tuesday, June 16, 2009
CRUDE IS GOING TO TAKE A UGLY REVERSAL...BE PREPARED
Good morning to all my readers from Chicago again. This will be my last article out from America as I will be back to India by Tuesday. The city is fantastic and so was the CBOT ring. I spent almost an hour on the CBOT ring and it was an experience of a lifetime. It is a pity that India does not follow the outcry trading anymore. As far as the Indian pits were concerned they were really chaotic but a fun place to be in. the shouting and the execution of trades are something that cannot be enjoyed on electronic trading. Well the difference now is that now that we any big moves on the screen we start shouting. The whole concept of “diya”, “liya” is gone. I guess the last time a pit was shown in a movie recently was the “Bombay cotton exchange” in the movie guru. But the pit in indore the NBOT is still active to some extent. There you still have open outcry trading going on. Someone is still running the tradition. But I did not see a lot of people trading or lots of contracts being traded. The way it seemed even that may close down due to lack of volumes that ncdex and mcx generate. Coming back to the CBOT ring, the place is quite huge and every commodity is traded in a different pit which is on the same floor.
Now looking back at the last weeks movements in the market, the precious metals prices have been falling down over all week. Starting the week with the high of $966.70 it has closed at $940 making low of $936. the whole week the prices did not make any great moves and they were in a narrow range of $30. Every time the prices tried to fall they were pulled up at the end of the day. One thing that has to be noted that gold will give a small pullback in prices if it has to continue its down trend. There will be some profit booking at the beginning of the week and then it will take a reversal with fresh shorts coming in the market. Dow Jones have been trading in narrow ranges too. Showing some signs of American economy trying to stand on its feet back again. I will again like to mention that do not be under the impression that the American economy will not revive. Because if anyone it telling you that it wont happen then you are being misguided. For your information the economy is already on revival and it is now just a matter of time that you will be seeing the economy booming again. The pain days are almost over so start counting the days now for a big moves to come in the market. Well as far as gold is concerned it will go down eventually. Because it cannot happen that the equity markets and the gold prices go up together. As the plain logic goes when the equity indices start rising the investors start diversifying their income towards equity and they no longer have the interest to trade gold as now they will first try to make up for their losses in the equity market and when they have made somme profits they will be investing that extra income in gold and property. If I am not mistaken the property prices have stopped falling and no longer you will be able to get any discounts on any property you buy. I do not say that the pices have started risig but they have stopped falling for sure. It is basic economics. Will you be really interested in buying gold if the you know that you will make some quick returns in equity rather than gold in a short period of time? Gold is a long term investment and should not be mistaken as a short term trading commodity. So start planning your investments now and start looking at the equity markets now as they are the ones that will give you the return that you wont even imagine till 2014. obviously I expect you to take your steps cautiously. Do not make the mistake of putting in all you money in one stock and playing the gamble on it. Do you research be convinced and then invest. If you are seriously looking at sectors to invest then alternative energy, auto ancilliaries, coal and metal sectors are good avenues to invest in.
Now crude the black gold investment. The last whole week crude prices had been rising. The investory rpot that came in on Wednesday were not encouraging enough and there was great panic created which made the prices to run on the higher side. Well let me say one thing this possibly will be the last time that you will be hearing of any reductions inn crude inventory levels in America. You may have reductions in inventory but not to large extents. Reason is quite interesting to know. In my recent visit to Brazil I met petrobras one of the largest oil companies inn brazil. Petrobras has discovered a huge reserve on crude oil off its coast of brazil which is as big as the crude oil well of Saudi Arabia in terms of oil reserves. Now they are not any far from declaring that once they start pumping inn the oil from there. Second thing to note is that the demand of crude oil has been the lowest in last 10 years but the supply has been the highest inn last 10 years. For last 3 months traders had been holding some large shipments of oil to be sold inn the market when the prices cross $70. these were the traders who had bought crude around $38-$40 and they have been holding it since long time. Now if they do not sell this crude in the market they will be stuck in the market with their stocks. They have almost doubled their investments and it does not make any sense to hold back the stocks. Even they are aware of the fact that huge supplies will be hitting in the markets now so they will be simply letting go their stocks and book their profits. Besides that china and India have finished buying their reserves of crude oil and they no longer will be buying any extra inventories as the time of cheap dollar will no longer prevail. If you remember I had mentioned inn the article of rupee that it will get weaker now against the dollar and the stop loss of Rs. 46 /- has still not hit in since the article was published.
My advise to you now is that if you wish to take long positions inn crude make sure that you do not hold them for long and exit them when you have made some decent profits in it. I will be waiting for the right time to sell crude rather than buy. I am waiting for the right chart formations to come in and once I am convinced I will be selling heavily in the market.
Now looking back at the last weeks movements in the market, the precious metals prices have been falling down over all week. Starting the week with the high of $966.70 it has closed at $940 making low of $936. the whole week the prices did not make any great moves and they were in a narrow range of $30. Every time the prices tried to fall they were pulled up at the end of the day. One thing that has to be noted that gold will give a small pullback in prices if it has to continue its down trend. There will be some profit booking at the beginning of the week and then it will take a reversal with fresh shorts coming in the market. Dow Jones have been trading in narrow ranges too. Showing some signs of American economy trying to stand on its feet back again. I will again like to mention that do not be under the impression that the American economy will not revive. Because if anyone it telling you that it wont happen then you are being misguided. For your information the economy is already on revival and it is now just a matter of time that you will be seeing the economy booming again. The pain days are almost over so start counting the days now for a big moves to come in the market. Well as far as gold is concerned it will go down eventually. Because it cannot happen that the equity markets and the gold prices go up together. As the plain logic goes when the equity indices start rising the investors start diversifying their income towards equity and they no longer have the interest to trade gold as now they will first try to make up for their losses in the equity market and when they have made somme profits they will be investing that extra income in gold and property. If I am not mistaken the property prices have stopped falling and no longer you will be able to get any discounts on any property you buy. I do not say that the pices have started risig but they have stopped falling for sure. It is basic economics. Will you be really interested in buying gold if the you know that you will make some quick returns in equity rather than gold in a short period of time? Gold is a long term investment and should not be mistaken as a short term trading commodity. So start planning your investments now and start looking at the equity markets now as they are the ones that will give you the return that you wont even imagine till 2014. obviously I expect you to take your steps cautiously. Do not make the mistake of putting in all you money in one stock and playing the gamble on it. Do you research be convinced and then invest. If you are seriously looking at sectors to invest then alternative energy, auto ancilliaries, coal and metal sectors are good avenues to invest in.
Now crude the black gold investment. The last whole week crude prices had been rising. The investory rpot that came in on Wednesday were not encouraging enough and there was great panic created which made the prices to run on the higher side. Well let me say one thing this possibly will be the last time that you will be hearing of any reductions inn crude inventory levels in America. You may have reductions in inventory but not to large extents. Reason is quite interesting to know. In my recent visit to Brazil I met petrobras one of the largest oil companies inn brazil. Petrobras has discovered a huge reserve on crude oil off its coast of brazil which is as big as the crude oil well of Saudi Arabia in terms of oil reserves. Now they are not any far from declaring that once they start pumping inn the oil from there. Second thing to note is that the demand of crude oil has been the lowest in last 10 years but the supply has been the highest inn last 10 years. For last 3 months traders had been holding some large shipments of oil to be sold inn the market when the prices cross $70. these were the traders who had bought crude around $38-$40 and they have been holding it since long time. Now if they do not sell this crude in the market they will be stuck in the market with their stocks. They have almost doubled their investments and it does not make any sense to hold back the stocks. Even they are aware of the fact that huge supplies will be hitting in the markets now so they will be simply letting go their stocks and book their profits. Besides that china and India have finished buying their reserves of crude oil and they no longer will be buying any extra inventories as the time of cheap dollar will no longer prevail. If you remember I had mentioned inn the article of rupee that it will get weaker now against the dollar and the stop loss of Rs. 46 /- has still not hit in since the article was published.
My advise to you now is that if you wish to take long positions inn crude make sure that you do not hold them for long and exit them when you have made some decent profits in it. I will be waiting for the right time to sell crude rather than buy. I am waiting for the right chart formations to come in and once I am convinced I will be selling heavily in the market.
Wednesday, June 10, 2009
FOLLOW THE SPECULATOR PHYSCOLOGY...AND MAKE MONEY..
This article I am writing today is all the way from Chicago in America which is the hub of the commodity trading markets in America. Yes I am talking about Chicago board of trade- the CBOT. And Monday evening when you will be viewing the live prices of international market I will be standing on the floor of the ring of CBOT witnessing the live market and the live trading. Before this that I was in Brazil for more than a week’s time I came across a strange thing. The people in Brazil are crazy for Indians. You will be happy to know that Brazil has a local version of saas- bahu serial where they have the local actors dressed in complete Indian dresses and it is a story of a house where there is clash of culture, because an Indian gets married to a Brazilian woman. How they try to adjust to the Indian culture is the main story. Now this serial runs at the prime time of 9.00 in the night which itself is the proof that how popular that serial is in Brazil. All the people I met asked me about the Indian culture, the clothes we wear the food we eat. The most popular words that the people out here have learnt in hindi is “ arre-baba” and “theek hain” so now our Indian women have the complete right on the TV remote as they have a new chapter to add to their addiction of saas- bahu serials. They can very well proudly say that Indian serials are not only popular in India but also on the other side of the world. By the way they do have Indian restaurants but they simply cannot beat our Indian taste.
Now going back to our addiction of markets, as I have been looking at the markets the last week the prices were in a very confused mode I should say. Most of the commodities started with a bang on Monday and they started the rally on the higher side but somehow they could not keep the trend going up to the end of the week. As I had mentioned in my last article that the rally will be a trap and if you are on the buying side then there is a possibility that you may be stuck with your long positions. Let’s take some examples here that will explain my theory in a bit more precise manner.
Take castor for instance, it started the week at 486.6 made a high of 490.20 but could not sustain to break 492.85 which was mentioned in the daily technical call that I had given last week. The prices turned around at the price of 491.60 and on Friday made a low of 471.60. Now a bottom of 480 has been breached and the target of 476 hit making a low of 471.60. The next example will be of natural gas which started the week with a rise to make a high of 208.30 and turned to make a low of 177.60. But as I had mentioned that if the prices close below 185 then it will be safe to sell. But the market the day it made a low of 177.60 it never closed below 185. It actually closed at 188.70. That’s the reason why I had mentioned only a close below 185 is a safe level to sell. Natural gas had been simply riding on crude oil. Closing of prices below or above a particular level is very essential, or you will be stuck in the position if you have taken a step in haste.
The last week’s article was on crude oil. In the article the levels that were given have been achieved and if you had taken a long position then I guess you must have made the money that you deserve to make by taking such positions. Last week crude did start with a bang and started to rise except for Wednesday that it came down by $2.43. But the prices were still far away from the stop loss that was mentioned of $62.25. Well I admit that the prices reversed from $70.32 on Friday which is $0.33 before the target price that I had given of $70.65. Well I am sorry for that but I hope I can have some concessions with my calculations from my readers. The rest of the commodities that have mentioned inn the daily calls may not have moved as had calculated them to be, but I still feel that till the time certain figures are not breached if will be very risky to take any positions. Let’s take copper for example again. As I had mentioned that if the prices close below 226.50 it will be safe to sell. The prices rose to the high of 246.45 on Tuesday and then fell down to the low of 232.50 exactly to the same price it had started on Monday. Now how can you still say that the prices of copper will rise where it cannot even sustain a rise for two days?
Now why the prices of crude oil reversed? The threat of North Korea is still active and live, then why did the prices reverse on Friday? I know very well that you will be asking these questions to yourself. If you remember that I had mentioned in the last week article that it is a trap rally. But you still made your money in the move right?? You will read the English newspapers then you will get the headline that President Obama made a speech in Cairo in Egypt that’s why crude oil prices reversed. Will you really now believe that reason for the reversal of crude prices?
Let’s look at this from a different angle. When crude prices started its rally it took a break on Wednesday where in the speculators booked their profits. Had the Obama speech been the real reason then the prices would not have reversed the other day on Thursday. It is a very simple logic of trading where in you take your position and take your profits where you feel comfortable. The price movements are merely reflecting the physcology of the speculators and not the fundamentals. As I had mentioned the fundamentals have to set in right if the prices have to move up. The fundamentals did not support the rally that’s why they did not sustain the move on the higher side. Now Monday will be a new beginning in crude and similarly inn all other commodities. So let’s wake up on Monday and witness a new physcological game of the speculators.
Now going back to our addiction of markets, as I have been looking at the markets the last week the prices were in a very confused mode I should say. Most of the commodities started with a bang on Monday and they started the rally on the higher side but somehow they could not keep the trend going up to the end of the week. As I had mentioned in my last article that the rally will be a trap and if you are on the buying side then there is a possibility that you may be stuck with your long positions. Let’s take some examples here that will explain my theory in a bit more precise manner.
Take castor for instance, it started the week at 486.6 made a high of 490.20 but could not sustain to break 492.85 which was mentioned in the daily technical call that I had given last week. The prices turned around at the price of 491.60 and on Friday made a low of 471.60. Now a bottom of 480 has been breached and the target of 476 hit making a low of 471.60. The next example will be of natural gas which started the week with a rise to make a high of 208.30 and turned to make a low of 177.60. But as I had mentioned that if the prices close below 185 then it will be safe to sell. But the market the day it made a low of 177.60 it never closed below 185. It actually closed at 188.70. That’s the reason why I had mentioned only a close below 185 is a safe level to sell. Natural gas had been simply riding on crude oil. Closing of prices below or above a particular level is very essential, or you will be stuck in the position if you have taken a step in haste.
The last week’s article was on crude oil. In the article the levels that were given have been achieved and if you had taken a long position then I guess you must have made the money that you deserve to make by taking such positions. Last week crude did start with a bang and started to rise except for Wednesday that it came down by $2.43. But the prices were still far away from the stop loss that was mentioned of $62.25. Well I admit that the prices reversed from $70.32 on Friday which is $0.33 before the target price that I had given of $70.65. Well I am sorry for that but I hope I can have some concessions with my calculations from my readers. The rest of the commodities that have mentioned inn the daily calls may not have moved as had calculated them to be, but I still feel that till the time certain figures are not breached if will be very risky to take any positions. Let’s take copper for example again. As I had mentioned that if the prices close below 226.50 it will be safe to sell. The prices rose to the high of 246.45 on Tuesday and then fell down to the low of 232.50 exactly to the same price it had started on Monday. Now how can you still say that the prices of copper will rise where it cannot even sustain a rise for two days?
Now why the prices of crude oil reversed? The threat of North Korea is still active and live, then why did the prices reverse on Friday? I know very well that you will be asking these questions to yourself. If you remember that I had mentioned in the last week article that it is a trap rally. But you still made your money in the move right?? You will read the English newspapers then you will get the headline that President Obama made a speech in Cairo in Egypt that’s why crude oil prices reversed. Will you really now believe that reason for the reversal of crude prices?
Let’s look at this from a different angle. When crude prices started its rally it took a break on Wednesday where in the speculators booked their profits. Had the Obama speech been the real reason then the prices would not have reversed the other day on Thursday. It is a very simple logic of trading where in you take your position and take your profits where you feel comfortable. The price movements are merely reflecting the physcology of the speculators and not the fundamentals. As I had mentioned the fundamentals have to set in right if the prices have to move up. The fundamentals did not support the rally that’s why they did not sustain the move on the higher side. Now Monday will be a new beginning in crude and similarly inn all other commodities. So let’s wake up on Monday and witness a new physcological game of the speculators.
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