MAJOR PRICE LIMITS ARE HIT. MARKETS TO DECIDE WHICH WAY TO MOVE...

The markets have been quite volatile last week and many investors have been caught on the wrong footing after the major fall in prices of most of the commodities. The biggest dilemma has been that when the prices came down everyone went short and the very next day the prices recovered back. If you have guessed it by now then good, yes I am talking about crude oil. It fell from the high of $68.99 on 27th jul to make a low of $62.70 on 29th jul and the very next day it was again up to give a close of $66.94. usually if the prices of any commodity fall so drastically and the other day if the prices do not fall with the same intensity then it is advisable that you book your profits and exit the market. If not profit book a minimum loss and simply exit and watch the prices. Do not hold the position with a rigid mind, because believe me having a rigid mind for a position can make huge losses.

I have been receiving calls from many readers asking me about natural gas. To much of my surprise investors have been holding natural gas position as if it is a replacement of gold. They ask me what is going to happen in natural gas and my answer is simply to give them a stop loss as I know all of them have bought at unbelieveable prices and have been holding it with huge margins being debited to their account. Why would someone make a mistake of buying natural gas when the fundamentals are not in its favor?? I am really very sorry to say but I request the investors not to mix up my opinion or figures if they have taken a position with the opinion of others. If anyone is suggesting you to take a position it is but obvious that the same person will give you a stop loss. If you try to match up my stop loss with the stop loss given by any other analyst there is bound to be a difference and it will confuse you as you are the one who is investing your money in that particular position. I can only try to minimize your losses but cannot turn that position to a profit making trade as it is not possible.

The markets are going to remain very volatile and I request you to trade in very small quantities. The bulls and the bears have been fighting it out in the market and you really do not know who is going to win. Let’s put this in a simple manner that most of the commodity prices have hit their higher limit prices and some of them their lower limit prices. Believe it of not the solar eclipse has reversed many prices in the market if you really want to cross confirm then match the dates of the eclipse and the price movements in the commodities. You will see major reversals around those dates.

The metal prices had also fallen down drastically on Wednesday and it scared everyone to a major sell off in the markets. Even the Chinese stock markets were down, but what is interesting to know that if you look at the charts of the Chinese stock markets they have rallied from the low of 2037 on 3rd march to a high of 3453 on 29th July. The prices have rallied for 5 continuous months without a single correction then it is quite expected that the prices will fall. Then this fall is actually a correction and not a collapse. There is no reason to worry as hyped by the TV channels.

For all the investors who are still short in crude then your stop loss will be 3250 on closing basis. If the prices close above 3250 then exit your positions the next day. I am writing this article on Friday so if by Monday the prices have closed above 3250 then I request you to please exit your positions and book your losses. If you have your position in gold then wait for the prices to close below $909. if the prices of gold have to fall then they have to close below $909 for two continous days. If they do not then exit your position and wait for the prices to close below $ 865 to sell further but make sure you have your stop losses confirmed. In Indian prices right now your stop loss in gold is 15375, which is equal to $960 more or less in the international markets. Silver will have a stop loss of 22911. natural gas as most of the investors are long your stop loss will be 171.65 on closing basis.

HERE ARE THE STOP LOSSES FOR YOUR TRADES...

What I had feared that really was the case. After last weeks article the number of calls that I received was overwhelming. My readers had actually taken the positions on the wrong side and were really curious to know now what?? And believe me the positions were really very big to hold and not worth the risk. People have been acting on their instincts which I feel is really dangerous in this market, because the way this market is moving and the way the moves are coming in I request you to please trade with caution and please trade in small quantities. Do not be in a hurry to recover your losses that you made in the past trading the equity markets. The markets are going to be volatile till the end of august till the rain spells have not ended. So please do not make the mistake of holding huge positions quantity wise as you will not be able to catch the reversals easily with the speed that is needed in the market.

The rains have been lashing Gujarat , Rajasthan, Madhya Pradesh and Uttar Pradesh. The way the satellite images are showing the cloud formations it is quite obvious that they won’t be stopping soon. The rains are going to be good and there is no need to worry. As I had said before do not make your conclusions that the rains are less simply by seeing the news channels. They are always on the lookout to give out hot news without even checking the authenticity of the matter. I had also said till the end of august you will be in the right position to conclude if the rains were satisfactory or no. I don’t think you will be having any doubts now.

This week I would again make an exercise the way I had done previously. I know many of my reader have been caught on the wrong side of the market and that’s why I decided to help them out by setting in stop losses for most of the commodities irrespective of which side you have taken the position. I am going to mention only the commodities that I feel most of the people are stuck in and they are their hot favorites.

If you wish to follow these figures make sure that you follow them on closing basis. If the prices close above or below these figures exit your positions.

Crude – stop loss for long position 3105 and stop loss for short position 3325.
Gold – stop loss for long position 13960 and stop loss for short position 16375
Silver- stop loss for long position 20001 and stop loss for short position 24735
Zinc- stop loss for long position 72.35 and stop loss for short position 83.75
Copper- stop loss for long position 241.25 and stop loss for short position 272.65
Nickel – stop loss for long position 722.50 and stop loss for short position 805.75
Natural gas- stop loss for long position 171.65 and stop loss for short position 215.65

I had very few callers who had any position in the agri commodities. That’s the reason why I am not giving any calculations for them. What I have noticed that most of the traders are interested in trading metals and energies as they give quick returns. But please keep in mind that they too follow fundamentals and they are more dependant on fundamentals that are based on international market and not Indian markets. With the end of the solar eclipse lots of commodities have already shown their reversals. This week the prices will show the effects of eclipse. I wish you a happy trading week and a profitable week.

CAREFUL WHILE TRADING YOU MAY END UP ON THE WRONG SIDE

The rains have been arriving steadily to the other parts of the country. It has been quite a relief that the rains have come in even though they have been late. As and when the rains are hitting the parts of the country the prices are going for a wild ride. Let that be spices or oilseeds or any other commodity including gold and silver. And not to forget the equity markets and the rupee-dollar. The investors of commodity markets are already in a fix which side they have to be? The moment they are on the buying side the market reverses and the moment they sell the prices shoot up. Even though the fundamentals are in your favor it is not necessary that the prices too will be in your trading position’s favor. This week we will be experiencing a solar eclipse which will make a lot of impact on the prices of commodities as well.

Last week when I had put in the article about crude a lot of investors had misinterpreted what I had said. I had clearly mentioned that there is a possibility that crude prices may simply crash from the levels without giving a pullback. And if the prices come up a bit then they will come up to levels of $63-$64. Those levels would have been a good level to sell again. But with the calls I received from my readers I was completely surprised that they had actually bought crude oil contracts rather than waiting for a reversal to sell. This physcology of trading will make you end up making losses. If the price of certain commodity is on the downtrend then if the prices come up a bit that does not mean that you should be buying in the market because you may never know from which levels the prices will turn and you will be completely unaware when such a thing happens. Then how much ever you try you will end up making losses forget coming out of your position at cost.

The prices follow a certain trend and a discipline which if we honor then the prices will honor us and give us the desired profits. Taking position in haste will make your capital wiped off which makes you completely handicapped because you won’t be able to enter the markets again without capital. Make sure when you are trading initially make some decent profits that will cover your future loss making trades. Do not risk your capital on the trades instead risk your profits.

Gold right now is stuck between the fight of the bulls and the bears in the market. Which way it will end up you never know. It is when this fight happens in the market small investors suffer to great extents. If we look at the chart of gold on 8th July the prices had actually breached the bottom of $911 but the other day itself the prices reversed and the shorts in the market were beaten heavily. The price shot up and has created a bit of panic in the market. If the bulls can manage to pull the prices from here they can take the prices to any extent. The equity markets world over have bottomed out. Investors in the market have money now that they can divert their funds to buying gold now. The dollar index has bottomed out and it will shoot up any moment now. The dow jones has reversed and given a break out on the higher side. Now question is will this take the prices of gold sky high or rock bottom. Right now the magic figure in gold is $939 if the prices close above this price for one week then there is a possibility that the prices will go higher. But to be very honest I will not be on the buying side neither be on the selling. I will be simply watching the movement in gold like I watch a movie and when I am completely comfortable I will make my move in it. I will advice my readers the same if you are planning to take a position in gold on either side let that be a buy or a sell, intraday or positional you may end up on the wrong side. Keep yourself away from gold and silver for the time being. There is a reason why I have been keeping myself away on writing on any commodity extensively for sometime as I had mentioned earlier I am still waiting for the rains to complete their course which will give me a better idea to analyze the market. I do not wish to mislead my readers by simply writing false information on any commodity and make them trade for no reason and end up making losses.

THE FALL IN CRUDE HAS NOT ENDED YET....

The rains have been giving everyone a shiver now with its constant delays. Even the government is scared now and no doubt they have made provisions in their budget if the rains fail to set in the country on their normal course. The rains have been delayed but we still have 2 months to wait and watch. It may so happen that the rains may completely surprise us after entering in mid or late July. It does happen and it has happened in the past history of India before that the rains have entered in mid or the last week of July and has completed its quota to the satisfaction of everyone. Right now what we are facing is a high pressure zone over the land mass which means the clouds that are being pushed back towards the sea. There does not seem to anything to worry till 20th of July. But yes if the rains do not come in by then, that means we are facing a big problem wherein the rains would be 60% of the normal rains that the country receives annually.

For last 15 days it would have been a good time for traders who had been short in their crude oil positions. I remember mentioning in one of my articles that, be prepared for a fall in crude oil prices and I hope I have kept my words. Crude had finished its rise at $74 on 11th June. After that no doubt it did try to again rise to that level from the low of $66.37 to make a high of $73.38 on 30th June. That day itself it gave up and ended up closing at $69.89 down $1.65. And after that I doubt the crude oil price have seen the rising sun. It was setting down and further down for 7 continuous trading sessions to end up at $59.25. The question that now arises is- has the fall in crude prices ended? I would say not yet, it still has to continue its fall. But what needs to be seen is will it simply fall down from here onwards or will it give a slight pullback and then take a reversal. Remember crude prices have almost fallen down by $15. So as far as the physcology of the market goes it should take a break, let the prices rise a bit further and then fall again. And this will be the last phase of its fall, because after this my dear investors, crude will never see these low prices again for a long time to come which I would say long long years to come. This week it will be the time when we will have to observe till what prices does crude give a pullback and then we decide if we really want to sell further. Because when the prices are in the last phase of their fall it is will be very difficult to know when the prices will take a reversal. As I see it, they should be around the price range of $55 and $48 for next 2-3 weeks or maybe 2-3 months.

By the end of august the hurricane season in the USA will hit the country and we will have to wait and watch if anyone of it hits the country and what kind of damage it may cause. Because august and September are the months where crude oil is at very wild rides and a slight here and there in the weather out there can take the crude prices to any heights. But for that reason I said it may range between $48-$55, which I feel maximum may go up to $60. Trading during those times is a bit risky as the prices are simply news driven and not the fundamentals. To be put in a very simple manner now is actually a wait and watch time in crude and if the prices give a pullback then it would be the last opportunity to sell again in the market. If the pullback does not come in then it is better to stay away and not sell as the stop losses will be at really high levels which do not justify the targets. Incase if the pullbacks come in then it may come to the levels of $64 and at such levels it may be advisable to wait for a day or two and if the price of $64 is not breached for 2 continuous days then a risk of selling can be taken with your stop losses limited to around $ 66.35 on closing basis. Please do not tempt yourself to taking a buy position if the markets are showing a sharp rise in the prices. Have a happy week trading and a happy week making profits.