Good morning to my readers. As I had mentioned last week that the markets will be volatile it indeed was. Now this volatility is what most of the analyst would say is in their favorite language “Overbought” and “Oversold” which now has become a very common word among investors in the market. But what most of the people fail to realize that overbought and oversold conditions can prevail in a market for a long time and waiting for reversals is far much better than taking a position and hoping for a reversal. Hoping for reversal will cost you margins and even losses on expiry of contracts. But taking a position after the confirmation of reversals is far more recommended. I do not wish to hurt the sentiments of my readers who indeed had put in their hard earned money in the markets, but what has really surprised me that even after my requests to people to exit their positions and book their losses they went ahead and continued holding their positions which caused them huge losses. I really appreciate my readers calling me and asking to give them a future direction in their positions. But I also had said earlier that all I can do for you is to give you a stop loss so that I can minimize your losses because most of the times I receive calls from people who are caught on the wrong side of the market. Of course I want my readers to make money in this market, but if you do not follow the stop losses in a disciplined manner how can I help you.
In the month of august we witnessed the commodity prices rising to unprecedented heights. But I would not like to call it overbought, I would rather call it panic buying, and believe me those who had buy positions in this panic buying are now in panic selling situations. The rains have indeed turned the situation for all the crops and the physcology of the markets have now turned to higher crop output. But what I need my readers to understand is that even if the rains have come in late the crops that were sown earlier have already suffered. Now that the new wave of rains hit the country the farmers are again going in for fresh sowings which obviously creates a situation of late harvesting. Now in this situation if the crop arrivals are delayed then this panic selling will automatically turn into new buying opportunities. I do not say that the prices will simply shoot up to new heights but they will again rise up to meet their resistances at older highs. What investors need to watch now is not the opportunity to sell in this market but wait for confirmation of reversals and then buy for smaller profits on the buying side. If you wish to sell any commodity now at these prices you will be looking at very small profits against big stop losses.
India is not facing any drought situation lets be very clear on that, because if a drought situation has to be declared then the country should have only 25% rains in the whole monsoon season. That is the right definition of drought. So if the news channels keep on flashing drought all the time, you need not panic but what is really a sorry state that the news channels create such a hype of anything without even cross-verifying any details. The race is simply on to be the first to flash the news. The country has till now received 70% of its rains and we still have time till mid September. The perfect time to take any position will be after 9th September because by then the rains will be all over and the real crop situation will be in front of you. At that time you won’t be caught on the wrong side of the market. There are very few commodities have the selling potential so please be cautious in selecting those commodities. Have a happy week trading…
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