Bullish scenario already explained earlier but keep bearish possibilities in mind

What if break above 3774 is a fake one??
No real way to know for sure but here is one thought for the fundamental investors
if cmp of nifty is 3774
and p.e is 20x (using rough figures here just bear with me please 10-20 pts and a few decimal pts 19.9 20.1 won't affect the outcome significantly :))
Current earnings = 3774/20 = 189
Next year's earnings using 15-22% growth = 217 - 230 (this comes from 6-10% gdp + 4% inflation so 15% is almost the bare min one would expect for nifty. The actual figure is likely to be much higher since nifty 50=best 50 companies of India and they can be expected to outperform gdp growth)
Now using savings rate of 7.25 % per year we get:
Earnings yield on savings deposit = 13.8
Nifty would be attractive if it was priced at a level such that it was priced at 13.8 times future expected earnings?
So the band we come up with is 217*13.8 - 230*13.8
= 2999.4-3174

Fits closely for a wave C down = A target of 2874 :)
or close enough anyway


P.S this just a one year discounting. I leave it as an exercise for savvy investors to use a longer term discounting model and come up with a suitable valuation. If looking over a horizon of 5-10 years then 15% cagr can really add up and give you huge returns in excess of a savings deposit even if current p.e were to be 30+.

Nifty w4 almost done completion of consolidation phase by 15th/25th of december likely!!

Nifty unfilled gap 3624-3656 giving support for now. The arithmetic channel was near 3700-3675 and its holding fairly well.
Log t2 is at 3630 and log channel is 3600. That would be 'fib perfection'.
The 'perfect' target for the drop. Remember t3 on upside and t2 on downside that is the rhythm of an impulse.
The market is not always perfect as evident from the action at 3975.
We briefly whipsawed and crossed over this key resistance. We did 4035 then humpty dumpty.

News analysts will say it was crr hike that killed us.

Trendline warriors will say trendline break below 3960.(note whipsaw of the trendline happened at 3866-3800 on 11/20/2006)

Swing traders will say 3860/3794/3774 stop levels were violated.

Funda analysts will say nifty hit p.e of 21.5 which was same as may 2006 top so in fundamental terms u have a DOUBLE TOP!!

P.s I mentioned all of these reasons in my analysis.


Who was right? The answer is everyone is right! Instead of imagining operators and gods who move the markets one would be a wiser if one were to study the principle of Emergence.
"Emergent structures can be observed in swarms and flocks. Flocking is a well-known behavior in many animal species from swarming locusts to fish and birds. Emergent structures are a favorite strategy found in many animal groups: colonies of ants, piles of termites, swarms of bees, flocks of birds, herds of mammals, shoals/schools of fish, and packs of wolves. A more detailed biological example is an ant colony. The queen does not give direct orders and does not tell the ants what to do. Instead, each ant reacts to stimuli in the form of chemical scent from larvae, other ants, intruders, food and build up of waste, and leaves behind a chemical trail, which, in turn, provides a stimulus to other ants. Here each ant is an autonomous unit that reacts depending only on its local environment and the genetically encoded rules for its variety of ant. Despite the lack of centralized decision making, ant colonies exhibit complex behavior and have even been able to demonstrate the ability to solve geometric problems. For example, colonies routinely find the maximum distance from all colony entrances to dispose of dead bodies.
"
--------Quote from site on emergence---------
If at first you don't see the connection between individual ants going about their tasks using chemical trails and trends in the stock market created by fiis+mfs+retail+hni+punters+rookie traders+veteran/floor traders then read a bit more carefully and use google to look around :)

Everyone who trades contributes to the market structure. If everyone has the same view (bullish/bearish) and trades on it then the market is likely to go in that direction. This is the basic foundation of trend following.

My Automated system stop level was 3860 narrow and 3774 wide posted earlier. Once 3860 broke it was retested for resistance and right now the same seems to be happening at 3774. My worst case drop anticipation is still 3630-3600 region (log t2/0.382 retrace of large swing + 0.618 retrace of small swing+log channel). I do not yet have a position in Nifty.
I would like one last drop to my key level so i can get an entry. No offense to all the bulls who are already long :)
I suggest hedging with 3850/3900 call options for december if already long to get some protection from downsides.
Market should consolidate for some time between 3600-3975 before heading for 4100-4450-5000 levels for next year.


The structure of the market would turn significantly bearish on a closing below 3600 at which pointt all bets are off (keep in mind 3975 whipsaw ) above 3600 safe, below 3600 ugly but i can't say there won't be a whipsaw :).

Good analogy for trading as a business

What separates the successful traders from the failed ones is the ability to see trading as a business.
"I'll never forget the saying of my second boss: Trading is a business like any other business. Learn to buy wholesale and sell retail. If they don't come for your inventory~ mark it down and move it out the door" (This is called taking a loss, by the way.)"
Linda Raschke, street smarts

A nice extension of this basic analogy has also been proposed by our very own Prem
"Prem's 10 simple tips like a shop

1)Trading in share mrkt is like opening a new shop.

2)Identify the product with good demand.

3)Buy the Products which has long shelf life(L&T,BHEL,BEL).

4)If there is a particular demand for the season like cements,textiles(Diwali &Holi season) buy&sell them in season.

5)Dont buy perishable items(penny stocks).

6)Maintain standards in shop for purchase & pricing.

7)As demand increases for ur product try to sell some qty at every rise(remember there is no MRP).

8)Do your homework on purchase and maintain good Accounts(essential for shop)

9)If there is a strike(correction),close your shop and stay at home, you can buy good products at a cheap price during the strike.

10)If u dont have enuf money buy it thru advance payments(F&O)....GUD LUCK FOR YOUR SHOP."

If you approach the market as a business you will succeed.
Here are my practical translations

Use sector Rs to figure out which sector is in demand

Use stock Rs to figure out which stock within the sector is most in demand

Buy stocks which meet a minimum quality in terms of traded volumes/trade capitalization per day

Fundamental Investing is about buying value or growth.
Trading is more about buying whats in demand :)
So my summary for now invest in sugar/cements/IT/capital goods/Auto parts/Pharma, trade in infra/realty.
Specific list of stocks which I consider worth trading in are listed in the previous post.

High Beta stocks

If one trades high beta stocks using the nifty as a timing tool then risk can be minimized and rewards maximized
This is my pet theory which i have verified using automated backtests
Traders will tell you buy strength and sell weakness. Well I have created systems which define strength and weakness and tell me which stocks to buy/sell
Just see this watchlist for an example
Nifty rose by 1% today. See the gain in these stocks

Nifty begins w4??

Possible w4?
Log Targets using 3200-287x as base swing
3784/3630/3378. Strongest support at 3630-3600 rising 10% channel area for w4

most probable retracement levels for w4
(0.236/0.382/0.5) 3764/3595/3408

Weekly channels

A couple of channels to watch for

Nifty Swing Trading updated sl At 3856/3774 target 4100-4200

Purple line = stoploss level reads 3857
Cycle degree breakout intact till 3774 is held sl for cycle degree swing is last pivot at 8800 sensex which will probably never get broken unless we have WWIII or something. Targets are monstrous 20-36k sensex and 6-12k nifty