Posts Tagged ‘Financial Markets.’

COMBINING TECHNICAL ANALYSIS WITH OTHER RESEARCH TECHNIQUES

Though technical analysis as a research tool can be used in isolation but for the betterment of subject under study i.e. financial markets; we can employ other research tools in combination to technical for the best possible outcomes. Due to lack of technical knowhow, people opt for one of the many research tools available to us. On the other hand, markets are globalizing and probability of generating return is diminishing with the every passing day so to surpass the competition, one should have the basic knowledge of the other research tools as well so that they can deploy the same as and when required. Technical analysis is concerned with when and how to place money. It determines the optimal timing for a position and conclusions about how long to stay in a particular trade have significant importance for the kind of derivatives structure one may use.

.

Using derivative instruments requires strong background as the nature of the product has several advantages and at the same time disadvantages if used without the proper understanding.

.

So by combining the aforesaid research methodology, there are various trading possibility arises which ensure sustainability of return despite fluctuating market conditions. In emerging markets, these concepts are getting popular for the consistent return with minimum risk. Derivatives help to hedge the position in the underlying to avoid unmanageable losses.

..

For success in any market condition, one need to know the prevailing trend which we can make out through technical analysis now comes the derivative part that what we can do within that trend for maximizing the return with the minimum risk. There are N numbers of trade possibilities once you generalize the market direction well. Technically, there are tools like Moving average, which indicates the prevailing trend once we overlay above the same on price chart so if the trend is up the bullish strategy like Bull call spread, call buying and many more. In other words, there are techniques for every market condition so understanding of derivative will give you an edge as the major segment of the market participant is still not clear over the profitable usability of the same so all you need is confirm the prevailing trend whether its’ up, down or sideways and design the strategy accordingly.

.

To start with, it does require study of different terminology and their implications from the derivative segment that will ultimately be fruit full in future.

.

By taking an example, the concept will be crystal clear. In the recent past, I have employed one of those techniques for trading Reliance industries. The related analysis is explained with the chart shown from the snap shot of the report dated 09th June, 2010.

.

.

.


On the weekly charts, it was trading in uptrend channel with the slow pace of inclination. It tested the lower band of the channel thrice in the past and was trading around the same zone. With the help of Bollinger band, we noticed that the bottle neck pattern was formed which indicated possibility of sharp move either side in the near future with rise in volatility.

.

Accordingly, we recommended buying straddle. Strategy – Buy CA 1000 June@ 30 and Buy PA 1000 June @ 21 so the total cost of building strategy was 30600 {total premium paid (i.e. 30+21= 51) * lot size of 300*2}for the target of overall rise in the premium paid by `20-30 (i.e. – `71-81) with the stop loss of decline in premium paid by Rs 10. ( i.e. `41) Though the overall trend was sideways but we witnessed that such opportunity may arise due to rise in volatility and trigger the position accordingly.

.

Within a week, it outperformed the above mentioned target by good margin. The idea is to enhance the base so that the probability of beaten down in adverse situation reduces. Better defense is more important than attack and derivative provide the same against the market odds when one fails to realize that the deterioration may erode the capital if not tackled on time so it make sense to combine the derivative strategy with technical to get the optimal returns with calculated risk.

.

OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,
http://www.smctradeonline.comhttp://www.smcwealth.com

.

Share/Bookmark
//

Weekly Update 24th – 28th May

Global markets nosedived after German financial regulator introduced a temporary ban on naked short selling and naked credit-default swaps of Euro-area government bonds to provide stability to the financial system from the excessive price movements. The move shattered the confidence among investors that the various efforts like 750 bn euro package to tackle the situation are not enough to stem the crisis.

.

EU countries efforts to cut down on their deficits by reducing spending & increase in taxes may lead to contraction in the region. The situation poses a serious threat to US & World economy as it could lead to slide in world trade & economic growth.

.

According to Emerging Portfolio Fund Research(EPFR), investors withdrew $12 billion from European & US equity funds in the week to May 19. In order to tighten the US finance industry regulation, the senate approved a bill to impose restriction on banks proprietary trading & to create a consumer protection agency having powers to write & enforce rule to ban abusive lending. In another development Fed raised the US growth estimates to a range of3.2% to 3.7% this year & lowered forecast for unemployment & inflation. The European crisis has not only hit hard the equity markets but also commodities as well. With the commodity prices coming down especially oil, it has somewhat reduced the inflationary pressures building up in the economies.

.

RBI deputy governor Subir Gokaran said “cautious pace is the best way to go and that is the stance,” after the Global economy outlook changes in the last six weeks. One the domestic positive development for the Indian Government that happened was 3G auction. The government managed to garner close to Rs. 70,000 crore, double the amount it anticipated in the budget estimates. This extra money is likely to lift the pressure on the market borrowing and will give some extra room to the government  for the developmental purposes. For the time being the markets are expected to remain in pressure & will eye on the monsoon to gauge how Indian economy will behave in the rest of year as agriculture is the mainstay for the overall development.

.

Overall trend of world stock markets is down though in the short term they are oversold and a bounce can be expected in the coming week which would be more of a relief rally. Till the European markets do not stabilize, the recovery might be short lived. One should be cautious in such markets. Nifty faces resistance between 5040-5120 levels and Sensex between 16800-17100 levels.

.

Volatility in the global financial markets is expected to calm down in near term which will lead to some recovery in base metals and crude oil. European Union finance ministers pledged to stiffen sanctions on high-deficit countries and ruled out setting up a mechanism to manage state defaults. Bullions may continue to trade on weaker path as decline in safe haven status can keep the prices pressurized.

.

.

Weakness in local currency has curtailed the volatility in bullions in domestic bourses to greater extent. Key economic releases like US GDP will set the course this week for base metals. Bulls may again take center stage in spices while oilseeds counter may try to find direction taking cues from CBOT and BMD. Wheat and Chana can trade in range with marginal buying.

Moneywise…Be Wise ;)

.

If you find yourself asking the question –

.

Why should I Save ?

.

Why should I Invest ?

.

Where do I Invest ?

.

Who would Guide me to take informed decision on my Investments ?

.

…then look no further !

Why SMC?

.

SMC Group, a leading Financial services provider in India, a vertically integrated investment solutions company, with a pan-india presence is there to guide you and provide complete investment solutions to you.

.

SMC Group, having rich experience of more then two decades in financial markets, is one of the largest & most reputed investment solutions company that provides a wide range of services to its client base of more than 5, 50,000 clients with presence in more then 1500 cities.

.

SMC Online, an unit of SMC Group, is one stop financial investment portal for investor’s all financial needs.

Investors can trade online in Equities, FNO, Currency Futures, Commodities, apply online for IPOs, and invest online in Mutual Funds.

.

SMC is :

.

a) 4th Largest broking house of India in terms of trading terminals (Source: Dun and Bradsheet, 2008)

.

b) 5th largest distributor of Initial Public Offering (IPOs) in retail (Source: Prime Data Ranking)

.

c) Awarded ‘Fastest Growing Retail Distribution Network in Financial Services’ (Source: Business Sphere, 2008)

.

d) Recipient of ‘Major Volume Driver Award’ from BSE for last three years consecutively.

.

e) Nominated among the top three in the CNBC Optimix Financial Services Award 2008 under National Level Retail Category.

.

f) One of the largest Proprietary Arbitrage Desk doing risk free arbitrage in equities & commodities.

.

g) Commanding turnover of more then 3% in equity market, 4% in commodity market and 10% in DGCX.

.

h) Transparent and professional management.

.

j) Relentless focus on investor care.

.

k) World class in-house research facilities providing research support to investors.

.

l) All financial products and services under one roof.

.

🙂

.

Next Blog we would try to read more about the other SMC’s investment products and services.

Stay Tuned for more on this 🙂

.

To know more about the SMC Products and Services, click here.

MCX Comdex & Benefits of Index :)

Hello Friends here we come up with another write up on “SMC Gyan Series”.

.

INDEX - The Measuring Barometer

.

Topic is  INDEX – The Measuring Barometer.

.

Here, we would read that what is MCX Comdex and what are the advantages of Index.

MCX COMDEX captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX.

.

It is the significant barometer for the performance of commodities market and would be an ideal investment tool in commodities market over a period of time.

The MCX COMDEX futures give users the ability to efficiently hedge commodity and inflation exposure and lay off residual risk.

.

Protection can be established regardless of overall market direction.

MCX COMDEX, India’s first composite commodity futures index was launched on June 7, 2005.

.

Advantage:

.

Investors who own stocks of companies having exposure to primary commodities could use the COMDEX as a guide to hedge their risk in the commodity exchange, thereby bringing stability to the financial markets and strengthening linkages.

.

Weight age (%) of Commodities in MCX COMDEX:

.

On the MCX-COMDEX, Agricultural sub-group carries 20% weighting.

It includes ref. soy oil, potato, chana, crude palm oil, kapaskhali & mentha oil.

.

Metals also carry 40% weighting and comprise gold, silver, copper, zinc, aluminium, nickel & lead.

The energy sub-group consists of crude oil & natural gas and carries 40% weighting.

.

Weight age (%) of Commodities in MCX COMDEX

.

Also Group Indices for MCX AGRI, MCX METAL & MCX ENERGY on commodity futures prices have been developed to represent different commodity segments as traded on the exchange.

.

🙂

.

Note : For More Latest Industry, Stock Market and Economy News and Updates, please Click Here

INDEX – The Measuring Barometer

Hello Friends here we come up with another write up on “SMC Gyan Series”.

.

INDEX - The Measuring Barometer

.

Topic is  INDEX – The Measuring Barometer.

.

Here, we would read that what is MCX Comdex and what are the advantages of Index.

MCX COMDEX captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX.

It is the significant barometer for the performance of commodities market and would be an ideal investment tool in commodities market over a period of time.

The MCX COMDEX futures give users the ability to efficiently hedge commodity and inflation exposure and lay off residual risk.

.

Protection can be established regardless of overall market direction.

MCX COMDEX, India’s first composite commodity futures index was launched on June 7, 2005.

Advantage:

.

Investors who own stocks of companies having exposure to primary commodities

could use the COMDEX as a guide to hedge their risk in the commodity exchange,

thereby bringing stability to the financial markets and strengthening linkages.

.

— 

Weight age (%) of Commodities in MCX COMDEX:

.

On the MCX-COMDEX, Agricultural sub-group carries 20% weighting.

.

It includes ref. soy oil, potato, chana, crude palm oil, kapaskhali & mentha oil.

.

Metals also carry 40% weighting and comprise gold, silver, copper, zinc, aluminium, nickel & lead.

.

The energy sub-group consists of crude oil & natural gas and carries 40% weighting.

.

Weight age (%) of Commodities in MCX COMDEX:

.

Performance 2009:

.

The chart above depicts that with the bull-run in commodities,

this index has outperformed throughout in the year 2009,

as compared to other years, where they had shown a sideways movement.

.

Also Group Indices for MCX AGRI, MCX METAL & MCX ENERGY on commodity futures prices have been developed

to represent different commodity segments as traded on the exchange.

.

Performance 2009

.

Note : For More Latest Industry, Stock Market and Economy News and Updates, please Click Here

Government Will Take Necessary Steps to Control Inflation

Finance Minister, Mr. Pranab Mukherjee, said on Tuesday that rising inflation is a major area of concern and the government will take necessary steps to control prices.

Mr. Mukherjee said Inflation has risen mainly due to the prices of food that have gone up in last month. According to the provisional data issued on Monday by the Ministry of Commerce and Industry, the reported inflation rate accelerated to 4.78% in November to 1.34% in October.

Pranab Mukherjee also said the government is taking necessary steps to cut its recorded fiscal deficit to 3 % of GDP after 2001/12, from 6.8 % estimated for the current financial year ending March 2010.

During 2005-06 and 2007-08, the economic growth was recorded at 9 % is mainly coming down due to Inflation and high financial loss, which is creating obstacles in the way of economic development.

Mukherjee told in parliament, “Prices are a major area of concern and we shall have to address it.” He also added “Whatever steps are needed, we will take those steps,”

The government agencies are paying high prices to farmers for buying grains and supply shortage of food items in the country, resulted in increase of inflation in the last four decades.

According to the latest government data released shows food inflation at 16.7 % in November, which have pushed the inflation to 4.78 %.

Taking the steps to control inflation, the Reserve Bank of India (BBI) has cut its policy lending rate by 425 basis points between October 2008 and April 2009, reduced Cash Reserve Ratio (CRR) and brought in liquidity in financial markets to control the increasing Inflation rate.

The government also increased the tax slabs and higher spending, which widened the fiscal deficit that has to be funded by a record borrowing of 4.51 trillion rupees ($96.6 billion) in 2009-10.

Mr. Mukherjee also said the deficit was “unsustainable”, and the government would reduce it to 5.5 % in financial year 2010-11 and to 4 % in 2011-12″ and thereafter, we shall have to come back to 3%.”

The government”s fiscal deficit has touched almost half of the full-year estimate in the first six months of FY”10. The fiscal deficit for the six-month period stood at Rs 1,97,775 crore, which is 49.3 per cent of the total estimate of Rs 4,00,996 crore for this fiscal. The fiscal deficit during the same period last year was at 77 per cent of the annual estimate.

It swelled to 6.2 per cent of the Gross Domestic Product (GDP) last fiscal against budget estimates of 2.5 per cent.

ECONOMIC INDICATORS… “Leading the World” Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series”.

 

Topic is ECONOMIC INDICATORS… “Leading the World”.

Here, we would go through the Brief of like what are Economic Events & Indicators and important sources of data provider for calculating & determining economic indicators.

🙂

 

ECONOMIC INDICATORS… “Leading the World”

..

Economic Events & Indicators are statistics that precede an economic event.

 

The goal is to track the economy & derive a forecast for future performance.

 

Economic indicators have tremendous potential to generate volume and to move prices of commodities futures as well as the financial markets including Forex.


Tools of Construction: This would include separate sections of statistical methods including

– Calculating indices and re-basing them,

– Differences between arithmetic and geometric averages,

– Standard deviations,

– Regression analysis,

– Correlation and causation,

– Margins of error in statistics calculations and

– What this means for interpretation, subsequent revisions and why they happen.

🙂

 

Economic indicators include various indices, earnings reports, and economic summaries.

 

Examples : unemployment rate,  housing starts,  Consumer Price Index (a measure for inflation),  Consumer Leverage Ratio,  industrial production,  bankruptcies,  Gross Domestic Product,  broadband internet penetration,  retail sales,  stock market prices,  money supply changes etc;

🙂

 

The important sources of data provider for calculating & determining economic indicators are like:

– Bureau of Labor Statistics,

– Census of Construction Industries,

– Bureau of Economic Analysis &

– Reserve Bank.

🙂

 

The value of the indicator data is considered important if it presents new information, or is instrumental to drawing conclusions which couldn’t be drawn under other reports or data.

 

Each indicator is marked with “H”-“M”-“L” (High-Medium-Low), according to its level of importance, as commonly considered.

🙂

 

Next Blog we would try to know about the classified categories of Economic indicators in details and what is Time Era.

Stay Tuned for more and more on this 🙂

 

However For More latest Industry,Stock Market and Economy News Updates, Click Here