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Interest Rates & The Markets

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In terms of events, the major announcement this week’s is that of the RBI on Tuesday (3 June, 2014). It is expected that the key interest rates will remain unchanged. This ‘decision’ has already been priced in the markets. In my opinion, if there is no change in the interest rates, the market will not react – however a rate cut will move the markets immediately. The interest rate sensitive stocks in the Auto, Realty, Infra & Banking sectors usually react during such announcements.

As a trader, I make it a point to studiously avoid taking a position before & during the announcement and this week is all the more mysterious due to the high hopes pegged on an uncommonly dynamic Prime Minister at the helm of affairs.
Markets Next Week

I have been writing about impending sell-off in the markets since last week. It seems that last week’s fall from 7450 to 7230 has vindicated that analysis. As a trader, my life is full of possibilities and each of these situations creates an opportunity. If the markets are able to reach lower levels of 7100-7150 and show strength, then that would be a great opportunity to buy. Strength can be seen as a Newton Method setup, a ‘Hammer Absorption Pattern’ or simply a ‘Swing High Break’ after the ‘Breakdown’.

Quite a few stocks, across the sectors will show some selling pressure in the first half of the week. My own strategy for the week will be to grab a buy position in Wipro and HCL tech if they breakout. I will also be looking to buy other stocks at the end of the week if the markets show strength.

In summary, I’m waiting for the markets to fall further and buy only when the markets show any strength for recovery.

Recommendations Last Week
No Trade

Recommendation This Week

Wipro (NSE: WIPRO)
Action: Buy (limit order) at 520, stop loss to be placed at 506. Target for this trade is 540.
Timeframe: 4-6days

TCS (NSE: TCS)
Action: Buy (limit order) at 2190, stop loss to be placed at 2128. Target for this trade is 2280.
Timeframe: 4-6days

Lupin (NSE: LUPIN)
Action: Buy (limit order) at 941, stop loss to be placed at 927. Target for this trade is 950.
Timeframe: 4-5days

Trade Well
•    Until you become an experienced trader, do not risk more than your disposable income.
•    Risk no more than 0.5 - 1 per cent of your capital per trade by adjusting position size to risk.
•    Profit percentages mentioned in the column are before deduction of brokerage, taxes and slippage. That’s because each broker charges at different rates.
 
Prateek Singh is CEO, MarketScientist
http://www.marketscientist.in