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The Euphoria Continues

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It’s a difficult calling to be a trader on the stock market in such interesting times. People who know constantly ask where is the market going next -  is it going to reach 30,000? Well, the honest answer I give is that I don’t know! As traders, it is our job to react to the market, not predict it  -  the latter I leave to the ‘pundits’. However, I must say that the high spirited move upwards we have seen in the last few weeks is a slight cause of worry. The move is based on great expectations from the new government to be formed today but its policies are yet to be crystallised into actionable strategies. Formulating strategies and implementing them, takes time before showing a positive result on the books and make take its toll on public patience and consequently, investor patience. Many large cap stocks have now overstretched valuations although the entire index is still at ‘average’ PE ratio pricing, you can see that chart in the article written last week (Is It A Good Time To Buy?).  
 
Like I wrote in last week’s article, it would be best for investors to stay away from the market at the current prices, at least in the large cap space. There will be many opportunities in the market for investors who have the patience.
 
Despite the continued euphoria, I still remain certain that within the month of June, we will see a minor correction and that will be a better time for swing traders to enter the market rather than at current levels.
 
We have had another  interesting development over the weekend – the stay on the Ranbaxy Sunpharma deal on account of suspicion regarding insider trading has been lifted by the HC. (Ranbaxy rallied before the announcement was made!)
 
Recommendations Made last week
Cummins India: +4.9 per cent

Recommendation This Week
Biocon (NSE: CUMMINSIND)
Action: Buy (limit order) at 460, stop loss to be placed at 449. Target for this trade is 475.
Timeframe: 4-6days 
 
The Week Ahead: 
26th may
Modi to sworn as PM and will declare cabinet
JP Infra, India Cements, Muthoot Finance, Praj Ind, Wockhardt Results
27th May
Hotel Leela, JP Associates, Oil India, Power Finance Corporation results
28th May
Apollo Hospitals , Havells, Hero Moto, HPCL, SAIL, JK tyre results
29th May
May Expiry
BHEL, BPCL, Cipla, COAL iNDIA, DLF, ONGC, SUN Pharma, Tata Motors results
30th May
Aurobindo Pharma results
The government will also announce GDP for the fourth quarter ended March 31, 2014 on Friday
 
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