MIDCAP MANIA

AS A TRADER BY PROFFESION….I have observed that people, time and again, exhibit a certain tendency at certain levels of the market.

THE BEAR MARKET 

People want to buy only safe stocks. Stocks which have historically rewarded investors. The INFOSYS and the HUL’s of the world.They aren’t really concerned about the valuations as much as they are about the ability of the company to weather the storm of the recession.

THE START OF A BULL MARKET 

Here people are still skeptical about the outlook of the economy but are willing to take calculated risks. Hence they try to find under-valued stocks or stocks which have underperformed their peers in terms of price action. They focus on parking their money in steady stocks and are patient with their investments.

THE BULL MARKET HAS MATURED

Everyone knows we are in a bull market. Large caps have outperformed the indices. Institutions then play the valuation gaps and midcaps are doing a hop skip and jump. Here people don’t want stock a stock which will deliver a 10% return in the short span. They are rather interested in knowing which stock (of all the stocks they know ) is going to deliver that return the quickest. People are now interested in the fastest stocks.

THE BULL MARKET IS ABOUT TO CORRECT 

Small caps, names which you haven’t heard of before and may never hear again till the the next bull run ends are hitting circuits by the dozens. Your neighbor gives you tips and surprisingly the tips are achieving targets!!

For now we are PHASE III where midcaps are on fire. Your broker has 5 recommendations for you everyday and all of them seem to be doing fine. The problem with PHASE III & PHASE IV is that they can last for a good amount of time.

HOW TO PLAY OUT PHASE III?

My trading experience has taught me that churning of your portfolio everyday seems very tempting in such times. There are times when you decide to let the next recommendation go and the stock runs 10% on the same day (if you are unlucky) & there are times when you shift from one stock to another only to regret as the former stock does a 10%.

No doubt that the quickest money is made in PHASE III & PHASE IV. But the reverse is also true!

My advice would be to ride the stocks which you are holding till the markets show signs of a turnaround.

If one feels that a particular stock in which he/she is invested in isn’t moving, they should have an intended holding period in mind, after which the stock should be sold, irrespective of the price.

Be quick, sharp and flexible. Enjoy the ride till it lasts but be the first one to throw your stocks and run like a jackrabbit if the market goes against you.

Opportunity lost is always better than money lost.

Have a great trading day!

Regards,

Rahul.

STOCK CALLS : FSL LIMITED & INDIA CEMENTS LIMITED......

FIRST SOURCE LIMITED ( FSL )

IT Stocks have been the outperformers of 2009. Infosys and TCS are trading at life    highs. Now its time for Midcap IT.

Buy FSL around 35-36 for a target of 40/48. Keep a stop loss below 34.

INDIA CEMENT LIMITED

STRONG BUY : INDIA CEMENTS buy around current market price. Keep a stop loss below 110. Momentum players may catch the stock on closing above 135. Medium term target is placed at 170.