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Trading Strategy for the week ending April 30, 2000

In the last four weeks, Indian stock markets have witnessed one of the wildest moves in recent history. This volatility has been generated by none other than the technology stocks. The impact was also felt on the old economy stocks and they also participated, especially on the downside move.

The downtrend started during the third week of February, and by the first week of this month touched a low 4601 points. The sensex shed 25 per cent from the February peak. The rally was equally sharp from 4601 points to 5542 points. With the latest fall dipping below 4600 points, the technical position of market is extremely weak. This offers very less opportunity for fresh position for short term to medium term traders. Overall, the current state is more confusing than anything else.

Although few stocks are still above their panic levels, yet buying makes little sense as the reference points in all these cases are very far and have very unattractive risk/reward ratio. At the same time, an average fall of around 30 per cent has already occured in most cases, the rewards in short-selling also diminishes.

The best thing that could be done at this juncture is to sit tight, and wait untill some consolidation take place.

By Arc Investments and Consulting

Stocks

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