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Portfolio Yoga - Part 87

SKS Micro – A study case in Trend Following

I am a strong believer in Trend following. Systems I build and those I trade are those that incorporate the same in one way or the other. In fact at 2 recent seminars where I gave a talk, I talked purely about trading the trend without any focus on why the trend is weak or strong. The only reasoning required is to know the trend in the time frame of your choice and then decipher how to get a entry point / exit point.

SKS Microfinance is a example of how a trend can continue in a single direction with strong news coming at every low (or higher in cases like Crude / Silver, etc). The news in itself may or may not have exited earlier, but when the news flow comes in, the trend just becomes stronger.

At the recent BgSE organised workshop I spoke about how to exit / enter using simple breakout strategies. The audience was not thrilled coming as it was right after a very good friend of mine spoke on Fundamentals and how a investment of 10K in Infosys was now worth 6 Crores or something of that order as well as how a 10K investment in Wipro / Cipla / etc would have worked out.

But a cursory glance at SKS chart says that the first breakdown happened at 1035 level. The breakdown level was tested but never did the market close above it. Its been downhill ever since and suffered its second major breakdown at 600 level. The fall has been so sharp since the listing that the 200 day MA is not even in operation 🙂

Unfortunately I guess that like Silver where a lot of small players am told were stuck with Short positions, here the opposite would have happened. The stock would have moved from strong hands to weak hands (read Retail players).

One of the surprises that SKS offers is that a lot of FII’s have been locked in and hence have no way to exit. Am saying this since a question was asked of me of why Karnataka Bank was falling despite JP Morgan having picked up a huge quanity of shares (this was at the workshop which was held a day after the JP Morgan buy. The fact is that FII’s need not be smart (as can be seem from SKS Micro / Satyam (where a lot where there before the fall and still are with it) and many others.

Buying Cheap (read low) is never IMO a good strategy in the markets since its like rowing a boat against the flow of the river. Tough and may not yield the desired result.

Sks_micro

Cheers

Prashanth

 

Thoughts on Quora

First there was the VBulletin style forums, then Yahoo Groups then Facebook and then Twitter and in between somewhere came linkedin and now Quora.

The meat of all the sites above as well as the many I have missed was to enrich user experience by being able to connect one to another based on our choice of subjects or topic we liked.

So while the Yahoo groups and VBulletin style groups are sites which focus on a particular type of information (and more the people flocking to that particular site / group, better the chance of learning / knowing / enriching ourselves).

Facebook came with a different agenda. The idea was to connect to our friends so that we knew what they were upto :). Once upon a time, you needed to visit a friend to know what he was doing, now, voila, all you needed to do was login to fb and see what your friend is doing. Of course, since connecting is easy, we connect to every one who seems to be interesting (the thought being, what is there to loose after all).

Twitter hit upon a idea of connecting in a different way. Instead of just knowing what your friend was doing, how cool it would be if you can share what you like or what you feel (there of course is a bit of overlap with fb since you can do the same there too) as also connect with guys you don’t even know if you felt that the information they shared (links / posts) are on subjects that you were interested in.

Linkedin approached the whole social networking in a wholly different way. Instead of connecting with friends for chit chat, here the idea is to connect with professionals so that it opens new avenues.

I have been a member of linked in for many years and have 100+ connections and while I have head stories of how linkedin has helped, what I mostly see is A connects to B, C and D in every update. I wonder if its just human psychology at work here to make it appear that the more we connect, the more potential we have got for better oportunities never mind the fact that not many even bother to read teh updates.

Yesterday, got a invitation to Quora. This takes the social networking concept in a pretty new way where the idea is that you can either ask a question that bothers you or answer where you feel you can contribute.

In just 2 days, am feeling bored with Quora while when I joined Twitter, it excited me no end. The problem as I see is that I don’t know whether I should wait for days on end to get a answer to a question that bothers me when a google search can give me similar / better results in real time.

Add to it, the problem is that there is nothing that says the answer has been given by a person with the right credentials. There is ofcourse a way to vote up or down, but that is assuming that others are either following you and are interested / knowledgable in similar area of expertise.

The bigger problem is motivational. If you are good at something, how often will you find the time and the interest to respond to queries on your topic. It takes time and lots of effort and if it does not even get noticed, you may start to feel, what the heck am I doing wasting my time on something where there seem to be no rewards.

Unless properly moderated, most sites / forums become a spammers delight. Am seeing it in groups (Yahoo / Facebook / Linkedin) and same can happen here too. Right now, its invite only and hence numbers are low, but once its open for all, without moderation and grouping, your question can attact no attention since the number of questions will be too much for anyone to handle.

For the time being, I would rather stay with Google where I can search and get answers from different sites / forums than hope some lonely sees my request and answers the same.

 

Happy Networking

 

Prashanth

 

 

Untitled

Some Recent Commodity moves

 

MCX Rubber was trading in Jan 2009 at 7000 and now trades at 24000

Cotton trading at 90 in August 2010 (US cents per Pound for Upland cotton) now trades at 230 (Link: http://bit.ly/gSqIHo)

NCDEX Pepper which was trading at 10500 in Mach 2009 is now trading at 27180

and the most recent and best of all 🙂

NCDEX Red Chilli which was trading at 4100 in September 2010 is now traded at 10550