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Friday 30 November, 2007

Weekly Newsletter

Q2 GDP slows to 8.9%

India's economy slowed a little in the second quarter of the current fiscal year due largely to a slowdown in the manufacturing sector, as a series of monetary tightening steps and a steep rise in the rupee started taking some toll on local demand. The GDP grew by 8.9% in the quarter ended September as against the consensus estimates of 8.7%. But, this was lower than the first quarter's expansion of 9.3% and a 10.2% growth in the same quarter last year.

The farm sector growth came in at 3.6% as against 2.9% in the same quarter last year, and 3.8% in the first quarter. The manufacturing sector grew by 8.6% versus a strong 12.3% in the corresponding quarter a year earlier. In the first quarter, manufacturing sector growth stood at 11.9%. Expansion also slowed in the service sector, which grew by 10.2% compared to 11.8% in the second quarter last year.

Mining sector growth shot up from just 3.9% in the July-September quarter of last year to 7.7% this year. The other economic activities which registered significant growth in Q2 of 2007-08 were ‘electricity, gas & water supply’ at 7.3%, ‘construction’ at 11.1%, and ‘community, social and personal services’ at 7.8%.

The GDP growth dipped below 9% for the first time in three quarters, but economists said that the Reserve Bank of India's full-year forecast of 8.5% should be met comfortably. Asia's fourth-biggest economy grew by 9.4% in the fiscal year ended March 2007, its strongest rate in 18 years, and the central bank expects expansion to slow to 8.5% this year. Growth has averaged 8.6% a year in the past four years.

Maharashtra scraps ULCRA

After several months of dithering and dilly-dallying, the Maharashtra Assembly cleared the repealing of the Urban Land Ceiling and Regulation Act (ULCRA), paving the way for the state to get central assistance to some key infrastructure projects. The move will also lead to the release of vast tracts of land in the state, especially in the financial capital Mumbai.

According to rough estimates, 15,000-17,000 acres of land will get unlocked following the move. Across Maharashtra, over 75,000 acres of land will be released. Some experts also said the repealing of the three-decade old law will help soften spiraling property prices in Mumbai, as more space will be available for development. "I expect some softening in prices," HDFC Chairman Deepak Parekh said. But, the jury is still out on whether this will indeed be the case.

Meanwhile, shares of real estate companies with exposure to Mumbai and other companies with substantial land bank in the city shot up amid optimism that the move will lead to faster clearances and more land being available for development. Akruti City, Orbit Corp, HDIL, Peninsula Land, Godrej Industries, Century Textiles and Bombay Dyeing were among the biggest gainers post the announcement.

The Vilasrao Deshmukh Government was keen on getting the assembly's approval to repeal ULCRA as the law was a big stumbling block in obtaining central aid for a slew of key urban infrastructure projects. Without repealing ULCRA, the state could not have accessed funds from the Rs110bn Jawaharlal Nehru National Urban Renewal Mission. The Centre had set March 2008 as the deadline for the abolition of the act.


RBI releases report on Trend and Progress of Banking in India

The Reserve Bank of India today released its Report on Trend and Progress of Banking in India, 2006-07. This Statutory Report provides a detailed account of policy developments and performance of commercial banks, co-operative banks and non-banking financial institutions during 2006-07. The Report also presents a detailed analysis of the Indian financial system from the financial stability viewpoint.

The Report highlights that the major challenge for banks in India in current times is to mobilise enough resources for meeting the demands of a growing economy. Most of business of banks in India is still concentrated in a few urban centres. To mitigate this problem, since 2006, opening of new branches for any bank is approved by the Reserve Bank only on condition that at least half of such new branches are opened in under-banked areas as notified by the Reserve Bank. Many banks now find that the branches in semi-urban and rural areas are also commercially viable. The Report records that there are some States where the credit-deposit ratio is observed to be low. Already some area-specific action plans for accelerated financial deepening have been drawn up with full participation of the State Governments, banks and other local development agencies.

The Reserve Bank would continue to play the role of a catalyst as well as a coordinator in these initiatives of growing cooperation between the States and the banking system. The Report further notes that there remains huge potential for growth in small centres and States with low credit-deposit ratios. The challenge going forward is to increase banking penetration further. Banks, therefore, need to expand their outreach to hitherto under-banked areas/States by re-focussing their strategies and using appropriate technology and delivery channels. Information technology is critical to minimising transaction costs. At policy level, the Reserve Bank, in recent years, has also focussed on democratisation of the financial sector with the aim of ensuring hundred per cent financial inclusion. The Reserve Bank has also made a beginning to enhance financial literacy and impart financial education to enable vast numbers of new entrants into employment and higher incomes to better manage their finances in a rapidly marketising financial sector.

As noted in the Report, there is also a need for the banking sector to increase the flow of credit to agriculture and small scale industries. To address this issue, the Reserve Bank has at policy level already modified the definition of the priority sector in April 2007. Priority sector is now restricted to advances to highly employment intensive sectors such as agriculture, small industry, educational loans for students and low cost housing.

The Report observes that to raise capital from the market continuously to sustain their operations in a fast growing economy is a challenge for banks. They also need to be vigilant about maintaining their profitability in future. Banks’ net interest margins have come under pressure in recent years. This is the outcome of increased competition and reflects an improvement in the efficiency of the banking sector. However, the impact of reduced margins on the profitability of banks has been disguised by strong volume growth in the last few years. In order to maintain their profitability in future, therefore, banks would have to contain operating costs, apart from searching for non-interest sources of income.

In an increasingly global and competitive financial world, a major challenge for banks is to institute appropriate risk management systems to manage such risks and for the Reserve Bank to understand the changing forms of risk and adapt its regulatory and supervisory responsibilities appropriately while maintaining financial stability.

Operations and Performance of Commercial Banks

The main points emerging from the analysis presented in the Chapter entitled 'Operations and Performance of Commercial Banks' are:

Bank credit growth remained robust for the third year in succession, although there was some moderation. Deposit growth of commercial banks accelerated due mainly to term deposits. Higher net accretion in deposits than expansion in credit, resulted in moderate growth of investment portfolio as well

Net profits of scheduled commercial banks increased on the back of rise in interest income and containment of operating expenses

Non-performing assets ratio, both on a gross and net basis, declined further

The capital to risk-weighted ratio of SCBs was sustained at the previous year’s level despite strong growth increase in risk-weighted assets emanating largely from credit expansion

Consequent upon the amalgamation of 147 RRBs into 46 new RRBs, sponsored by 19 banks in 17 States, the total number of RRBs declined from 196 to 95 as at August 31, 2007 .

Developments in Co-operative Banking
The major points emerging from the analysis of balance sheets, financial performance and soundness indicators of co-operatives in the Chapter titled, 'Developments in Co-operative Banking' are:

Assets of urban co-operative banks (both scheduled and non-scheduled) increased moderately during 2006-07.

Net profits of scheduled UCBs declined during 2006-07 in contrast to an increase in the previous year mainly on account of increase in provisions, contingencies and taxes

Asset quality of UCBs improved significantly during 2006-07
In the short-term structure of rural co-operative banks, while the operating profits of StCBs declined during 2005-06, their net profits increased significantly mainly on account of substantial decline in provisioning. The balance sheets of DCCBs expanded moderately. Their profits witnessed a sharp decline. During 2005-06, total profits earned by profit-making PACS increased, while the losses made by loss making PACS declined.

In the case of long-term structure, the operating profits of state co-operative agriculture and rural development banks (SCARDBs) registered a sharp rise

Asset quality of StCBs, DCCBs and SCARDBs declined, while that of PCARDBs improved significantly

The SHG-Bank linkage programme continued to make significant progress as 0.6 million new SHGs were credit linked by the banking system during 2006-07 taking the cumulative number of SHGs credit linked to 2.86 million.

Non-Banking Financial Institutions
The Chapter outlines major policy developments and analyses the business operations and financial performance of financial institutions (FIs), non-banking financial companies (NBFCs), and primary dealers (PDs).

The main points emerging from the analysis in this Chapter are:

Financial assistance sanctioned and disbursed by FIs continued to expand during 2006-07. While sanctions grew at a lower rate as compared with previous year, disbursements witnessed a sharp rise

The combined balance sheets of FIs during 2006-07 expanded at a high rate as compared with the previous year. On the asset side, loans and advances continued to expand, albeit with some moderation

While non-interest income of FIs increased significantly during 2006-07, the operating expenses of FIs registered a decline, resulting in a sharp rise in operating profits.

The capital adequacy ratio of FIs continued to be significantly higher than the minimum prescribed. Asset quality of FIs improved during the year.

Total assets of NBFCs (excluding RNBCs) expanded at a higher rate during 2006-07 as compared to 2005-06

Financial performance of NBFCs turned around during 2006-07. This was entirely on account of sharp rise in fund based income, which offset the sharp increase in operating expenditure and financial expenditure

Asset quality of various types of NBFCs as reflected in the various categories of NPAs (sub-standard, doubtful, loss) remained broadly at the previous year’s level

The increase in income of RNBCs during 2006-07 was more than the increase in the expenditure, as a result of which the operating profit of RNBCs increased

The liabilities/ assets of non-deposit taking systemically important non-banking finance companies (with asset size of Rs. 100 crore and above) (NBFCs-ND-SI) increased during the year ended March 2007 over the previous year

The gross NPAs to total assets ratio of NBFCs-ND-SI declined during the year ended March 2007

As a result of sharp increase in expenditure, net profits of PDs declined during 2006-07

The CRAR of PDs continued to be much in excess of the stipulated minimum of 15 per cent of aggregate risk-weighted assets

Financial Stability
The main points that emerge from the analysis of Chapter on Financial Stability are:

Financial markets remained orderly during 2006-07, barring some occasions when the money market turned volatile mainly due to large capital inflows and movements in Government cash balances. However, orderly conditions were restored

The activity in the money market has witnessed further significant migration from the uncollateralised to the collateralised segment during 2006-07

Foreign exchange markets showed a two-way movement during 2006-07

Yields in Government securities market hardened during the latter part of 2006-07 and the first half of 2007-08, reflecting domestic developments as well as global events

The net mobilisation of resources by mutual funds under equity oriented schemes during 2006-07 declined, reflecting the risk aversion tendency among investors particularly in view of the stock market touching record peaks.

The stock markets registered large gains with occasional bouts of volatility due mainly to global developments.

Continuing the upward trend during 2007-08, the BSE Sensex closed at an all-time high level of 19976 on November 2, 2007.

The volume and value of transactions through RTGS increased manifold


Empowered panel approves dual GST

The Empowered Committee of State Finance Ministers cleared a dual Goods and Services Tax (GST) - both at central and state level. GST is proposed to be introduced in April 2010. The empowered panel would send its recommendations to the Centre next month after the state finance ministers give their views in writing, group's chairman Asim Dasgupta said. There would be more than one slab of tax for goods, but a single rate for services within the GST framework. At the central level, the rates would be decided by the Union Government. The Centre and the States would attempt to keep them uniform. Set offs would also be available against tax paid on inputs at both central and state levels. Dasgupta said states and the centre will fix their respective GST rates after ensuring their will be no revenue loss from the proposed changes. GST at the state level will subsume as many taxes on goods and services as possible and feasible. However, exact rates at the state and central level would be decided later.

FM announces more sops for rupee-hit exporters

Finance Minister P. Chidambaram announced more relief measures for exporters hit badly by the steep appreciation in the rupee versus the dollar this year. The Finance Minister announced additional subsidy of 2% in pre-shipment and post-shipment credit to Leather, Marine, Textiles and Handicrafts sectors. The latest interest rate subsidy is in addition to the 2% offered earlier this year. The additional interest rate subsidy is valid till March 31. The Centre exempted storage and warehousing services, specialised cleaning services (fumigation & disinfection) and business exhibition from service tax.

The Government also slashed customs duty on polyester staple fibre and polyester filament yarn from 7.5% to 5% and on other manmade fibres from 10% to 5%. Customs duty on intermediates for PSF and PFY - polyester chips, DMT, PTA and MEG was reduced from 7.5% to 5%. On Paraxylene (a raw material for PTA), the customs duty is being lowered from 2% to nil. There is no change in customs duty for nylon chips, nylon yarn, caprolactum, rayon grade wood pulp and acrylonitrile.

SEBI amends DIP guidelines for Fast Track Issues

Capital market regulator SEBI announced amendments in the Disclosure and Investor Protection Guidelines to enable listed companies faster access to capital through follow-on public issues and rights issues. These companies, subject to meeting certain specific requirements, have been allowed to make ‘fast track issues’, whereby they need not file draft offer document with SEBI and stock exchanges. Some of the eligibility requirements for Fast Track Issues include an average free-float (non-promoter holding) of at least Rs100bn, a trading history of at least three years, redressal of at least 95% of total investor grievances, and absence of prosecution proceedings or show cause notices against the company or its promoters by SEBI.

SEBI also made amendments to allow all categories of investors to apply for Indian Depository Receipt (IDR) issues, subject to at least 50% of the issue being subscribed by QIBs, and the balance being made available for subscription to other categories of investors. The minimum application value in IDR has been reduced from Rs2 lakh to Rs20,000. SEBI also introduced a provision in the DIP guidelines, permitting companies making public issues to issue securities to retail investors at a discounted price not exceeding 10% of the price at which securities are issued to other categories of public. Quoting of PAN in application forms for public/ rights issues has been made mandatory, irrespective of the value of application.

Govt okays SBI Rights Issue

The Government approved the Rights Issue of the State Bank of India (SBI) to enable the country's largest bank to boost its capital and meet the growing demand for credit in a fast expanding economy. The Government will issue bonds for subscribing to the SBI Rights Issue, Information & Broadcasting Minister Priya Ranjan Dasmunsi said. The issue would be completed within the current financial year, he added. SBI hopes to raise up to Rs180bn before the end of the current fiscal year. The actual number of shares to be subscribed, the total amount subscribed, coupon rate and tenure of the securities, and other modalities will be worked out by the Government in consultation with SBI. The additional growth of the bank due to its increased capital base will also have multiplier effect on the overall performance of the bank, which will gain in terms of its position in the industry, ratings and increased valuation of its stock, besides boosting the economy at large, the Government said in a statement. The transaction will be completed within the current financial year and a Securities Redemption Fund will be created thereafter.

Cabinet approves 11th Five Year Plan draft

The Union Cabinet approved the draft document of the 11th Five Year Plan (2007-12). The same will now be placed before the National Development Council (NDC). The decision would enable the operationalisation of the 11th Plan in full. The Government has decided to convene a meeting of the NDC on December 19 to approve the 11th Plan. The Planning Commission had cleared the draft 11th Plan document on November 9 with a target of 9% annual GDP growth, up from 7.6% in the Tenth Plan. Among other things, the 11th Plan proposes to increase agriculture growth to 4% from around 2% in the previous plan. It also aims to reduce poverty by 10%, generate 70mn new employment opportunities and reduce unemployment among educated persons to less than 5%. The 11th Plan has also fixed certain important targets which include taking industrial and services sector growth to 9-11% and investment rate to 36.7%.

Credit bureau, TransUnion unveil credit score

The Credit Information Bureau India Ltd. (CIBIL) and TransUnion announced the development of the CIBIL TransUnion Score. This is the first generic credit score developed for India and will help banking and financial institutions to better evaluate the credit worthiness of their customers. It will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit, including credit cards, personal, home and auto loans within the next year. "By introducing this generic score with TransUnion, CIBIL is helping financial institutions minimize future defaults as well as potentially reduce consumer abuse of the credit system, while allowing access to credit at better terms and conditions for good borrowers," said S. Santhanakrishnan, Chairman of CIBIL.

TRAI recommendations for IPTV services

The Telecom Regulatory Authority of India (TRAI) released the draft recommendations on provisioning of IPTV services. Telecom service providers having license to provide triple play services and ISPs with net worth of more than Rs1bn can provide IPTV service without requiring any further registration. Similarly, registered cable TV operators can provide IPTV service without requiring any further license. IPTV operators would be permitted to transmit channels in exactly the same form (unaltered) for which the broadcasters have received uplinking/downlinking permission from the Government. The operators should transmit only those channels that have been approved by the Information and Broadcasting Ministry, according to TRAI. The I&B Ministry and the IT Ministry should regulate the content provided using IPTV.

Reliance Power gets LoI for Andhra UMPP

Reliance Power Ltd., a subsidiary of Reliance Energy Ltd. (REL), received the Letter of Intent (LoI) for setting up the 4,000 MW Krishnapatnam ultra mega power project (UMPP) in Andhra Pradesh. Coastal Andhra Power, the Special Purpose Vehicle (SPV) formed by Power Finance Corporation (PFC), awarded the LoI to Reliance Power, which had emerged as the lowest bidder at a price of Rs2.33 per unit. The Anil Dhirubhai Ambani Group company outbid Larsen & Toubro (L&T) and Sterlite Industries, which had quoted Rs 2.68 per kwh and Rs 4.81 kwh, respectively. Reliance Power has already secured the Sasan ultra mega power plant in Madhya Pradesh, which would be run on domestic coal. The Krishnapatnam project is to be operated on imported coal and would require an investment of more than Rs160bn. Andhra Pradesh will receive 1,600 MW, while Maharashtra, Tamil Nadu and Karnataka will get 800 MW each from the project.

Tata Steel announces group recast

Tata Steel announced a new organization structure effective from January 1. Tata Steel Group comprises two entities - Tata Steel (including Tata Steel Thailand and NatSteel Asia) and Corus Group Ltd. Ratan Tata, the Chairman of Tata Steel will continue to lead the Strategy and Integration Committee. Jim Leng, B Muthuraman, Philippe Varin, Dr. Tridibesh Mukherjee, Rauke Henstra, Hemant Nerurkar, Koushik Chatterjee and Jean-Sebastien Jacques are members of this committee. A Group Centre has been created for functions that are to be performed with a common approach across the Tata Steel Group. These functions are Technology & Integration, Finance, Strategy, Corporate Relations & Communications and Global Minerals. The executives responsible for these functions will report to the Managing Director (MD) of Tata Steel and the CEO of Corus. Both Tata Steel and Corus entities will have Executive Committees chaired by the MD, B Muthuraman and the CEO, Philippe Varin, respectively. A Joint Executive Committee for Tata Steel Group will meet quarterly to review overall performance. This committee will be co-chaired by the MD of Tata Steel and the CEO of Corus.

RIL denies reports on RNRL acquisition

Reliance Natural Resources Ltd. (RNRL) shares climbed after a business newspaper reported that the Ambani brothers had resolved their differences over a controversial gas supply agreement. The Bombay High Court has directed the two camps to settle the long-running dispute amicably in four months. The newspaper reported that both sides are believed to have arrived at some concrete proposals, and according to one such plan Reliance Industries Ltd. (RIL) could eventually buy out RNRL. In return, Anil Ambani-promoted Reliance Energy Ltd. (REL) will purchase gas from RIL at a higher price, the financial daily stated. As per the current contract between the two parties, RNRL is supposed to buy gas from RIL at US$2.34 per mmbtu. If the two companies cannot arrive at a common meeting point on all commercial aspects of the gas sale and purchase agreement by February 15, they are likely to return to the court. But, both RIL and RNRL denied that there was any plan, or any talks between ADAG and RIL involving the acquisition of RNRL.

Hexaware to probe forex fraud

Hexaware Technologies Ltd. announced that its Board of Directors had appointed a special committee to conduct an internal investigation and make recommendations for changes to its foreign exchange management practices. The action was due to certain actively concealed and potentially fraudulent foreign exchange option transactions conducted by one official, Hexaware said. The official, who exercised unauthorised fiduciary powers, was immediately suspended, pending investigation. Hexaware said it will make provision between US$20-25mn to cover any potential exposure as a result of these transactions. Reports suggested that the company had roped in consultant Jamal Mecklai to work with it on minimising the negative impact of the forex transactions. Hexaware is also understood to have deferred its plans for the share buyback till the investigation on the ongoing forex issue is complete.

Its raining deals on the street

US-based oil & gas giant Chevron Corp. said it was evaluating options on what to do with its 5% stake in Reliance Petroleum Ltd. (RPL), and could even sell the same. Chevron, which has an option to increase its stake in RPL to 29%, may not do so, a business daily reported. "Chevron continues to evaluate its options with its ownership in RPL," Bangkok-based spokeswoman Nicole Hodgson was quoted as saying. "We will provide specific project updates when definitive decisions are made," she added. Reliance Industries Ltd. (RIL) said on Nov. 23 that it had sold a 4% stake in RPL for about Rs40.2bn. After the sale, RIL still holds 70.99% in RPL, which sold stock at Rs60 in an Initial Public Offering (IPO) in April 2006. Chevron bought 5% in RPL at Rs 60 per share before the latter's Rs27-bn public issue.

DLF said it has formed an equal partnership with Aman Resorts, whereby it will acquire a controlling interest in the Aman Resorts group. The entire transaction, when completed, is estimated to be valued at US$400mn with an assumed debt of about US$150mn. Overseas Hotels, a subsidiary of DLF, will make the investment in Aman Resorts. Aman Resorts is the world's leading hospitality and lifestyle business and currently owns and operates 22 luxury hotels, many with residences, in 12 countries.

Nirma said that it had entered into a definitive agreement to acquire US-based natural soda ash producers Searles Valley Minerals Operations Inc. and Searles Valley Minerals Inc. (collectively known as SVM). Nirma agreed to purchase SVM from an affiliate of Sun Capital Partners Inc. and other minority shareholders. Nirma did not disclose the consideration paid for the US acquisition. SVM has a combined production capacity of over 1.9mn tons. It sells 80% of its production to domestic customers and exports the balance.

Bharat Petroleum Corporation Ltd. (BPCL) said its Board had approved a proposal for the acquisition of a 2.5% stake in Oil India Ltd. (OIL) from the Government. BPCL will acquire 5,350,110 shares of OIL at a price equivalent to the issue price proposed to be offered to the public in its forthcoming Initial Public Offering (IPO). The sale and purchase will be completed within 48 hours after the issue price is fixed through the 100% Book Building issue and approved by the OIL Board. Meanwhile, Indian Oil Corporation Ltd (IOC) Board also approved the Share Purchase Agreement with the Govt. of India for acquiring 1,07,00,220 shares of OIL, which constitutes 5% of the latter's pre-issued paid-up capital.

Mundra Port and Special Economic Zone (SEZ) made a spectacular debut on the bourses on Nov. 27. The stock of the Adani Group promoted private port operator crossed Rs1,000 despite the overall weakness in the market. The stock opened at Rs770 on the Bombay Stock Exchange (BSE) as against the issue price of Rs440 per share. The scrip finished the maiden trading day at Rs961.70 after being as high as Rs1150. It closed the week at Rs923. The company raised around Rs1.77bn from the public issue. The IPO was subscribed over 115 times. The company received bids for 4.66bn shares as against the issue size of 40.25mn shares. The QIB portion was subscribed almost 160 times while the HNI category was subscribed 156 times and Retail portion 16 times. Mundra Port offered shares to local and overseas investors in a range of Rs400 to Rs440 per share. The company is likely to utilise the IPO proceeds to part finance the construction of basic infrastructure in the proposed SEZ at Mundra, besides a terminal for coal and other cargo.



US Govt ups Q3 GDP growth estimate

The US economy expanded at the fastest pace in four years during the third quarter, growing at a real annual rate of 4.9%, the Commerce Department said in making its second estimate of growth for the three-month period. The upward revision to the GDP, in line with Wall Street expectations, was due to larger inventory building and a better trade balance. A month ago, the Government had pegged third-quarter GDP at 3.9%. The US publishes three estimates of GDP, adding more complete information with each passing month. However, some Wall Street economists expect a sharp slowdown in the current quarter due to a partial reversal in both trade and inventories. Housing remained a severe drag on growth in the third quarter, subtracting a full percentage point from the growth rate. It was the seventh straight quarter that housing contracted.

Japan's industrial output rebounds in October

Japan's industrial production grew by a seasonally adjusted rate of 1.6% in October from the previous month, when it had fallen by 1.4%, the Trade Ministry said. The consensus forecast by economists saw an increase of 1.5%. The production index climbed to 112.1, the highest since the current gauge was set in 2000, the Japanese Trade Ministry said. Export growth doubled to 13.9% in October from a year earlier, spurred by higher imports by China and Europe. The rise in output was mainly due to a recovery in cars and semiconductor production equipment in response to firm domestic and overseas demand, an official at the Trade Ministry said. The Trade Ministry maintained its assessment on output for the third straight month, saying it was on a moderate rising trend. Output in October-December is expected to expand 1.7% from the previous quarter, the Trade Ministry said.

Citi gets US $7.5bn cash from Abu Dhabi

The beleaguered American financial sector received a vote of confidence even as investors worldwide remained concerned about the housing mess in the US, and its impact on the credit markets. Citigroup announced that it had received US$7.5bn from the Abu Dhabi Government to shore up its balance sheet after writing off billions of dollars in losses linked to the sub-prime mortgages. The biggest US bank said it would sell US$7.5bn in equity units convertible into common shares to the Abu Dhabi Investment Authority, with the capital injection equivalent to 4.9% of Citigroup's total shares outstanding. Citigroup will pay an annual yield of 11% on the convertible securities. The Abu Dhabi Investment Authority will help Citigroup strengthen its capital base, Win Bischoff, the New York-based bank's acting CEO said in a statement. "This investment also enables us to access capital in an efficient manner," he said. Bischoff said the funds would be used to expand the bank's business and fit with other steps taken recently to strengthen its capital base. The Abu Dhabi Investment Authority will have no role in the management or governance of Citigroup, including no right to designate a member of the company's board. Separately, E*Trade, the US online discount broker which has expanded into mortgage securities and credit facilities, received a US $2.5bn cash infusion from the Citadel Investment Group. The US$17bn hedge fund is known for swooping into troubled companies and buying their holdings at steep discounts.
Philips to acquire Genlyte for US$2.7bn

Royal Philips Electronics announced it had entered into a definitive merger agreement with North American luminaires company Genlyte Group Inc. Accordingly, Philips will commence a tender offer to acquire all of the issued and outstanding shares of Genlyte for US$95.50 per share, or about US$2.7bn (€1.8bn) to be paid in cash upon completion. The proposed transaction builds on Philips’ earlier acquisition of Color Kinetics and provides the company with a leading position in the North American luminaires (also known as ‘lighting fixtures’) market. The deal vaults Philips ahead of General Electric in the share of America's lighting market and adds to its presence in the country's expanding market for energy-saving light bulbs.

Nokia ups global market share in Q3

Nokia increased its market share for the fifth consecutive quarter, while Samsung Electronics upstaged Motorola as the world's second-biggest mobile handset manufacturer, a survey by research firm Gartner showed. Nokia increased third-quarter market share in unit sales to 38.1% from 35.1% in the same period a year earlier, according to the Gartner report. Samsung increased its share to 14.5% from 12.2%. Motorola's share fell to 13.1% from 20.7%. Apple's iPhone sold more than one million units in the quarter ended September, capturing about 2.5% share in North America. Sony Ericsson boosted its share to 8.8% from 7.8% in the third quarter a year earlier. LG had 7.1% of the global market, up from 6% a year earlier. Meanwhile, Gartner said global wireless handset sales will rise to 1.13bn units or slightly higher this year, a growth of about 14%, in line with its previous forecast. Global mobile handset sales rose 15% to 289mn units in the July-September quarter, led by Asia-Pacific, Eastern Europe, the Middle East and Africa. Unit sales are expected to rise 10-15% this quarter from the previous three months.

Other key global news

Morgan Stanley's Zoe Cruz, co-president and previously considered a potential successor to CEO John Mack, is leaving the Wall Street firm. Morgan Stanley said that effective Dec. 1, Walid Chammah and James Gorman will become co-presidents, reporting to Mack. Cruz, the highest-paid female executive on Wall Street, is leaving Morgan Stanley after 25 years. She assumed her current position in February 2006, after having served as acting president since July 2005.

Rio Tinto announced a package of measures, including a boost to its share dividend, that bolsters its defence against BHP Billiton's hostile takeover. It also reasserted its belief that the offer price from its larger mining rival was undervalued. Still, BHP Billiton remained confident about the success of its bid to combine with Rio Tinto.

Northern Rock, a distressed British bank, named a consortium led by Sir Richard Branson's Virgin Money as the preferred bidder for its purchase. The consortium promises to pay back immediately £11bn (US$23bn), or almost half, of the money lent to Northern Rock by the Bank of England in a rescue package. Northern Rock shareholders objecting to Virgin's deal threw their support behind a rival bid being mooted by Olivant, a private-equity firm.

Ping An Insurance, a Chinese insurer, took a 4.2% stake in Fortis, a Belgian-Dutch financial company, becoming its largest shareholder. Chinese finance companies are estimated to have spent around US $17bn this year buying stakes abroad, including some in Blackstone Group, Bear Stearns and Barclays.

Eni SpA, Italy's biggest oil company, agreed to buy Burren Energy Plc for 1,230 pence a share, valuing the entire existing issued share capital of the British firm at approximately £1.74bn.

How To Profit When Stocks Advance

Hold DLF, Kotak outperformer

Emkay puts 'hold' on DLF; target Rs 868

Emkay Share and Stock Brokers has recommended ‘hold’ on DLF for a target price of Rs 868.

DLF has entered into 50:50 joint venture with Adrian Zech, founder & chairman of Aman Resorts, to acquire controlling interest in Aman Resorts. The deal has been valued at an enterprise value of $400 million, including debt of $150 million

Aman Resorts presently operates 22 luxury hotels in 12 countries. It is expected to report revenues of $120 million and an EBITDA of $26 million in 2007. Management expects margins to remain at current level and expects 20 per cent annual growth.

Emkay believes DLF has entered into the agreement at very attractive valuations with EV/EBITDA at 15.6 times, EV/Revenue of 3.3 times 2007 estimate and EV/room at $357,000 (Rs 14 million).

Prabhudas puts ‘outperformer’ on Kotak Mahindra

Prabhudas Lilladher has rated Kotak Mahindra Bank an ‘outperformer’. The brokerage has valued Kotak Mahindra on SOTP methodology and arrived at a fair value of Rs 1,381 per share, implying a 21 per cent upside over the current market price. Of this, 66 per cent of the value accrues from non-banking business.

Kotak Mahindra plans to invest $400 billion in next five years and will be focusing on strengthening asset the management and insurance business.

The brokerage has valued the banking business at 4.5 times 2008-09 at the adjusted book value. On this basis, Prabhudas has arrived at fair value of Rs 464 per share for the banking business.

Broking firms are currently trading at 25-30 times 2008-09 estimate earnings. Considering the huge market share of Kotak Mahindra, and vast branch network, the brokerage believe it should trade at higher end of the band. Prabhudas values Kotak's broking business at Rs 406 per share, which is 30 times 2008-09 estimate.

The brokerage expects mutual fund AUM to grow 4 times over FY07-09 and total AUM to grow by 3 times over the same period. Alternate assets and offshore funds have a 2:20 structure and therefore gives a higher valuation of 8 per cent of AUM compared to 6 per cent in case of mutual fund. This values the total assets under management at Rs 3.97crore, deriving a per share value of Rs 116.

Considering NBAP margin of 19 per cent, the brokerage has valued life insurance business at Rs122 per share and car finance business at 3 times. On this basis, Prabhudas has arrived at a fair value of Rs 56 per share.

Kotak Mahindra Bank started operations in 2002-03. Its share in the CV segment, which was as high as 59 per cent in 2003-04, has come down to 24 per cent in July-September quarter. While the share of home loans has gone up from 4 per cent in 2003-04 to 16 per cent in second quarter of 2007-08. Similarly, personal loans and corporate loans too have seen significant jump in the last few years.

Kotak Mahindra Bank has higher margin compared to its peers, which is due to lower leverage of the bank facility and high yielding assets. Despite lower share of CASA deposits compared to leading peers, it is able to maintain higher margin. Citing opportunities in the retail segment the bank has increased its network to 856 outlets with presence in 309 cities compared to 660 outlets in 2005-06.

Kotak Mahindra Asset Management has a total corpus of Rs 222 billion as of Oct 2007, representing 4 per cent of the industry. During April-September the industry grew by 65.4 per cent, while Kotak's assets have more than doubled to Rs 189 billion.

Sensex up 360 pts at 19363; Nifty up 128 pts at 5763

Markets end strong on start of fresh series. Sensex was up 360 pts at 19363 while Nifty was up 128 pts at 5763. CNX Midcap Index was up 3.6% while BSE Small cap Index was up 1.3%. All sectoral indices ended in green and metal, realty gains the most.


Markets end strong on start of fresh series. Sensex was up 360 points at 19363 while Nifty was up 128 points at 5763. CNX Midcap Index was up 3.6% while BSE Small cap Index was up 1.3%. All sectoral indices ended in green and metal, realty gains the most. BSE Metals Index was up 5.1%, in which Sterlite was up 12.2% and SAIL was up 3.3%. BSE Realty Index was up 3.9%, in which DLF was up 6.2% and Unitech was up 2.4%. BSE IT Index was up 2.7%, in which TCS was up 4.5% and Wipro was up 3.3%. BSE Oil & Gas Index was up 2.6%, in which ONGC was up 3.3%. Other index gainers were VSNL, up 12.5%, MTNL, up 6.7%, Tata Power, up 5.7%, REL, up 4.8% and Suzlon, up 3.9%. New F&O stocks added today which includes HOEC, up 13.5%, WWIL, up 10%, Gitanjali Gems, up 7.2% and Ispat, up 6.5%. Non Index gainers were Essar Oil, up 15.5%, Chennai Petro, up 6.7%, Neyveli Lignite, up 12%, United Spirits, up 12%, ABG Shipyard, up 12%, Jindal Steel, up 6.5%, Sesa Goa, up 6%, Ansal properties, up 6.8%, Omaxe, up 6.3% and Mphasis, up 5.7%. 52 week high was touched by Kotak Mahindra Bank, Neyveli Lignite, Essar Oil, VSNL, HDIL, IOB, Godrej Industries and Voltas. Recent listings make new lows in Barak Valley, Empee Distilleries and Varun Industries. Advance-Decline ratio was at 2:1. Total market turnover was at Rs 91,000 crore (Prov) Vs Rs 1.29 lakh crore yesterday.

FNO Snapshot:

Good start to new series. Fresh long was seen in Nifty, it added 17.8 lakh shares in OI. Textile, Sugar, Metal continue to see long positions after strong long rolls. Power stocks saw fresh longs after low rollover. 15 new entrants saw mixed response, Ispat Industries, WWIL, Gitanjali Gems saw good OI buildup while MICO, Info edge, GBN saw low OI buildup. Metal stocks were driven by short covering. Momentum boys RNRL, JP Hydro, IFCI were back in focus.

Star Performers:

Essar Oil: Up 14.5%; added 70 lakh shares in OI
Neyveli Lignite: Up 13%; added 44 lakh shares in OI
VSNL: Up 12.5%; added 8.3 lakh shares in OI
Shipping Corporation: Up 11%; added 5.3 lakh shares in OI
Hotel Leela: Up 10.4%; added 24 lakh shares in OI
RNRL: Up 10%; added 1.4 crore shares in OI

New Listings:

Ispat Industries: added 1.9 crore shares in OI
HOEC: added 29 lakh shares in OI
WWIL: added 30 lakh shares in OI

Global markets today:

Asian stocks ended firm; Taiwan, Korea were up neraly 1.5%. Fed chairman Ben Bernanke left the door open for more rate cuts. Shanghai market posted biggest monthly losses since 1994. In Taiwan, FIIs net buy equities worth $ 330.3 million in today’s trade (Prov). FIIs bought equities worth $ 601 million during this week Vs outflow of $ 1.55 billion during last week.

Month till date:

Shanghai down 18%
Hang Seng down 11%
Hang Seng down 8.5%
Korea, Straits Times down 7.5% each
Sensex down 2.5%
Indonesia only market among Asian peers ended in the green

Thursday 29 November, 2007

8 ways to identify profitable shares

Though investment opportunities abound all the time and in almost all situations, they may not be very easy to identify. A shrewd and discerning investor will usually find opportunities for making money in places, and in situations, where a less discerning one will not. The best investment opportunities are often found in the most unlikely of places and situations. For example, in the beginning of 1994 few could have predicted that the shares of the then relatively unknown company like Infosys Technologies [Get Quote], focusing primarily on Y2K software projects, would provide one of the best investment opportunities of the last decade.

Let us consider some typical situations which provide excellent investment opportunities.

1. Turnaround situations

A turnaround situation exists when a company that has been making losses for a number of years starts turning the corner and is expected to begin making profits. Since the company has been making losses, its shares are likely to be quoted at very low prices, often below par. Once the company wipes out its accumulated losses and begins to make profits, its changed fortunes are bound to be reflected in a sharp and steep rise in the price of its shares. This rise can be as high as 200 to 300 per cent in one year.

SAIL [Get Quote] (Steel Authority of India) is an outstanding example of a successful turnaround company in recent years. At one stage, in October 2003, its share price had fallen to as low a figure as Rs 6 per share. Due to a turnaround in the fortunes of the steel industry and the company by early 2004, its share price had soared to Rs 55 per share, notching up a capital appreciation of 916 per cent in a matter of a little over three months.

However, while investing in a turnaround company you should make sure that the reversal in the company's performance is not going to be a flash in the pan and short-lived. The turnaround should be sustained over a sufficiently long period of time for you to profit from it.

2. Amalgamations and mergers

The amalgamation of one company with another, or the merger of two companies into one company, is normally advantageous for both companies. Amalgamations and mergers are mostly resorted to with the object of strengthening the finances and operations of both companies by forming one consolidated company. In some cases of amalgamations or mergers, a high growth, profit-making company combines with a company which has large accumulated losses so that substantial tax benefits can be derived by setting off the profits of the former against the losses of the latter.

Sometimes, companies manufacturing similar or complementary products and catering to overlapping markets find it advantageous to merge because they can substantially cut down on overhead, and operational and sales expenses. Similarly, overhead and other expenses can be trimmed considerably if a company merges with its own subsidiary company. It is also much easier for a company to diversify and grow by merging with an established company than by setting up new units and nursing them through their gestation periods.

After the merger, the new combined company generally performs much better than the combined performance of its component companies prior to the merger. Hence, news of impending amalgamations and mergers always has a bullish effect on share prices of the companies involved. This is the main reason why companies going in for amalgamations and mergers provide an attractive investment opportunity.

3. Takeovers and acquisitions

A takeover is initiated when a business house, a company, or a group of companies acting in concert take over a large enough chunk of another company's shares to displace the old management and give the new management complete control over the company. A takeover bid usually results in frantic, large-scale buying of shares by both the competing groups in an effort to acquire more shares than the other. As a result, share prices are pushed up to levels far above their intrinsic worth.

Takeover bids, whether successful or not, provide an opportunity for ordinary investors to make money. In addition, takeovers often benefit the company and its shareholders by giving it a new, dynamic and growth-oriented management. Often this factor alone provides a good reason for investing in the shares of a company which is the target of a takeover bid.

Sometimes a company, a business house or a group of companies acting in concert acquire control over another company through a negotiated purchase of the shareholding of the existing management. This is different from the usual takeover bid because it doesn't involve large-scale competitive buying of shares in the stock markets and, therefore, doesn't really have a big impact on the company's share prices. In such cases, share prices usually move up or down depending upon the reputation and record of the company's new management.

4. Changes in government policies

Major changes in government policies often benefit some companies by opening up new avenues for growth and higher profits and such companies provide excellent investment opportunities for investors who are quick in recognizing the implications of such policy changes. In the early 1980s, removal of price controls over cement ushered in a period of high growth for ACC and other cement companies.

In 1988, the lifting of price controls over aluminium boosted the profits of companies, like Hindustan Aluminium and Indian Aluminium. Later, the strong package of financial incentives and disincentives contained in the budgets for 1993-94 and 1994-95 ushered in a period of high growth for computer software companies, like Infosys Technologies, Wipro [Get Quote], Satyam [Get Quote] Computers, I-flex [Get Quote] and Rolta; hotel companies, such as Indian Hotels, East India Hotels and Asian Hotel, and power sector companies, like Tata Power [Get Quote] and BSES (now called Reliance Energy [Get Quote]).

Changes in government policy can also sometimes affect a company adversely. If you are a shareholder and are quick to foresee the implication of such a change, you can sell your shares before their prices begin to fall. For example, the cuts in customs duties on imported steel items in 2004 made it more difficult for Indian steel companies, like SAIL, TISCO [Get Quote] and Essar Gujarat to compete with cheap steel imports. Shrewd investors reacted quickly to these disadvantageous budgetary provisions and immediately offloaded their steel shares. However, these detrimental changes in excise and customs duties did not imply the death-knell of the steel industry, which bounced back smartly after 2-3 tears.

5. Technological innovations

We are living in a society which is increasingly dominated by technology. Accordingly, alert investors on the lookout for big gains will find suitable investment opportunities in companies, which go in for technological innovations in a big way. For example, IT services companies, biotechnology companies and telecommunication companies are major beneficiaries of technological changes.

6. Anticipating the future

The best investment opportunities are available to those who can successfully anticipate the future.

How do you anticipate the future? The best way to do so is to be always alert to what is happening around you. The seeds of the future are present today.

For example, if you live in an industrial city or area, you cannot help but notice the steadily deteriorating condition of the environment. Water and air are becoming rapidly polluted. The day is not far off when the pollution levels will become intolerable and will pose a major health hazard to the population. Environmental pollution is becoming an area of serious concern to the public and the government.

The Water Pollution and Air Pollution Acts have already been passed by Parliament and the government has established a new department, known as the Department of Environment, for implementing these laws. All these developments are pointers to an emerging high-growth area, namely, the manufacture of air pollution and water pollution control equipment. These developments also point to a high growth in healthcare.

7. International trends

Globalization is the buzzword since the 1990s. No country in the world can now hope to remain immune from the influence of international economic trends. As a result, it has now become imperative for Indian stock market investors to keep a close watch on international economic developments and to analyze their likely impact on the performance of Indian companies. For example, the signing of the WTO (World Trade Organization) agreement opened up high growth opportunities for Indian food, pharma, textile and IT exporters.

It has also created the conditions required for a sustained long-term growth in the volume of world sea-borne trade, thus significantly improving the prospects of Indian shipping companies, like Great Eastern Shipping and Shipping Corporation of India [Get Quote].

In the 21st century, a stock market investor who is aware of what is happening in the larger world beyond India's borders and who keeps a close tab on major international developments will definitely find himself in a more advantageous position vis-�-vis an inward-looking investor whose awareness is confined only to what happens within the country.

8. Sunrise industries

The term sunrise industries refers to the new and emerging industries of the future. Early investment made in those companies which have been correctly identified as the future leaders of such nascent industries have always provided and will continue to provide truly attractive returns to patient and farsighted investors.

In the 1960s, for example, the sunrise industries in India were scooters, synthetic textiles, and five-star hotel chains. If at that time you had bought shares in Bajaj Auto [Get Quote], Indian Hotels, Century Spinning (now known as Century Textiles [Get Quote]) or Gwalior Rayon (now renamed Grasim [Get Quote]) you could have accumulated a huge fortune in the last 30 years.

The sunrise industries of the 21st century are likely to be computer software, computer training, bio-technology, electronic mail, processed foods, telecommunications, corporate hospitals, budget hotels, private airlines, oil exploration, pollution control, diagnostic kits, fast-food chains and departmental stores. If you are serious about making money then you simply cannot afford to ignore sunrise industries.


Excerpt from, Profitable Investment in Shares by S S Grewal and Navjot Grewal. Price Rs. 145.


S S Grewal was an ex-IAS officer with an educational background spanning science, engineering, literature, and economics, and was a practicing investment consultant since 1985.

Navjot Grewal is a specialist in industrial psychology and has been a keen investor on the stock markets.

IPO Analysis - Burnpur Cement

CAN BURN A HOLE IN YOUR POCKET

MAX.ISSUE SIZE (Rs) : 26 crores
PRICE BAND (Rs) : 10 - 12
ISSUE OPENS/CLOSES : 28th November 2007 to 3rd December 2007
LISTING : BSE, NSE.


A mini-cement manufacturer, Burnpur Cement Limited (BCL) has limited presence across the eastern Indian states of Bihar, Jharkhand and West Bengal.

At a time, when demand for cement is burgeoning, this company’s capacity utilization stands at a pitiable 29 per cent. IPO funds are now being sought to set-up an integrated clinkerisation and cement grinding plant of 800 TPD capacity expandable to 1600 TPD.

The expansion plans, to say the least, appear highly ambitious given BCL’s uninspiring track record hitherto, Given the absence of any niche or critical mass, chances of BCL becoming an acquisition target is also minimized.

The overdependence on external suppliers for key production inputs is well reflected in operating margins that are barely 50 per cent of the industry average.

The financials, both past and estimated appear very modest. This coupled with the high percentage of debtors outstanding ( over 50 per cent of sales ) in a booming industry surely cannot enthuse investors.

The proverbial final straw on the camel’s back comes in the form of criminal charges towards theft of energy.

Given this backdrop, the only point that merits attention is the temerity of the issuers and their merchant bankers to affix a P/E demand of around 35 to what clearly ranks as one of the poorer IPOs in recent times.

Of course, that the promoters are dropping their post-IPO stake by almost half to below 50 may be purely co-incidental.

Or is it ?

Read between the lines.

Grey Market Premium

Jyothy Lab. 620 to 690 220 to 225

Burnpur Cement Ltd. 12 8 to 9

eClerx Services 270 to 315 80 to 90

BGR Energy 425 to 480 240 to 250

Edelweiss 725 to 825 750 to 775

Renaissance Jewellery 125 to 150 20 to 25

Kolte Patil 125 to 145 75 to 80

Kaushalya Infra 50 to 60 12 to 15

SVPCL 42 - 3 to -5

More broking IPOs soon

Buoyed by the enthusiastic response to the IPOs of leading broking and investment banking firms, more and more industry players are eyeing the capital market route to raise funds.

If market sources are to be believed, about half a dozen players, including established names like Enam Securities, Anand Rathi Securities, Angel Broking and Anagram Stock Broking, are going in for an initial public offering to cash in on the soaring valuations in the stock broking space. Some of these firms, particularly those which have roped in private equity investors, may want to get listed to provide an exit route to their PE partners, said market sources.

Though none of these companies have announced any plans so far, market sources believe the timing is right, given the strong investor appetite for such stocks. Not to be missed is the fact that the recent IPOs of Edelweiss Capital and Religare Enterprises met with an overwhelming response from the public, attracting subscription several times higher than the respective offers. Religare debuted smartly on the bourses on November 21, while Edelweiss Capital is expected to list soon.

Enam Securities, one of the biggest investment bankers in the country, is understood to have initiated moves toward becoming a public listed company. Enam Securities chairman Vallabh Bhanshali, however, declined to comment on the subject. Anand Rathi Securities, which has placed a 20% equity stake with Citigroup Venture Capital, is also learnt to be looking at the IPO option. Company officials were not available for comment.

KR Choskey Shares and Securities, another prominent broking firm, intends to rope in an PE investor, though the company has not finalised its plans. “We are looking at the PE option but nothing has been decided as yet,” said KR Choksey Shares and Securities chairman Kisan R Choksey.

Riding high on the back of the historic bull run, broking and investment firms have recorded a significant growth in their activity and financial performance in the past 3-4 years. Their valuations have also soared to unprecedented levels amid accelerating flow of investments from global players. “Stock brokers are one of the biggest beneficiaries of the bull run. Many of them are raising funds to fuel further growth in areas like portfolio management services and wealth management” said Prime Database MD Prithvi Haldea.

Among players, which have successfully tapped the primary market in the past, include India Infoline, Indiabulls Financial Services, Motilal Oswal Financial Services, Religare Enterprises and Edelweiss Capital. All of them, except the yet to be listed Edelweiss Capital, have had a good run on the bourses post-listing. Their current market cap ranges between Rs 4,000 crore to Rs 15,000 crore

via Economic Times

FIIs net sellers of Rs 1,113cr in cash market

Foreign institutional investors (FIIs) were net sellers of Rs 1,112.96 crore (provisional) today, according to data released by BSE.

While FIIs made gross purchases of Rs 5,155.11 crore, gross sales totalled Rs 6,268.07 crore.

Domestic institutional investors (DIIs) were net buyers of Rs 606.25 crore today. While DIIs made gross purchases of Rs 1,974.70 crore, gross sales totalled Rs 1,368.45 crore.

FIIs were net sellers of Rs 450 crore on Wednesday, November 28, according to data released by Sebi today. While FIIs made gross purchases of Rs 3,268.50 crore, gross sales totalled Rs 3,718.50 crore.

Mutual funds (MFs) were net buyers of Rs 57.10 crore on Wednesday. MFs made purchases of Rs 778.70 crore and sales of Rs 721.60 crore.

Markets settled in green post F&O expiry

The market came sharply off higher level in late trade due to expiry of November 2007 derivatives contracts. Infosys slipped into the red in late trade in contrast to a decent gainers earlier during the day. Bajaj Auto, Ranbaxy, Reliance Energy slipped. ICICI Bank came off higher level. Market breadth turned negative from positive in the last one hour of trade. 16 out of 30 stocks from the Sensex pack were in green.

European markets, which opened after Indian market, were mixed. Asian markets, which opened before Indian market, surged after comments on Wednesday, 28 November 2007, from US Federal Reserve officials raised the chances of another US rate cut in December 2007.

The market has been volatile over the past few days due to alternate bouts of buying and selling amid FII sales caused by redemption pressure in their home countries and fears of a US recession arising from US housing slump and credit crisis.

The 30-share BSE Sensex rose 64.39 points or 0.34% to 19,003.26. Sensex hit a low of 18,930.31 at the fag end of the trading session. At day's low, Sensex shed 8.56 points for the day. The Sensex hit a high of 19,297.01 in early trade. At day's high, the Sensex gained 358.14 points.

The broader based S&P CNX Nifty gained 17.05 points or 0.30% to 5634.60. Nifty hit a high of 5725 in early trade. At day's high, Nifty had risen 107.45 points.

The BSE Mid-Cap index fell 0.25% to 8,362.55. The BSE Small-Cap index was up 0.14% to 10,389.75. Both these indices underperformed the Sensex.

The market breadth was negetive. On BSE, 1317 stocks advanced, 1468 stocks declined and 72 stocks remained unchanged.

BSE clocked a turnover of Rs 7596 crore, higher than yesterday (28 November 2007)'s Rs 7,472.89.

Nifty November 2007 futures were at 5641, a premium of 6.4 points as compared to spot closing of 5634.60.

NSE’s futures & options (F&O) segment turnover was Rs 98225.56 crore, which was higher than Rs 86287.52 crore on Wednesday, 28 November 2007

India’s largest private sector firm by market capitalisation & oil refiner Reliance Industries was up 1.15% to Rs 2818.40.

India's second biggest motorcycle maker in terms of market share Bajaj Auto fell 0.13% to Rs 2724.30. The stock came under selling pressure in late trade when it hit a low of Rs 2600.

India's biggest drug maker in terms of sales, Ranbaxy Laboratories fell 2.67% to Rs 378.95.

The BSE Bankex rose 2.04% to 10,601.41. It outperformed the Sensex. Indian Overseas bank surged 7.43% to Rs 157.65, HDFC Bank soared 4.30% to Rs 1677.15, Punjab National Bank rose 1.53% to Rs 593, and Kotak Mahindra Bank rose 1.52% to Rs 1127.15.

India’s largest private sector bank by assets ICICI Bank rose 3.15% to Rs 1162.20. The stock came sharply off the higher level in late trade. It came off session's high of Rs 1184.

The BSE IT index rose 0.11% to 4,085.76. It underperformed the Sensex. HCL Technologies jumped 3.18% to Rs 313.40, Wipro gained 0.23% to Rs 450.50, Satyam Computers rose 0.15% to Rs 425.60, and TCS rose 0.10% to Rs 976.75.

India’s second largest software exporter by sales Infosys Technologies was steady at Rs 1569.60.

Realty stocks jumped on television reports that Maharashtra State Assembly has passed a resolution repealing the Urban Land Ceiling Act, leading to more area available for real estate development in the state. The BSE Realty index was up 1.54% to 10,223.93. It outperformed the Sensex. DLF rose 0.27% to Rs 881.85, Unitech soared 3.56% to Rs 372.45 and Sobha Developers gained 0.12% to Rs 860.

The BSE Power index fell 1.03% to 4,253.43. It underperformed the Sensex. Areva T&D fell 3.46% to Rs 2604.30, Power Grid Corporation of India fell 2.39% to Rs 142.80, Reliance Energy declined 2.37% to Rs 1663.70. NTPC gained 0.32% to Rs 231.70, Tata Power rose 0.45% to Rs 1119.50 and Neyveli Lignite rose 0.69% to Rs 210.15.

India's largest public sector oil explorer ONGC fell 0.81% to Rs 1141.20. ONGC Videsh (OVL), the overseas arm of state-run Oil and Natural Gas Corp (ONGC), has reportedly bagged two oil and gas exploration blocks in Brazil. Meanwhile, some reports suggest that the company has found more natural gas in a block in the desert state of Rajasthan. This block was awarded to the company before India moved to a regime of auctioning its oil and gas exploration blocks.

Mukesh Ambani-held Reliance Petroleum surged 11.95% to Rs 215.05 on huge volume of 5.56 crore shares on BSE.

The BSE Auto index rose 0.28% to 5,419.51. It underperformed the Sensex. Tata Motors rose 0.25% to Rs 722.30, Hero Honda Motors jumped 3.53% to Rs 733.90 and Maruti Suzuki gained 2.46% to Rs 990.45.

Mahindra & Mahindra rose 1.47% to Rs 720.25. Mahindra Holidays and Resorts, part of Mahindra & Mahindra Group, is reportedly planning to develop holiday homes on ownership basis. It also plans to float an IPO by March 2008.

India's largest cellular service provider by market share Bharti Airtel rose 0.62% to Rs 915.65. India's second largest listed telecom service provider by sales Reliance Communications fell 1.98% to Rs 665.05.

Pharmaceuticals firm Jubilant Organosys fell 0.79% to Rs 302.25 on reports that the firm is evaluating various proposals to acquire companies in the contract research and manufacturing services, drug discovery and clinical research segments in the US and Europe. It has earmarked around $100 million for acquisition.

Electric equipment maker Kirloskar Electric Company rose 0.71% to Rs 370.20. The board of directors of Kirloskar Electric Company on Wednesday, 28 November 2007 approved the merger of the operating business of Kirloskar Power Equipments with itself. The board also approved merger of its subsidiary Kaytee Switchgear with itself.

Ship building firm ABG Shipyard jumped 8.34% to Rs 888.55 after the company said its board had approved raising funds through issue of equity shares to qualified institutional buyers and convertible warrants to the promoters.

Post-production firm Prime Focus gained 0.17% to Rs 1210 after the company said it was in advanced talks to buy US-based firms, Post Logic Studios and Frantic Films for $43 million.

Liquor firm Shaw Wallace & Company rose 1.05% to Rs 409.60, off day's high of Rs 434 after its board approved merging the firm with group firm United Spirits. Shaw Wallace shareholders will get four United Spirits shares for every 17 held. United Spirits, part of the UB Group, fell 0.41% to Rs 1844.30

Offshore logistics firm Sical Logistics jumped 4.97% to Rs 238.50 on foreign investment promotion board's approval for Old Lane Mauritius IV's $26 million investment in Sical's new infrastructure unit, Sical Infra Assets.

Reliance Petroleum clocked highest turnover of Rs 1137.84 crore on BSE. Mundra Port & Special Economic Zone (Rs 371.03 crore), Reliance Natural Resources (Rs 202.57), Reliance Energy (Rs 186.61 crore) and Jaiprakash Associates (Rs 186.22 crore), were the other turnover toppers on BSE in that order.

Reliance Petroleum registered highest volume of 5.56 crore shares on BSE. Gujarat State Petronet (2.42 crore shares), Ispat Industries (2.11 crore shares), Reliance Natural Resources (1.31 crore shares) and Tata Teleservices (1.20 crore shares), were the other volume toppers on BSE in that order.

In Europe, key indices in France and Germany were up by between 0.02% to 0.28%. UK’s FTSE 100 was down 0.24%.

In Asia, key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were up by between 2.06% to 4.06%. The Fed's next policy-setting meeting is scheduled for 11 December 2007.

US markets rallied overnight on expectations for an interest rate cut by the US Federal Reserve in December 2007. The Dow Jones industrial average jumped 331.01 points, or 2.55%, at 13,289.45 on Wednesday, 28 November 2007. The Standard & Poor's 500 Index was up 40.79 points, or 2.86% at 1,469.02. The Nasdaq Composite Index was up 82.11 points, or 3.18%, at 2,662.91.

Oil surged by more than $4 a barrel towards $95 a barrel today, 29 November 2007, after a pipeline explosion cut crude oil imports to top consumer the United States by nearly a fifth.

Wednesday 28 November, 2007

What should RPL investors do?

Following the steep fall in the share price of Reliance Petroleum, what should retail investors do? The surge in the stock last month had many retail investors flocking to the counter, even as experts were crying hoarse that the shares were overvalued. After touching a peak of Rs 295 earlier this month, the stock price has been hurtling downhill.

The stock is yet to emerge out of the trading ban in the derivatives segment — it had done so for brief while on Monday — players expect some more volatility at the counter.

Investors should continue to tread cautiously, warn market watchers. “The current confusion regarding the stock’s movement would get cleared by the expiry of derivatives on Thursday and by then RPL is expected to come out of F&O curb,” said PINC Research head-derivatives and strategy Sailav Kaji.

“What is needed to be looked at is whether in the derivatives expiry short positions are rolled over or get covered. In case of short positions getting rolled over, the stock will find support at Rs 180,” he said, adding that long-term investors can still buy the stock at current levels.

Sentiment has been undermined by the promoter, Reliance Industries’, decision to offload 4% stake in Reliance Petroleum through open market trades.

Market watchers said the next key trigger for the stock will be Chevron’s decision on its 5% stake in Reliance Petroleum. Chevron has an option to raise its stake to 29%, but analysts see a low possibility of that happening following RIL’s decision to sell shares in the open market.

”We believe that RPL’s rich valuation and the fact that RIL sold a 4% stake to the market, may imply a possible future Chevron exit unless there is meaningful pullback in the market,” broking house Goldman Sachs said in a note to clients.

Many analysts expect RPL to stabilise around Rs 180 near term. However, Religare Securities president-equities Amitabh Chakraborty said the stock could rally to Rs 215-220 by the end of the December derivative series.“Investors who are right now long on RPL futures should roll over their positions to the December series,”
he said.

The 29-million-tonne-per-annum refinery being built by Reliance Petroleum was originally scheduled to commission by December 2008. However, considering the fact that almost 70% overall progress has already been achieved, the management expects to complete the project ahead of schedule. By crunching the original timeline of three years, the company is poised to create a new world record for project implementation in the refining sector.

Via ET

Chevron to sell RPL stake ?

U.S. petroleum giant Chevron on Monday acknowledged it was evaluating whether to hold on to its stake in Reliance Petroleum following a sharp run-up in the stock and parent company Reliance Industries' sale of 4% of its holdings in its subsidiary.

Chevron (nyse: CVX - news - people ) bought a 5% stake in Reliance Petroleum — a vehicle set up by Reliance Industries to build a refinery in the western state of Gujarat — for $300 million in April 2006, with an option to increase its stake to 29% by July 2009. The shares have more than tripled to over 200 rupees ($5) since, which could be a deterrent, particularly following Reliance Industries' share sale last week

Auto stocks surge in a subdued market

The market failed to hold on to its early gains on profit bookings in most of the frontline stocks and the Sensex entered into negative territory by afternoon. Shrugging off the weak Asian markets, the Sensex took a cue from US markets and opened with a positive gap of 189 points. However, sustained selling thereafter pulled the market down with the index plunging deep into the red to touch an intra-day low of 18,884, down 244 points from the last close. The Sensex gyrated over 433 points during the intra-day trades. The Sensex managed to recover some losses towards the close, but ended the session 189 points down at 18,939, while the Nifty declined by 81 points to close at 5,618.

The market breadth was marginally weak. Of the 2,873 stocks traded on the Bombay Stock Exchange (BSE), 1,497 stocks declined, 1,306 stocks advanced and 70 stocks ended unchanged. On sectoral front, BSE Oil & Gas index was down 2.29% at 11,918 and BSE Metal index slipped 2.12% at 16,976, while BSE CG index, BSE Realty index, BSE PSU index and BSE Bankex index were down 1% each. However, the BSE Auto index bucked the trend and gained 1.05%.

Among the major losers, Hindalco shed 3.66% at Rs184, Tata Steel declined 3.41% at Rs819, ACC fell 3.30% at Rs1,075 and Reliance Energy slipped 2.93% at Rs1,704. TCS dipped 2.11% at Rs976, DLF lost 2.05% at Rs880 and Reliance Industries slumped 1.96% at Rs2,786. Maruti Suzuki, however, gained 3.11% at Rs967, followed by Bajaj Auto up 2.82% at Rs2,728, BHEL added 1.93% at Rs2,725 and Ambuja Cement jumped 1.04% at Rs151. Tata Motors, ITC and HDFC ended the day in the positive territory.

Over 1.89 crore Reliance Natural Resources shares changed hands on the BSE followed by Ispat Industries (1.88 crore shares), Reliance Petroleum (1.46 crore shares), Tata Teleservices (1.24 crore shares) and Ashok Leyland (1.19 crore shares).

Valuewise, Mundra Ports registered a turnover of Rs324 crore on the BSE followed by Reliance Natural Resources (Rs302 crore), HDFC (Rs291 crore), Reliance Petroleum (Rs285 crore) and GMR Infrastructure (Rs221 crore)

Weak close ahead FnO expiry

Markets had a cautious play ahead of the FnO expiry tomorrow where rollover is expected to be smooth. After a decent gap up start market traded ranged till the mid session due to lack of momentum and then slowly lost its grounds on profit booking. Metals, Oil and gas and Power were among major sectors to witness selling pressure, while Auto gained some strength. Buying momentum was high in newly added strips list under FnO trade which kept midcap space in action and outperformed the front liners. Media stocks were also in limelight like PVR, Adlabs and Cinemax. At the final hour of trade market slipped significantly to close in Deep red. The weakness in market was in line with the trend in Asian and European markets.

F&O turnover for the day was strong on one day ahead of expiry and rollover has been seen good in Banking space followed by the Pharma sector. Overall the rollover is smooth with 50% positions compared with the last month.

Sensex ended down by 189 points at 18938.86. Weighing on the Sensex were losses in Hindalco (184.35,-4 percent), TISCO (818.7,-3 percent), ACC (1075.25,-3 percent), Rel Energy (1704.05,-3 percent) and Hero Honda (708.9,-3 percent). Losses are restricted by gains in Maruti (966.7, +3 percent), Bajaj Auto (2727.8999, +3 percent), BHEL (2724.55,+2 percent), Guj Ambuja (150.65,+1 percent) and Tata Motors (720.5,+1 percent).

Mold Tek Technologies closed higher by 13%. Mold-Tek Technologies Limited (Mold Tek) one of the leaders in packaging and an emerging player in the Structural Engineering KPO Services segment posted good numbers for the 2nd Quarter ending September 30th, 2007. Mold Tek managed a growth of 12 % yoy with total turnover of Rs. 28 cr as against Rs. 25 cr during last year. There could be some triggers from a probable acquisition on cards which today stock spurted up in the market today. The company rides on high value billing with a polished front end and a low cost backend. This gives good support for the company to lead in the space. We have detailed research note. Do have alook on this for more details. We remain positive on this business.

Solar Explosive showed good strength and kept its momentum. Solar explosive provides explosive solutions for mining activities including slurry Explosives. The company undertakes manufacturing of Detonators and Detonator components through its subsidiary. The business is good with strong barriers to entry and Solar has the edge with its high market share and explosive experts. This as an investment with a long term perspective is a good idea. The mining policy coming up in the later half of the year would eventually help unlocking the big potential of this business. Do read our research note for more details. We had Wow call on this one which delivered good returns in short term.

Technically Speaking: Sensex opened in green but slowly slipped and ended weak in red. It made intraday high of 19,317 and days low of 18,884. Volume was good at Rs 7,435Crs. The breath was in favor of Declines, where Advances stood at 1282 and Declines at 1490. Sensex has closed the day at weak, as we were expecting a weak expiry. Traders are advised to take long if markets fall further tomorrow. Supports are seen at 18715 and 18500. Resistance is expected at 19360.

New FnO Stocks

1 JINDAL SAW LIMITED JINDALSAW

2 KPIT CUMMINS INFOSYSTEMS KPIT

3 DEVELOP CREDIT BANK LTD DCB

4 HINDUSTAN ZINC LIMITED HINDZINC

5 MOTOR INDUSTRIES CO LTD MICO

6 INFO EDGE (I) LTD NAUKRI

7 NIIT LIMITED NIITLTD

8 GREAT OFFSHORE LTD GTOFFSHORE

9 WIRE & WIRELESS (I) LTD. WWIL

10 REDINGTON (INDIA) LTD. REDINGTON

11 NETWORK 18 FINCAP LTD. NETWORK18

12 GLOBAL BROADCAST NEWS LTD GBN

13 ISPAT INDUSTRIES LIMITED ISPATIND

14 HINDUSTAN OIL EXPLORATION HINDOILEXP

15 GITANJALI GEMS LIMITED GITANJALI

Tuesday 27 November, 2007

80 Trading stategies for forex

Please pour over the 80 currency trading strategy items on the checklist below that the big dogs use. You'll be glad you did. Please pick up on the fact that you only need four tools to trade the forex with, using my approach – "reading bars," MACD divergence, pivot points, and trendline analysis. That's it. Nothing more! Plain and simple. Don't let the naysayers have you believe otherwise. The world is full of "Doubting Thomases" who are everybody's armchair quarterback, but have never made a dime in this business. They "sell shovels." They don't use them.

Currency Trading Strategy Number One:

When you are just starting out, strive to carve out 20 pips per session, and that’s it. Then, turn it off, and study some more. When you get really good at it, you can then “graduate” to higher returns. So, set your goal at 20 pips and stick to it, until you are a grand master at this wonderful “business” called forex trading. I stress the word business. This is not a game, especially where your “hard-earned money” is involved.

Currency Trading Strategy Number Two:

Spend most of your time on the 15-min chart.

Currency Trading Strategy Number Three:

When you first start out in any particular session, look at the 1 hr chart to get an overall perspective on trend from one session to the next, and what it’s likely shaping up to be at the beginning of the upcoming new session.

Currency Trading Strategy Number Four:

Only look at the 5 min chart if you absolutely have to see what’s behind the current 15 min bar – especially where the bar is elongated, and may have just penetrated a pivot point; in other words, is price reversing course on the 5 min chart, which would obviously not yet be reflected on the 15 min chart?

Currency Trading Strategy Number Five:

Don’t dwell on the 5 min chart, as it contains a lot of “noise” that will whipsaw you to death.

Currency Trading Strategy Number Six:

MACD rules on the 15 min chart. Even if MACD is, say, trending up on the 1 hr chart, if it is trending down on the 15 min chart, that’s what you take your cue from. That’s not to say a shift in price direction is not in the works. It just means it’s coming, but not yet. In the meantime, you don’t want to miss what’s happening “in the now,” which is what is reflected in the 15 min chart.

Currency Trading Strategy Number Seven:

If MACD is trending down on the 15 min chart, and price is wanting to go north, price will sooner than later head south as it perhaps bounces off a pivot point, or gets turned around at a juncture caught by one of the other three “tools” you should be using (“reading bars,” MACD divergence, or trendline analysis). Same thing if MACD is trending up, and price is trying to head south.

Currency Trading Strategy Number Eight:

Only use MACD for divergence, not for buy or sell signals. It is a lagging indicator, and as such is useless as a trigger. It is too slow for that in the forex world.

Currency Trading Strategy Number Nine:

Again, MACD divergence on the 15 min chart is more significant than what you see on the 1 hr chart in the near-term. For those of you who don’t understand what divergence means, keep looking at my own personal forex trading examples on this page on a daily basis for examples of divergence. Basically, what it means is where you see MACD waves “waving” in the opposite direction to price action. That’s why I connect the top of the waves (in a downtrend) and the bottom of the waves (in an uptrend) to illustrate that the waves are “waving” higher in an uptrend and lower in a downtrend – in the opposite direction to where price is going.

Currency Trading Strategy Number 10:

Always “protect” your money by using 20-30 pip stops. Mental stops are okay, but not if you are dead serious about using a “disciplined” approach to managing your money. You will lose three out of ten trades. The three losses should be kept to 20-30 pips. Your wins will by far surpass your small losses, and that’s what stop-losses are all about. Don’t be afraid to lose. Even professional batters strike out six out of 10 times. Lions are only successful 20% of the time in their chase for the kill. Professional golfers lose 95% of the time. Professional poker players lose 50% of the time. So, your chances are better at trading the forex, using my system of course, than in any other venue. Even businesses have “bad inventory.” And, life in general is not always “100%” for sure.

Currency Trading Strategy Number 11:

That all said and done, if you entered a trade close to a pivot point, or a particular significant bar pattern (like a double top, for instance, or a trendline breakout), place your stop on the other side (but not too close to) the event that caused you to take action. This is because price has a tendency to snap back to that situation that caused it to bolt away from it in the first place. If you follow the 20-30 pip stop rule, but a 33 pip stop on the other side of that event would safeguard you against such a reaction, then so much the better. So, yes the stop rule is 20-30 pips, but within reason of course.

Currency Trading Strategy Number 12:

Stops (read “stop-loss”) are for insurance purposes only – not necessarily for taking profits. However, you can most certainly employ “trailing stops,” whereby you keep moving your stop up (or down, whichever the case may be) to protect your profits, as price advances, or declines.

Currency Trading Strategy Number 13:

Only use “reading bars,” MACD divergence, pivot points, and trendline analysis in your forex trading toolkit. That’s all you need for this market. Be a technical bigot. Focus on pure technical analysis, and avoid funnymentals. Even news is factored into price action, so you don’t need to be up on it each and every nanosecond. If you don't have my .pdf file on reading bars, please send me an e-mail, and I'll forward it to you: prbain@tradingsmarts.com As was pointed out to me by a client, "reading bars" includes spotting double, or even triple, tops and bottoms.

Currency Trading Strategy Number 14:

And now for the tough part. I know my documentation says that the forecast low and high for the next trading session can be M1/M3 or M2/M4. However, trading is shades of gray. It is not a black and white business. If it were, the world would be paved in gold, and everybody would be rich. Now, we wouldn’t want that would we? The forex would be nothing more than a Church at the end of a road connected to a river bank at the other end with nothing in between. The point I am trying to make is that the “actual” low and high for the next session could very well be any combination of M1, M2, M3, and M4. It could be M1/M4, M2/M3, or combinations of the other five pivot points. The M1/M3 and M2/M4 calculations are just guideposts, but are not poured in concrete. Price is the number one indicator. It will determine what the low and high are going to be. And one other thing, you should use these forecasts in conjunction with the other three “tools” in your forex trading toolkit – “reading bars,” MACD divergence, and trendline analysis. In other words, if price has been trending down from the past session into the current one, price is trading at, say, M3, and price is still going down, then M3 may very well be the high for the new session, regardless of the fact that my system may have called for M4 to be the high. So, use the pivot points in conjunction with other three possible signals – “reading bars,” MACD divergence, and trendline analysis. I have seen it happen, as in the example just given, where price was trending down from one session to the next right through M3 at the open of the next session – simultaneous with the formation of a “double top” bar pattern. Well, there you have three indications that price was headed south for sure. And, I believe MACD was also trending down in that particular case. So, that was another clue that the high for the session had probably already been put in.

Currency Trading Strategy Number 15:

When you are first starting out, pick one currency of the four major pairs (EUR/USD, USD/JPY, GBP/USD, and USD/CHF) to trade, and become a specialist in it. I would personally recommend the Euro, especially if you are going to be asking me questions, as that's what I focus on with my clients around the world. Get to know its rhythm. When you are doing well with it, then move on, and trade the other three major pairs, as you see fit. When you are in learning mode, you will have your hands full trying to figure out what to look for, and how to manage your trades – enough so that you don't want to be skipping back and forth between currencies.

Currency Trading Strategy Number 16:

Keep a log of all your trades – both good and bad. Analyze where you went right and wrong, and vow not to repeat those situations that could have been done better. This is all part of being organized as a "professional" trader - with good habits. This is not about gun-slinging and winging it with "Hail Mary" passes.

Currency Trading Strategy Number 17:

Important point here: If price action opens in the upper end of the projected range for the session (all the way up to R2, and beyond) – in other words, in the sell area (that area above the central pivot point) – and there are other suggestions that price is too high (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the upper end of its price range for the session. The same holds true where price action opens in the lower end of the projected range for the session (all the way down to S2, and beyond) – in other words, in the buy area (that area below the central pivot point) – and there are other suggestions that price is too low (such as a particular bar reading, MACD divergence, or trendline breakout), then price has probably achieved the lower end of its price range for the session.

Currency Trading Strategy Number 18:

If there is nothing to do, then don't do it. Don't just do something because your "gut" tells you to. That can get you in a lot of trouble in this business. Only react to bona fide signals provided by the four indicators talked about above – "reading bars," MACD divergence, pivot points, and trendline analysis.

Currency Trading Strategy Number 19:

Only use an "industrial strength" market maker with the lowest pip spread in the industry. If you would like more information on this, please send me an e-mail: prbain@tradingsmarts.com

Currency Trading Strategy Number 20:

Occasionally, you will see a huge spike up in price, as we did 11 May 03. This just happened to be on a Sunday, shortly after re-commencement of trading, after the weekend respite. Ordinarily, I would take the OHLC numbers from Friday, but given the nature of the wild swing up that evening on one of the 15 min bars, I would then use the OHLC numbers from Sunday night's session close to get a better reading on support and resistance levels for the next session. This is, of course, if you are using a market maker that delineates its break between trading sessions in the late evening - anywhere between 20:59:50 and 24:00 (midnight).

Currency Trading Strategy Number 21:

I often get asked by fellow traders why my pivot points aren't the same as theirs. Good question. The answer is, of course, that you may be using a different market maker, where a daily 24-hour session is "cut off" at a different time. Some end at 20:59:50. Others at five pm. Where you take your OHLC from will have a direct bearing on the pivot points that you calculate using my program. The results will obviously not be the same. But, that is okay – because you want to use the pivot point calculations that are reflective of the last 24 hours at the market maker you are trading with. That way, the resulting numbers will be truly indicative of the support and resistance levels you should be working with during the next session. If you are trading with a firm that cuts off at 5 pm, and using OHLC figures from another source that cuts off at a different time, your figures will be "out-of-sync." I hope this all makes sense. If not, please send me an e-mail: prbain@tradingsmarts.com Also, in your message, you can ask me how to get a copy of my program, if you don't already have one. You can also ask me where you should be trading – i.e., which market maker you should be using. I only recommend "select" providers, after considerable research, and feedback from my clients.

Currency Trading Strategy Number 22:

Former stock traders take note: I say former because I don't honestly know why you would ever want to go back to stocks after having tasted the forex. Don't over-trade the forex. This is not a scalping market! If you have to scalp, do it in slow motion. Currencies trend well. Don't buy too soon in a downtrend, and don't sell too soon in an uptrend. Watch for trendline breakouts to know when to make your move.

Currency Trading Strategy Number 23:

You cannot succeed at trading the forex unless you are TOTALLY committed to trading, and trading it. This is not something to be played with. If you are not going to take it seriously, then try something else.

Currency Trading Strategy Number 24:

Put your emotions in your hip pocket. This is a business, and should be treated as such. If you have any bad habits, the forex will fix them real quick.

Currency Trading Strategy Number 25:

Important point here: If you deem the major trend for the current session, based on everything you have learned to this point, to be down, then think DOWN. Sell rallies. Don't look to buy, or you might get whipsawed to death. Likewise, if you deem the major trend for the current session to be up, based on everything you have learned to this point, then think UP. Buy the dips. Don't look to sell. Former stock traders fall prey to wanting to have it both ways. Maybe, when you get real good at this, you can try. But for now, think one way, and save yourself the grief.

Currency Trading Strategy Number 26:

Another important point here: The major rally for the Euro begins after two am New York time. These are the London hours – the busiest in the forex, bar none. The Euro always – session after session – puts in, on average, 76 pips during the first 12 hours from that time forward. Whether you want to believe it or not, the Euro, once it makes up its mind what the major trend is going to be during those 12 hours, will "drive" to the other end of its range (76 pips) within those 12 hours. So catch the trend, and ride it. Now, it won't be a straight line, of course. Even an airplane taking off or landing encounters some bumps along the way. Same too with the Euro. Once it picks its direction, it will meander all the way to the other end of its range. This will "fake" the dumb money out. They never know what happens to them. To conclude: If the Euro wants to have a down trend during those 12 hours, it will achieve its 76 pips south of where it started. So, think DOWN. If the Euro wants to have an up trend from during those 12 hours, it will achieve its 76 pips north of where it started. So, think UP. The Euro either goes up or down during those 12 hours – not both. Here, I am talking about the major trend, of course. Ah yes, there will be rallies or dips along the way, depending on the direction of the trend (down or up), but like I said earlier, SELL THE RALLIES IN A DOWNTREND, AND BUY THE DIPS IN AN UPTREND. That's all there is to it.

Currency Trading Strategy Number 27:

Something to think about: If you get the above strategy - number 26, then you're going to love this one. It will test your nerve. If you buy into the idea of the major trend unfolding during those 12 hours (check it out here every day, and you'll see living proof), then why not try to get in when it starts to unfold, and "ride it." That will take nerves of steel, because the Euro will go against you from time to time – but not enough so to take out your initial stop. From a risk/reward ratio point of view, you are risking 20 pips to gain 76. Not a bad ratio. What I am trying to say here is why not just put your trade on, set the stop, and go clean the swimming pool while the Euro meanders its way to the end of its range. What spooks a lot of people out is when they stare at price action after they have engaged their trade, and they over-react every time the Euro hiccups. Just leave it alone. So, what's the worst that can happen? You can get stopped out right? Chances are you won't. If you catch the major trend, chances are very much in your favor that you will be richer by at least US$760 per lot. If you trade the action all the way through the trend, you may get beat up real bad, and lose anyway. Let the Euro lead you, not the other way around.

Currency Trading Strategy Number 28:

Every once in a while, I would encourage you to step back from the daily intraday action, and have a look at it from 30,000 feet. Sometimes, we can get too close to it, and not see the trees in the forest. On the daily chart, if you plot trendlines and look for divergences, you will learn a lot about where price is going to go "next." Of course, that's what we all want to know, right? Not only do trendline breakouts and MACD divergences tell a "big" story, but where a daily bar closes will offer up a clue as to where price will likely go in the next session. Study the chart, and you'll see what I mean.

For those of you who don't know what this is all about, the little line pointing off to the right of a price bar is the "close" for the daily session. The little line pointing off to the left is the "open" for that session. In the forex world, the close of one session automatically becomes the open for the next session, as this is a very liquid market, and there are no gaps in trading.

I just thought it wise to pause and reflect at a higher level from time to time. Looking at things top-down is sometimes healthy, and a wise thing to do. We can sometimes get caught up in the minutiae of the daily flurry of price movements, and lose perspective of the bigger picture unfolding above us.

Currency Trading Strategy Number 29:

To reiterate, there are just a "few" things you have to watch out for, and be "patient" for set-ups to occur. Don't just pull the trigger because you "think" it's time to do so. Wait for bona fide "signals." There are only "four" clues you have to look for: "reading bars," MACD divergence, pivot point breakthroughs/tests/violations, and trendline breakouts. That's it folks. That's all it takes to succeed in this wonderful business called forex trading. No other bells and whistles or toys are required, contrary to what you may have learned before. The hardest part for you will be to "unlearn" everything you knew about trading before. Just give your head a shake, and it will go away.

Currency Trading Strategy Number 30:

Although I have said that there are only four clues that you have to look at for price direction – "bar reading," MACD divergence, pivot points, and trendlines – there is actually a fifth. It's called "price." Price is the number one indicator in the sky. It will tell you where it wants to go. Let it point the way. It's like playing cards. Wait for it to reveal its "hand." You just have to be patient and wait. It's called "following the leader."

Currency Trading Strategy Number 31:

I was asked recently about multiple lots – in other words, buying or selling more than one lot at a time. You can either "load up the boat" at your entry point, or you can go at it one at a time – adding additional lot(s), as price moves through each successive pivot point, as it "reaches" for the end of its range. If you are confident that you are "with the trend," and are using good money management techniques, then there is nothing wrong with taking more position(s) along the way. Or, you can do both – load up to begin with, and buy/sell more, as price progresses through pivot points in its tear to the finish line. Don't bail too soon. Remember, currencies trend well (especially the major trend), and price knows where it wants to go. Let it take you there. Use the "five" indicators – "reading bars," MACD divergence, pivot points, "price," and trendlines – to make your trading decisions.

Currency Trading Strategy Number 32:

Be careful about taking trades in between pivot points. This is NO MAN'S LAND, and dangerous territory. Better trades are made in and around pivot points.

Currency Trading Strategy Number 33:

Make sure to take the time to draw pivot points on your 15 min chart, which should be your main focus. This is like the radar screen in the cockpit of an airplane. It is difficult to trade (fly) without points of reference to look at. You don't need to draw them all. They probably won't all fit anyway. At least have those that are close to price action plotted on the chart. You can also plot lines on the 1 hr and 5 min, but you shouldn't be spending much time there, so it may be a waste of time. But, can't hurt. You should also draw trendlines. Where price breaks a trend at a juncture with a pivot point, this is very powerful evidence that price is going the other way. Plot your MACD divergences. The more you see on the screen, the better your trades will be. Draw a line down the screen (on the chart of course) delineating start of session, and where you got your OHLC from to calculate the pivot points for the current session. I think you get the "point," pardon the _expression.

Currency Trading Strategy Number 34:

Just to re-hash and beat an old drum, the 5 min chart is like the trim tab on a sailboat, for you sailors out there. It is small and insignificant, seemingly, but very powerful as it assists in "steadying" the course. Same too with trading, looking at the 5 min every once in a while will give you some insight into what is happening "underneath" the current 15 min bar that is forming. This is important, especially at the end of a run, where price might be trying to do an "end run" or "sneak attack" in the opposite direction to what you're thinking, while you're not watching, of course. But, like I say, don't dwell in "5 min land" as ex-stock traders are wont to do. They are scalpers by nature, but will very quickly get scalped by the forex, as one of my new customers has recently found out the hard way. He now puts a trade on (with stop in place for sure), and goes to the airport to pick up company, or goes outside to clean the swimming pool – only to come back, and see how much money he has made by not obsessing over every little movement. I'm not saying don't pay attention, but what I am saying is too close is too close. Once you catch the trend, and enter a trade because you saw something in "reading bars," MACD divergence, pivot points, trendlines, or price action, let price steer the course, and "wait patiently" for the next event that will cause you to take action. Of course, that action will be taken again because you saw something in "reading bars," MACD divergence, pivot points, trendlines, or price action. If you don't see anything significant, then DON'T DO ANYTHING. Sit on your hands. Don't press enter whatever you do! Oh, and before I leave this point, with a market maker I recommend, you don't have to leave the 15 minute chart to "peek" at the 5 min chart to see what's going on at that lower level, because they show the tick-by-tick action right on the 15 min chart, as the next 15 min bar is waiting to form.

Currency Trading Strategy Number 35:

I was recently asked how many signals he should wait for before pulling the trigger. As you recall, I earlier said that you should only take direction from "reading bars," MACD divergence, pivot points, trendlines – and price itself. Now, how many of these should fire before you engage your trade? Well, certainly, one is enough to set the tone – but all the more convincing where you have a couple or more all lining up and saying the same thing. For example, recently the Euro was in a downtrend from the session just ending, entering the new session still in a downtrend, when price did a double top at the nearest pivot point as the new session started. Well, there you have three things telling you what to do – go short, of course. We had the downtrend, the double top, and the double top banging its head up against the pivot point. Lots of evidence that price was southward bound. I think you get the point. An analogy here: If you're sitting in your car at home waiting to go to work in the morning, and you are waiting for all the street lights to turn green on the way to work before you start the car, you will never get to work. So, the more green lights the better, but one is enough to get you going.

Currency Trading Strategy Number 36:

And now for some psychology. For you newbies out there, your self-esteem will grow the more trades you make. You will not always be right. You will make mistakes. That's only normal when you are first starting out, and even after you have been at it for a while. Don't beat up on yourself when you fail. Just say to yourself, "Next!" You must move on. If you are using wise money management techniques, like 20-30 pip stops, you will survive to see another trade. This is all about preserving staying power. Don't second-guess your indicators (remember, "reading bars," MACD divergence, pivot points, trendlines, and price). You wouldn't dispute the dials and gauges in a plane, or you'd crash and burn. So, why doubt what your indicators are telling you. You must believe in them, and take "action" when they tell you to do so, BUT ONLY WHEN THEY TELL YOU TO DO SO! Have the courage to do so. And, now for the big one. NEVER LISTEN TO ANYBODY ELSE. TAKE YOUR OWN COUNSEL. CLOSE YOUR EARS WHEN YOU ARE TRADING. IT'S YOU AND YOUR CURRENCY. YOU HAVE NOBODY ELSE TO TURN TO. SO, DO IT. AND, STAY AWAY FROM NEGATIVE PEOPLE. DON'T TALK TO ANYBODY ABOUT THIS BUSINESS, UNLESS THEY ARE AS DEAD SERIOUS ABOUT IT AS YOU ARE. OTHERWISE, THEY WILL DRAG YOU DOWN. AND, BE HUMBLE. SAVE YOUR BRAGGING RIGHTS FOR LATER. THE FOREX WILL TAKE YOU DOWN, IF YOU TRY TO BECOME LARGER THAN LIFE. And, finally, focus on success. Be careful what you think about. Your thoughts will mould your actions and outcomes. If you are committed to the end result being successful, then you will get there. If you are always fearful, that affect your psyche. When you stumble and fail, just pick yourself up, dust yourself off, and get on with it. Don't be intimidated by a mistake, or a wrong decision. You will get better at this, especially if you keep a journal of all your trades, and study it to death. Be a professional. Be prepared.

Currency Trading Strategy Number 37:

I recently had a customer ask me what to do when price had headed north through all the pivot points for quite a run and lots of money in the bank, stalled at R2, and then continued its journey north. Answer: R2 is normally resistance. When price penetrated R2 headed north, and couldn't fall back through R2, R2 became support. It was a buy signal when price decided to continue its trek north. Remember, price is King. It will go where it wants to go. You must follow its lead, even if it already has put in quite a tear in one direction – even beyond its average daily range. It will keep going in that direction if it wants to. Remember, currencies trend well. Don't buy too soon, don't sell too soon. Wait for convincing evidence that it has made up its mind. In this case, price played with R2, but never punched down through it with any sort of notion that it wanted to reverse course. Once it made up its mind to continue the journey north, all you had to do was follow suit. Don't fall prey to oxygen starvation at high altitudes like R2. Trust your indicators. Do what they tell you. This isn't about falling for your gut feel that price has gone "too far" up. It could go even further – a lot further, in this case – if it wants to.

Currency Trading Strategy Number 38:

"The more I practice, the luckier I get." (Wayne Gretzky)

Currency Trading Strategy Number 39:

You should not execute trades, as a general rule, in between pivot points. That area is NO MAN'S LAND. Wait for price to make up its mind on direction at a support or resistance level, supplemented by other indications of price direction – "reading bars," MACD divergence, reaction to pivot point, trendline breakouts.

Currency Trading Strategy Number 40:

Don't use MACD for anything other than divergence. Recently, MACD on the 15 was trending up, leading unsuspecting traders to believe that price was headed north. However, price did a u-e at the main pivot point, and headed south to find the other end of its range at S1. You wouldn't see this sudden shift in MACD, because it is a lagging indicator. So, to summarize, just use MACD for divergence and nothing else.

Currency Trading Strategy Number 41:

You should only take trades in and around pivot points – not in between, as stated previously. When price action centers around a pivot point, then take a look at the five minute to see what's going on behind the scenes. Because, you should have been focused on only the 15 min up to the point of price interaction with the pivot point. Now, you want to pay attention to what price has up its sleeve. In the above example (40), price faked out unsuspecting trades when it trended up through the main pivot point, only to tank as it did a price rejection bar on the 15 min chart. Of course, you wouldn't have seen this coming if you were only looking at the 15 min. You would have seen the price reversal on the 5 min, and been ready to head south with price.

Currency Trading Strategy Number 42:

The absence of divergence between MACD and price simply suggests that MACD is confirming that the price trend is intact. But, don't be fooled by this synergy. Please review strategy number 40 to see what I mean.

Currency Trading Strategy Number 43:

Resistance levels (M3, R1, M4, and R2) are levels (or sell zones) where sellers can be expected to outnumber buyers, and push price lower. Correspondingly, support levels (S2, M1, S1, and M2) are levels (or buy zones) where buyers can be expected to outnumber sellers, and push price higher. These expectations are based on my program's interpretation of buyer/seller interaction in the last session. I think you will agree, after close inspection of the results of my pivot point calculations, that price hesitates, pauses, and decides on its course of action in and around pivot points. That's why you should never enter trades in between pivot points, while price is in transit, and in a state of transition.

Currency Trading Strategy Number 44:

Don't let anybody scare you off the forex by saying it is too risky. It is actually less risky than trading any other market, that is exchange-based. The forex cannot be "engineered," as stocks and commodities can be. Also, being a true seamless 24-hour market, there is less of a chance of your stops not kicking in. That's because the forex is highly liquid, trading ~US$1.5 trillion each and every day. It is the most liquid financial market in the world, bar none. And, you get good fills, with fast execution times.

Currency Trading Strategy Number 45:

On May 23, we have had a rather unusual day, in that price "reached" beyond its average range to put in 135 pips in two hours, just above R2, after starting its climb at the main Pivot Point. The Euro reversed course at the double top, and broke down through R2, to mark the end of its run to achieve its average daily range, or better in this case, within 12 hours of the start of trading for the current session. You would have noticed, of course, that the double top formation was also a "railway tracks" bar formation (if you just happened to have been looking at bars, instead of candles). Those two patterns occurring at the same time are a pretty powerful indication that price has run its course. So, keep your eyes peeled for price patterns per se, but also for combinations of patterns occurring at the same time.

Currency Trading Strategy Number 46:

May 23 was supposed to be an M2/M4 day, given the up-close for the last session. But, the actual range came in at Pivot Point/R2. Trading is "shades of gray" ladies and gentleman. Pivot points are not cast in stone. But, they are usually pretty close.

That day, the combination of Pivot Point and R2 achieved better than the average daily range for the Euro, well within the confines of logic behind my pivot point definitions. The central Pivot Point becomes a buy point (read, support), when it is breached to the upside convincingly, and so it became a reasonable starting point for price to commence its "range-finding mission" for the session. Likewise, R2 is a sell point (read, resistance), and so it was a viable target for selling pressure, as the Euro exhausted its "search" for the end of its range for the session.

The main point in all of this is that the full range for the Euro was achieved within the parameters of the pivot point logic and rules, which is the most important point to get out of all of this. By that I mean that the four pivot points below the middle pivot point are all "buy" candidates, and the four pivot points above the middle pivot point (including R2) are all "sell" possibilities. Achieving the full range, or more than that as was the case May 23, is what it's all about, more so than strictly adhering to the M1/M3 or M2/M4 windows of "buying" and "selling" opportunity.

I hope you are beginning to see the power of pivot points in action. You only buy and sell in and around them – not in between, which is what we call "NO MAN'S LAND." Not the place to enter trades. The only caveat here is where price forms patterns like we saw that day above R2 with the double-top/railway tracks combination. Such a reversal phenomenon, especially with two distinct formations occurring at the same time, cannot be ignored.

But, what is significant here is the fact that this "double whammy" took place after price had penetrated R2 to the upside, which to me looked like an exhaustion area – considering the fact that the last point of resistance had been broken. Then, you look for convincing evidence that price is going to continue its trek north, or do a u-e, as it did in this case, and head south.

There are important lessons to be learned in all of the charts I post at this site. So, please study them carefully. There are parallels, as I am sure you can see, between one session’s price action and that of the previous one. In fact, given the nature of currencies trending well, every day pretty much looks the same, except for different actual ranges and different low and high points (read, iterations of the nine possible pivot point lows and highs).

Price will always determine which set of pivot points it is going to work with, and that is why you always follow price's lead. That's also why I call price the "fifth indicator," and perhaps the most important one of the five I work with. By now, you will have learned more about the other four indicators, as you studied the previous currency trading strategy tips.

Please study the charts I post at this site on a daily basis, as they offer important clues that occur each and every day! If you understand what you see in those charts, you can't help but prosper with your trading on a consistent basis.

Currency Trading Strategy Number 47:

Don’t be greedy. I heard it said recently by one of my clients that he walked away from a session with only 150 pips in his pocket, and left a lot on the table. Boy, for somebody coming from the stock world, as he did, he should been thankful for his catch of the day. The point is, if you start out as a newbie looking to carve out only 20 pips per session, then anything beyond that is gravy, and it will surely come over time.

But, don’t forget the old adage, “Nobody can argue over profits in the bank.” If you see a profit, and want to take it, then do so, and be happy. You’ll live to see another day, and take some more profits. Just don’t always grab for the brass ring. This isn't about always hitting home runs. This is about having staying power, and taking one base at a time. When you have good reason to exit a trade, make your move, and be done with it.

Currency Trading Strategy Number 48:

Former Cleveland Brown's coach, the legendary Paul Brown, taught his football players a systematical/methodical procedure of understanding tasks to attain successful results in face of unforeseen, variable difficulties.

So too with foreign exchange trading. Forex trading requires adherence to a set of currency trading strategy rules, which I have set out at this site.

A wide body of research in behavioral finance shows that traders consider the loss of $1 twice as painful as the pleasure received from a gain of $1. That's why they take more risks to avoid losses than to realize gains. They end up buying high and selling low, contrary to conventional wisdom. Follow my currency trading strategy rules, and you'll avoid getting a closely cropped haircut when the forex tanks on you, as it did May 28.

Currency Trading Strategy Number 49:

I had somebody ask me why I waited until 03:00:00am New York time to make my move, in the mean time missing potential in advance of that timeframe. The answer is quite simple. That is when London trading kicks in, and that is generally the busiest session on the forex. You will notice that is when the Euro usually starts its major trend to find its average daily range of 76 pips. Those pips are usually put in within the first 12 hours of trading. Check it out for yourself. It happens each and every day, over and over again.

Currency Trading Strategy Number 50:

"Ascending Triangle": Price forms higher lows, and looks like somewhat of a horizontal line on top and a rising lower trend line. This formation is normally bullish. You take its height at its highest point, and measure that distance from the upper line to obtain the upside target. If you want to see an example of this type of triangle, please send me a note: prbain@tradingsmarts.com and reference May 26/03.

Currency Trading Strategy Number 51:

By combining "pivot point readings" with other signals – like divergence, multi-tops, trendline breakouts, triangular patterns, etc. – you can pretty much tell where price is going next. Normally, I would say that you should only enter trades in and around pivot points. But, given the large distances that can sometimes happen between pivot point areas, you then have to be on the lookout for other evidence of future price direction.

Like I keep saying, trading is "shades of gray." Nothing is always black and white in this business. Trading is as much an art as it is a science. That all said and done, when price does encounter a pivot point, you can see that that point has a powerful influence over price. So, always be on the alert for that next point of interaction with the next pivot point, as it will have a distinct bearing on what happens next.

Currency Trading Strategy Number 52:

If you are trying to catch the major trend that unfolds during the London hours, but are afraid of getting your entry point figured out correctly, wait to catch the next entry point, as the Euro "reaches" for its average daily range of 76 pips. The next entry point will occur in and around the next pivot point that price passes through. Or, you may catch price as it tries to retest the pivot point it just went through. That way, you won't run the risk of getting in too early, when the trend tries to unfold in early trading. Sometimes, price fakes you out, and goes in one direction for a while, and then reverses course, before finally picking its direction. My favorite saying is, "He/she who procrastinates wins." What you are giving up, of course, are those initial pips of the trend, which may amount to, say 30 give or take, but you are more sure of capturing the remaining 46, as the major trend of the session matures.

Currency Trading Strategy Number 53:

I would like to remind you that the pivot points above the central "Pivot Point" have a "sell" bias, and the pivot points below the central "Pivot Point" have a buy bias. These biases hold true unless price action turns a pivot point's bias from sell to buy or buy to sell – i.e., from resistance to support or support to resistance.

On June 6, 2003, you would have observed from price action that M3 held its bias, but the pivot points below the central pivot points were turned from buy, or support, points into sell, or resistance, points. Of course, price action determined this.

The other important point to make is that when the major trend reveals itself, as it did on that day (and does every day, within 12 hours of the start of trading for the session), you should think along the lines of the bias. That day's bias in early trading was "short." Meaning, you should have forgotten how to spell the word "long." Scalpers want it both ways, but that doesn't work in the forex – unless, of course, you want a short haircut. I say this because currencies trend well. Don't second-guess the trend until it reverses itself with bona fide signals. In other words, don't sell to soon, and don't buy too soon.

Currency Trading Strategy Number 54:

Keep those trading journals going! If you always trade the way you always traded, you'll always get what you always got.

Currency Trading Strategy Number 55:

There is nothing that says you have to trade often, or even every day. In other markets, most professional traders catch only three to four really great trades a week, if that! Not so with the Forex. Here, the timeframe is more like a day. However, if you don't see any "ironclad" trades, then don't trade. Turn if off and go golfing.

Slow down, and drive the speed limit. This isn't a race. After all, you are in control of the market, not the other way around. Don't feel pressured into doing something you feel uncomfortable about. Wait for those "perfect set-ups" to make your move. Same goes for those "bad-hair days." If you are feeling out of it, sit on your hands, or go do something else. Take charge of your trading life, before it takes charge of you, and your money.

Currency Trading Strategy Number 56:

I often get asked what parameters I use for MACD. I use the standard default settings. They work just fine. After all, all you should be using MACD for is divergence.

Currency Trading Strategy Number 57:

I have said it before that you should only trade in and around pivot points. The only exception to that rule is if you see a trendline breakout or a bar pattern, like price rejection, that gives a clear signal that price is about to reverse course. If price is in between pivot points, and you are not sure what to do, don't do anything! If there's nothing to do, don't do it. Patience is the hardest thing to master in the forex, or any market for that matter.

Currency Trading Strategy Number 58:

The major trend for the Euro usually starts revealing itself as the London hours kick in. Up to that point, price may "bait and switch" you into thinking it is going one way, when in fact it is setting up to go the other way. It can easily fake you out, before the London hours start to unfold. So, be patient and wait. Look for clues coming out of the previous session as to where price might be going ultimately. Did you see a "head and shoulders" pattern? Did you see a triangle pattern? Do you see price trending in any one direction over a period of time. Do you see any divergence in MACD (on the 1 hr and 15 min charts)? Do you see any channels, where price is looking to break either way? Play Sherlock Holmes. A little bit of detective work will go along way before you dive into the new session. Like the Boy Scouts say, "Be prepared!" Be in charge of your trading. Put your emotions in your hip pocket, and save them for later. Run your trading as if you were running a "bricks and mortar" business. Same principles and rules apply. No different. This is not about betting and gambling. This is serious business. After all, your hard-earned money is at stake. Protect it at all costs.

Currency Trading Strategy Number 59:

I have people asking me all the time why I don't post my trades in real time, or why they can't call me while I am involved in my own trading activities. The answer is quite simple. This page is dedicated to my belief in the old adage: "Give a man a fish, and feed him for a day - teach him how to fish, and feed him for a lifetime!"

Plus, it would be very stressful and time consuming for me to take time away from my own work (and quiet time) to interact with a discussion forum. I am sure you will understand my position on this. I have customers in over 30 countries, and it would be a nightmare for me to react to each and every nuance that came along. A chat room is in our business plan, but at this writing, I don't have any idea of when that might happen. When it does, I will certainly give you lots of advance warning.

I teach people how to fish. I don't give them the fish. I can remember when I first learned how to trade. I had my mentor sitting right by my side each and every step of the way. Then one day he upped and moved, and changed cities. He actually moved to a remote and secluded island to get away from city life. Nice move for him, but it left me in a state of panic. How could I possibly survive on my own? I can tell you, ladies and gentleman, that I really learned how to trade when I had to do it on my own, and those were real drops of sweat rolling down from my forehead all over my face.

This is about you and the market, and you mastering your innermost psyche. Anybody can learn to trade the forex my way. But, what will get you every time is that little inner voice doubting your every move. And, then there's fear and greed that will bite you real hard too. It's the psychology of your mind that you must master. You must become disciplined and patient to a fault. You must react only to bona fide signals, that I teach here. Otherwise, you would be better off heading out to your local casino, and taking your chances there.

The forex is not about gambling. It is about running a business, where there will be gains and losses. Your every effort and constant struggle should be to get a grip on those times when price goes against you. You are in charge. You can get the upper hand on price by trading "smartly," and using good money management techniques, that I also teach here. You won't win every time. But, with my system, you should come out ahead seven out of 10 times. The trick is to limit your losses to small ones, and let your profits soar.

Getting back to going solo without an instructor at your side during each and every step of the way, I recall a friend of mine telling me how he learned to fly. After several practice flights with his instructor in the cockpit with him, they landed back at the airfield, and the instructor turned to Pal and said, "Now, it's your turn to take it up. I'm getting out. You're on your own buddy." Talk about anxiety and stress. Well, Pal took off and landed all by his little 'ole lonesome. But, he was pale and his knees were knocking when he got out of the plane back at home base. He has soloed ever since. It's his passion now. There's something about being able to do it yourself, without a partner holding your hand all the time. It's called "confidence boosting." If you can fly or trade by yourself successfully, there probably isn't anything else in life you couldn't do equally as well. Actually, Navy pilots who land on aircraft carriers make the best traders. But, that's another story for another time.

I can tell you my friend learned more about flying in that one solo session than he did all the times his instructor went up with him. Same with trading. You can do it. Just believe it so. Dedicate yourself to becoming a master at it. Analyze, read, study, think. Ask questions. There is no such thing as a stupid question. Become passionate about your trading. Don't think of it as a get-rich-quick scheme. Do it because you love it. Do it as if you would do it anyway, even if you weren't making money. There has to be an element of fun in it for you. If it's all work, and no play, well you know the answer to that one.

Don't get me wrong. I am here to answer your questions whenever you need my help. I am dedicated to your success, and your happy times with your family. Nothing would give me greater pleasure than to get an e-mail from you telling me how this has turned your life around, and that you are now happily making money trading the forex my way.

Currency Trading Strategy Number 60:

Don't get hung up on reading bars when you think you have caught the major trend. Once the trend is unfolding, you then look for a place to enter - around a pivot point. You look to reading bars to signal a change in the direction of the major trend.

A double top in a downtrend means nothing. A double bottom does. So, a price rejection bar or double bottom in a major downtrend would signal a short-term reversal, and that's all. But, once you see the major trend unfolding – say, on the short side – you pretend you don't know how to spell the word long. Stick with the overall major trend that is unfolding.

These comments relate specifically to the beginning hours of London trading, which is when the major trend reveals itself.

Currency Trading Strategy Number 61:

You need to get to the point where, when you look at a chart without any visual aids, you see indications as to where price is going. This has to become "second nature." At that point, you can trade with ease. And, your stress level will go down, because you will be in control of the market, not the other way around. This only comes with practice, day after day. This takes patience, and staying power. You must hang in there until you get it. Winners never quit; quitters never win.

Currency Trading Strategy Number 62:

At first, if you are fearful, don't trade until you see what you consider to be an ironclad set-up that you are familiar with – an easy one. That may mean waiting out a session or two, but that's okay. There's no rush. I find with some people they seem to have to prove something to themselves or someone else. Some people think they have to scalp all day long for some reason that is beyond me. After all, you are in control. Take your time. Relax. Enjoy it. Sooner or later, you will see a bona fide set-up that you recognize, and bingo you're in. When in doubt, do nothing. When there is no doubt, do something, do anything – pull the trigger.

Currency Trading Strategy Number 63:

Unfortunately, you will not always get all the signals you need to pull the trigger. After all, this is as much an art as it is a science. You cannot always be 100% sure that you are doing the right thing. If you wait forever to get all your ducks lined up, you may wait a long time. My favorite analogy goes something like this: Pretend you are sitting in your garage at home wanting to go to work, but you are waiting for all the street lights along the way to turn green before you pull out of the driveway. Guess what folks? You'll never get to work. Same with trading. Sometimes, you just have to make an educated guess (based on the currency trading strategy recommendations contained at this site) and go with it. You won't always be right, but this isn't about being right. It is about making a decision, sticking with it, and reversing course if you have to. Accept getting stopped out as God's way of kicking you to a higher level. Just one more step to success.

Currency Trading Strategy Number 64:

Thanks to Tom for this: There are two choices to be made – LONG or SHORT when a certain point in the session(M1, S1, R2, Pivot ... etc.) is reached. The BASIC rule is BUY (go long) below the pivot in the S1, S2, M1, M3 zone and SELL (go short) above the pivot in the Zone R1, R2, M2, M4. Obviously it isn’t as simple as this and other indicators such as MACD divergence, reading bars, trends, and patterns all add to the question LONG or SHORT. Bang on Tom! Way to go!

Currency Trading Strategy Number 65:

I have said previously that you should make your buy/sell decisions around pivot points. However, for example, if price is meandering in between pivot points and then does a double top, that would lead me to believe that price is going down. So, there are times when you would want to make your move before waiting for a pivot point to be hit. Of course, there's nothing wrong with waiting for price to do so and then reacting.

Currency Trading Strategy Number 66:

Thanks to Harry for this one: He indicated that I sometimes refer to "price rejection." And, what does that mean. It simply means that a price reversal bar has formed, causing the bar in the middle to have a higher high than the bars on either side of it. The price bar in the middle is essentially a key reversal bar. And, what you have is a "swing change." That is, price is reversing course, and heading south. The same holds true when price is reversing and heading north. You then have the bar in the middle of the three-bar pattern with a lower low than the two on either side, and the one in the middle is the key reversal bar.

Currency Trading Strategy Number 67:

Repetition is the key to success in any endeavor in life, including trading the forex. The more you practice trade, the more you trade real money, the better you get. You just have to keep at it - over and over and over again. Persistence is the key. You're bound to get better at something if you do in constantly and don't quit. Don't let the market psyche you out. When you have a down day, just treat it as experience. Lessons learned. But, try to learn from your mistakes. Keep those journals going. If it's not written, it doesn't exist.

Currency Trading Strategy Number 68:

I get the impression that some of you are not paying enough attention to trendlines. They are very powerful. Price WILL change direction when it breaks the trend, regardless of what other indicators may be telling you. So, draw them, and let them be your guide. REMINDER: In an uptrend, as we saw June 25/03, as long as the trendline holds, buy the dips. In a downtrend, sell the rallies. In an uptrend, don't look to go short EVER! In a downtrend, don't look to go long EVER! Plain and simple.

Currency Trading Strategy Number 69:

Thanks to Stu G. for this one. I have been harping on using MACD only for divergence. But, Stu is right. I do on occasion, as I did June 26th/03, use MACD to confirm the trend. If the price trend has been consistently down over a period of time, then it could very well be that when price tries to go counter-trend, it may just be a retracement or a temporary move in the opposite direction. I usually like to stick with the major trend. In a downtrend, sell the rallies; in an uptrend, buy the dips.

Currency Trading Strategy Number 70:

I was asked by some of my readership what happened Friday, June 27, with all the wide-range bars on the 15-min chart. That was a tough day to trade, even for seasoned professionals. Lots of whip-sawing. Lots of stops got taken out. Trading patterns were dominated by end-of-quarter positioning. A good day to stand clear. So, be prepared for the next end-of-quarter, and the one after that, and the one after that, etc. Mark those dates on your calendar. Trading is as much about being organized and prepared, as it is about being good at it.

Currency Trading Strategy Number 71:

Marathon runners have only one thing on their mind when they are running – to cross the finish line. They NEVER look back. Same too with trading. You should focus on surviving for the long haul. Sure, you will stumble and fall. But, just pick yourself up, just yourself off, and carry on. Winners never quit, and quitters never win.

Currency Trading Strategy Number 72:

Beware of holiday situations like the long July 4th weekend. Trading tends to be thin, and it is difficult to produce meaningful pivot points. Best to just go golfing, and forget about it. There's nothing that says you have to trade every day. Get a life.

Currency Trading Strategy Number 73:

If you are having trouble with your entry points, I suggest you try waiting until you see a hammer or a spinning top, and then pull the trigger. You may wait a long time, but at least you will be sure of getting a good entry point, as these particular candles are powerful precursors to a shift in price direction. Have a look at any chart and see how many of these candlesticks you can pick out. You might be surprised at how many there are. For more information on these bar formations, please read my August, 2003 edition of my newsletter: www.tradingsmarts.com/newsletter0803.htm Obviously, if you click on that link after August 1, 2003 the newsletter will be there. Before then, it won't.

Currency Trading Strategy Number 74:

I just returned from a meeting with a group of young traders who have been at the forex for the past two and a half months. They are making steady progress, and I am extremely proud of them. I thought I would pass along their observations that may prove helpful to your own trading. They have backed off short-term trading, and are more into position trading the forex – using a longer timeframe – taking cues from the 1 hour chart. They also believe that signals that occur on that chart are more powerful than those on the 15 min. For example, a signal on the 1 hour would have more weight than an indication on the 15 min. Basically, what they are saying is that you should wait on a trade for confirmation on the 1 hour chart before pulling the trigger, unless of course you see an ironclad setup on the 15 min chart. Trading is shades of gray ladies and gentlemen. These ideas are working for them. That doesn't mean to say you can't experiment on your own. If you do and find something that works for you, please let me know, and I'll share it with the rest of the gang.

Currency Trading Strategy Number 75:

Clarification re Aug. 22/03 chart, thanks to Bill: Bill quite rightly pointed out in the chart for August 22/03 that there were hammers at 3:01 and between 5:01 and 6:01 that didn't take. My answer to him was that such a candle should be complemented by some other indication of a shift in price direction. For example, in the cases he cited above, price did not break the down trendlines - so, in effect, the hammers' supposed effect was nullified. To conclude, bar formations that should signal a change in price direction should be accompanied by other signals, including pivot points. In other words, what happens to price around a pivot point when you see a hammer? Does the pivot point support what the candle is saying? Thanks Bill for this.

Currency Trading Strategy Number 76:

I was recently asked where one could find volume figures for a currency. None of the popular sites carry it. Nor is it necessary as the Forex is a very liquid market. Volume is somewhat redundant anyway in that regard. You just need to use technical analysis to trade the Forex.

Currency Trading Strategy Number 77:

Pay attention to that news. I had been calling for an advance in the euro and Swiss franc and, sure enough, they both popped on bad unemployment news in the U.S. September 5, 2003. News is not noise in the Forex.

Currency Trading Strategy Number 78:

There are “talking” bulls and bears and there are “real” bulls and bears. The real ones are reflected in volume and open interest. But, these numbers are not available for inter-bank currency trading. However, they are reported for futures markets, which represent a good proxy for sentiment because they are primarily a vehicle for speculation.

Turning points in currency markets often coincide with extremes in open interest levels, which represent extremes in speculation. The key here is to watch for extreme levels and extreme changes in both open interest and volume to signal a possible change in trend.

Open interest numbers are of little use intraday. However, knowledge of a change in trend or extreme speculation in a particular currency based on open interest and volume can be valuable information for any trader in any time frame. That’s where an understanding of how COT works can improve your chances of detecting the underlying bias to a particular FX currency based on its futures counterpart, and anticipating its next move.

As at September 2/03, the commercial traders were extremely long with their net futures positions on the euro FX and the Swiss franc FX, versus the funds, which were extremely short. When you see such extreme divergence between these two camps, you know that price will probably follow the commercial traders’ lead.

The euro FX and Swiss franc FX represented good position trades to the long side at that time. A good buy-and-hold situation for position traders. Sure enough on September 5/03 we had bad unemployment numbers coming out of the U.S., and both currencies popped. Who could have guessed?

Currency Trading Strategy Number 79:

I think there is a misconception out there that you have to trade only the 15 min chart. You can also trade off the 1 hr and daily charts. It just lengthens the cycle. For example, when I called the euro and Swiss franc to rise, you could have taken a position on the daily chart and rode it up. That's all I'm saying. Likewise, you can wait to take a position until you see a valid entry point on the 1 hr chart. Etc.

Currency Trading Strategy Number 80:

For newbie traders, it is probably best to steer clear of Mondays, the day after a holiday weekend and end-of-quarters where there is a lot of position squaring going on.

Of course, there’s more to be learned about currency trading strategy in my original book on trading and the two e-books on trading the forex – available only at currency trading strategy You automatically get all three when you order at that link. If you are reading this page, you probably already have these books, and are reaping the benefits.