Stategy for the week starting 06th October 08

Its time for all of us to go back to Nursery schools.The Primary reason being that if you index the small cap stocks.If you make a comparison with the price level of the same stocks some years back.You might see that some stocks have given negative returns on the same time line.Some of the stocks in my coverage have also fallen like nine pins.The Old nursery rhyme that London Bridge is falling down seems so True in the Indian stock markets.To pinpoint the same msp steel(down 35%)(in last one month),jayaswal neco(down 44%),rathi steel(down 25%).Ion exchange(34%),forbes and com(5%),Ilfs investment managers (21%).There is surely some detrimental news flow in steel stocks but the same is true for almost any stock in the market.
As an European dealer rightly pointed out some days back that markets are "Long on asset and short on cash."Anything which is an asset for an investor is being sold off and when everything is being sold off the valuations take a back seat.No point talking about valuations when people see liquidity and start a sell off.Now coming back to markets,people might give lower levels of 3200 or anything.I will still say for me downside at 3800 seems limited.I am not positive at 4100 odd levels but i am not negative at 3800 odd levels.I am personally expecting that we might just a small panic selling on Monday or Tuesday and a smooth rise from those levels.I have no idea that Where will the rise take us as markets are following the random theory as of now.I can be correct on a broader market basis as levels can never be precise in a low volume market.
Million dollar question: what to Buy and when to Buy?My reply will be Buy oversold stocks with good fundamentals which might survive the bear run even if its in a cyclical industry.Also do note that there are 20% pull back in broader index from lows even in a Bear Market.No point shorting it @ lower levels on a positional basis.In the words of jesse livermore,My ideal trader in bear market.Market will bottom out when the index continues to falls but momentum stocks stop making new lows.If i consider real estate as momentum stocks for bears then markets might just be bottoming out.

Do remember I consider myself more as a Trader in a bear market and i love to capture every move.So Kindly be polite and dont blame me if I talk about shorts again at 4XXX levels for lower levels.At the same time if by chance you are carrying shorts do remember to book full profits below 3700 odd levels.

:)


Nifty support,3670,3710-

Nifty resistance-3931-3958-4095