QUANT SYSTEM TRADE RECOMMENDATION - 08.05.22

From the desk of Capt.D.Ganesh Raja

Dear Friends,

I returned back home after completing my Marine training assignment in Abu Dhabi and I couldn’t find time to update earlier. Also, me and my family had to undergo trying times when I my younger daughter was badly bitten by a stray dog, given shelter inside society by “dog lovers”. She was in emergency ward and by God’s grace and prayers of many friends and well wishers she quickly recovered. We have taken a strong stand of getting the dogs removed from society premises. In spite such a major incident there was a big showdown with “dog loving” activists. Taoists rightly say, “Human beings take an idea so far and make a big show out of it that it loses its essence”. We are not against animals but when they become a danger or hindrance they have to be removed and put in a shelter. In a similar way there are activists who argue for human rights of terrorists who have killed many with impunity and without any remorse.

Let’s get back to markets. The Indian markets have been gyrating for past few weeks and I had said that we are in “No trade zone”. The results season is on and generally contributes to volatility in individual stocks depending on the results. India VIX is placed at 21.25 and seems to have formed a bottom and seems might go up in the short run but in the weekly charts there isn’t any confirmation signals as of yet. My cause of concern is the bottoming out of VIX coinciding in the month of May which has historically proved to be a volatile month with downward movements. This is just an observation and maybe we might not read too much into it. I did get a short signal in Nifty at 17000 levels in daily charts last week but since I was travelling, I could not update the blog. Also, signals from daily charts, typically need to be monitored on a daily basis, which was not possible for me. It looks like this week markets might consolidate a bit, so it is better to wait and watch. One of the important aspects of trading is to stand in the side-lines once in a while and watch patiently, else one might get drawn into volatility and chop capital.

Annual inflation rate in India increased to 6.95% in March of 2022, the highest since October of 2020, and above market forecasts of 6.35%, source: Ministry of Statistics and Programme Implementation (MOSPI). Inflation expectations however increased to 10.80 percent in March from 10.70 percent in January of 2022. However, looking at the chart, inflation expected is withing variance limit but it is placed at a very interesting level, just above an important bottom pattern. It is a classic case of breakout and testing of breakout levels. So, it could move either way. Recent repo rate hike by RBI seems to indicate that this is to rein in inflation rather than supporting the rupee. Oil is a major contributor towards inflation. Given the current geopolitical situation which has an important bearing on oil prices it seems to be in a higher probability that oil would continue to trade higher for the remainder of the year. according to Trading Economics global macro models and analysts’ expectations they estimate it to trade at 121.07 in 12 months’ time. Irrespective of the forecasts from the best and brightest in the industry, it has been a habit over the years not to trust it completely till it corroborates with my system filters. “Apa deepo bhava”, Buddha has said, which means light your own lamp and something in similar lines. As per Quant system, it seems crude is just moving out of consolidation pattern and that’s not great news for equity markets. However, I would wait for a dead cat bounce, because short term oscillators are extremely oversold.

I will be travelling in a week’s time to my village in Tamilnadu for prayers to “Kul devtha” and also vacation with children to few nearby places and hence I might not update my blog during that time. If the system gives a signal prior to that I will update the blog.

USD/ INR: On 20.04.22, I had recommended to go long on USD-INR currency pair at 76.20, with target of 78.09, leverage 2x. Part profit booking was prompted by system on 28.04.22 at 76.84. For now continue holding long position in USD with 1x leverage.

GOLD: Last close – 51343.0. Gold also had a volatile period in the international markets, triggered by fears of Federal reserve rate hike. Fed did raise rates by half a percentage point on 04.05.22, the biggest hike in two decades primarily aimed at fighting inflation, which is at a 30-year high. Tons of research paper will indicate that there no relationship exists between rates and gold based on long term data. There might be disruptions in the short run. On the weekly chart gold has been forming a consolidating pattern with support in the form of hammer on lower trendline. Here it boils down to one’s outlook about how long one wants to hold a particular asset class. Holding on for a longer timeframe needs focus and discipline and shorter news flows, which is basically noise and sometime very convincing, can make one go astray. I would still recommend to hold on firmly to positions in gold and people who have missed out the initial rally can accumulate at these levels. If I get a short term buy signal in gold, I will try to update.

In the Investopedia trading competition, I have followed the strategies which I have shared in the blog. I mostly build positions by equivalent ETFs to execute the trade. My ranking is currently 8551 out of 3,75,654 players worldwide. There are players who have built up phenomenal profits but I am show casing my strategies based on which is little longer term in nature and also with adequate margin of safety. Leverage is prudently utilised as per the situation.

RETURNS TILL DATE SINCE 04.07.20 : 56.61% (AS OF FRIDAY 06.05.22 CLOSING)

TRADE RECOMMENDATION LOG.pdf

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