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Finally, China Acknowledged The Bubble

  
Analysis, Economy, Education
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ChinaBubble

China’s lending surged to 1.39 trillion yuan ($203 billion) in January and property prices climbed the most in 21 months. According to the National Development and Reform Commission property prices in 70 cities of china have rose 9.5% from a year earlier. The surge of prices has been due to the affects of easy lending followed with uncontrolled flow of funds in to the main streets. Real estate is one of the sectors where prices have scaled up. Automobile followed with cements and capital goods are also under the ambit of excess flow of funds resulting over capacity bubble .Asset prices and commodity prices are also under the threat of excess valuation.
It’s not due to the stimulus package alone declared by china but the uncontrolled loans given by banks without taking care of any quality measures on the loan papers. Its juts like US mortgage case where quality of loans was never taken in to account. China’s 9.35 trillion yuan of loans in 2009 have given birth to the fear of another financial crisis in the fastest growing economy.
The borrowing in the month of January’s was 14% less than a year earlier, after the government targeted a reduction in new loans this year to 7.5 trillion yuan from a record 9.59 trillion yuan in 2009. This have happened due to the strict norms declared by china during the end of January 2010.Chinese banks are now focusing and have instructed on the quality of loans that are being disbursed. The new lending norms framed by china are:

Candlestick Formations -Learn & Earn

  
  Education
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Japanese candlesticks, which have been enjoying the spotlight in recent years, are difficult to explain in one broad brush. Candlesticks draw on the same open-high-low-close data as do bars. Here the length of the bar, or “candle,” is determined by the high and low, but the area between the open and close is considered the most important.

This area, the “body” of the candle, is filled with blue (or white for most charting programs) for closes higher than open, and is filled with red (or black from most charting programs) for down days. The wicks above and below constitute the “shadow” of the candle, or high or low.

No pattern is 100% correct, but these formations are often time incorporated into many mechanical systems and can provide as great information source for the naked eye.

doji

Doji – When the open and close price is almost the exact same value and the tails are not excessively long. This formation can alert investors of a possible indecision and during oversold or overbought conditions can possibly signal for reversal. The bulls and bears are equally pushing the price.

Long-Legged Doji

Long-Legged Doji – You can recognize this formation by one or two long tails (shadows). This formation will sometimes alert that we have reached the top of the market or warn that the trend has lost sense of direction.

Gravestone Doji

Gravestone Doji – This formation occurs when the open and close price is the same or near the low of the bar (period). Although this can be found at the bottom of a trend, this formation can be used to pick out market tops.

Hanging Man

Hanging Man – This formation looks like a body with feet dangling… or a hanging man. This occurs when there is profit taking near market open, then a rally with a close at or near the open price.  This formation can alert of a reversal and is typically found at the top of an up-trend. The longer the shadow, the greater the change is for a reversal.

Hammer formation

Hammer – This formation is a short body with a tail that is twice the body’s length. This occurs when there is a sell off near open, but then a rally supports a close at or near the open. This formation can alert of a reversal and is typically found at the bottom of a downtrend. The longer the shadow, the greater the changes are of reversal.

spinning Top

Spinning Top – This short body has sizable tables both on the top and bottom of the bar. This formation often times represents indecision and a standoff among the bears and bulls. There is little movement between the open and close, but both the bears and the bulls were active that trading day. After a long blue candlestick, a spinning top suggests weakness among the bulls. After a long red candlestick, a spinning top suggests weakness among the bears.

Bearish Engulfing Pattern

Bearish Engulfing Pattern – This formation is a major reversal pattern after the completion of an uptrend. After a blue candlestick, the next day will open above the previous day’s positive close, throughout the trading day it will blow past the previous days open completely engulfing the previous day’s movement.

Bullish Engulfing Pattern

Bullish Engulfing Pattern – This formation is a major reversal pattern after the completion of a downtrend. After a red candlestick, the next day will open below the previous day’s negative close, throughout the trading day it will blow past the previous days open completely engulfing the previous day’s movement.

Evening Star

Evening Star – This is a top reversal signal suggesting that prices will go lower. It is formed after an obvious uptrend. The 1st candlestick is a long blue box (usually when the confidence had peaked). This stick is followed by a small blue body, when the trading range for the day has remained small. The third bar (red) plows down at least 50% past the 1st day’s bar signifying that the bears have taken control.

Morning Star

Morning Star – This is a bottom reversal signal suggesting that prices will go higher. It is formed after an obvious downtrend. The 1st candlestick is a long red box followed by a small blue box, when the trading range for the day has remained small. The third bar (blue) shoots up at least 50% over the 1st day’s bar signifying that the bulls have taken control.

dark cloud

Dark Cloud Cover – This is a two bar formation that is found at the end of an upturn or at a congested trading area. The first bar is a blue (positive movement) bar followed by a red bar which reaches over the open of the previous days close and closes at least 50% down the previous days bar.

Piercing Pattern

Piercing Pattern – This is a two bar formation that is found at the end of a declining market. The first bar is a red (declining movement) bar followed by a blue bar which opens (often gaps) below the previous days close and reaches at least 50% of the previous days bar.

Dear Traders ,If  you want to know more about any other formation ..Just send me mail

Technically Yours

Anirudh Sethi

 

Scott Nations, The Complete Book of Option Spreads and Combinations-Book Review

  
  Education
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If you trade options, you’d do well to have Scott Nations’ Complete Book of Option Spreads and Combinations (Wiley, 2014) in your reference library. It’s an intermediate-level book that explains the structure of more spreads than most people will ever trade but that they should understand nonetheless. A case in point: a conversion or a reversal, a combination that is rarely executed as a package but that “a smart retail trader might end up having on.” (p. 209) It’s better to know in advance what this position is and how to deal with it.
There’s an abundance of information available online about option spreads and combinations, and Nations of necessity covers much of the same territory. But he proceeds more analytically, and he deals with issues that most online descriptions ignore, such as ways to mitigate wide bid/ask spreads. Take, for instance, the long call condor. Nations looks at an AAPL call condor that, using midpoint pricing, costs 18.87 and that, buying on the ask and selling on the bid would cost 0.63 more. What if we were to replace the in-the-money call spread “with something that’s out-of-the-money and has bid/ask spreads similar to the bid/ask spreads of these other out-of-the-money options?” That is, what if we sold a put spread with the same strikes instead of buying that call spread—and again sold at the bid and bought at the ask? Instead of paying a 0.63 penalty, we now pay only 0.27. This “new, magical structure” is an iron condor. (pp. 201-202)
In eleven chapters this book deals with vertical spreads, covered calls, covered puts, calendar spreads, straddles, strangles, collars, risk reversal, butterflies, condors and iron condors, and conversion/ reversal. Every strategy is encapsulated in cheat sheets and, more importantly, is illustrated with examples, complete with tables and figures. Here, for instance, is the graph of a vertical spread he analyzes, which includes the probability of profitability—something he explains how to calculate on the previous page.
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PBOC says complexities facing Chinese economy can not be underestimated

  
Analysis, Education

Peoples Bank of China over the wires

  • PBOC will maintain prudent policy
  • will keep mon pol flexible. Neither too tight nor too loose
  • will use mon pol tools to maintain appropriate liquidity
  • yuan remains within reasonable range
  • PBOC will lower social financing cost, will realise reasonable growth in social financing , money supply and credit

China still rightly and understandably on the cautious side as they face the challenges of loosening up the economy whilst also managing the downward trend.

25 Must-Read Quotes From Buffett's Letter to Shareholders

  
  Education
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Warren Buffett released his annual letter (PDF file, Adobe Acrobat required) to Berkshire Hathaway (NYSE: BRK-B  ) on Saturday. If you have the time, it’s worth reading the whole thing. If not, here are 25 important quotes.

On value: “The logic is simple: If you are going to be a netbuyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.”

On market moves: “Here a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben Graham’s The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.”

On foreclosures: “A largely unnoted fact: Large numbers of people who have ‘lost’ their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner, and the victim was the lender.”

On share buybacks: “The first law of capital allocation — whether the money is slated for acquisitions or share repurchases — is that what is smart at one price is dumb at another.”

On predicting turnarounds: “Last year, I told you that ‘a housing recovery will probably begin within a year or so.’ I was dead wrong.” (more…)

10 prerequisites for investing success

  
  Education

Here are 10 prerequisites that I believe are important:

  1. Love what you do.  Passion matters – nurture it and feed your inspirations.
  2. Repeat your successes.  Purge your failures.  Make the effort to understand both intimately.
  3. Embrace change.  No, I mean truly expect change, be open to it and figure out how to use it to your benefit.
  4. Market bubbles happen – accept their profits with a sense of wonder, gratitude and tight stops.
  5. Show up – be prepared organizationally, physically and emotionally to trade.
  6. Ethics matter – always more than money.  A good night’s sleep matters, too.  Never ever let yourself get close to the line.
  7. Be honest with yourself.  Be kind to others.  The two skills are related.
  8. Formulate your thesis.  Reach out and listen to both bullish and bearish commentaries.  Listen for their perspective and reasoning to help challenge your own thinking, but then decide for yourself.
  9. Accept praise for profits.  Accept responsibility for losses, but then move on.
  10. History has shown me that it rewards the bulls with a much higher frequency than it rewards the bears.  Plus, it feels better to be optimistic and positive.
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