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From: The Sharekhan Research Team [mailto:marketwatch
Sent: 13 May 2008 17:02
To: The Sharekhan Research Team
Subject: Sharekhan Post-Market Report dated May 13, 2008
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From: The Sharekhan Research Team [mailto:marketwatch
Sent: 13 May 2008 14:48
To: The Sharekhan Research Team
Subject: Opto Circuits India: Sharekhan Stock Idea dated May 13, 2008
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Lehman Brothers-GLOBAL COMMODITIES TEAM
OIL OVERSHOOTING (ENERGY SPECIAL REPORT)
WE REVISE UP OUR 2008 BRENT FORECAST TO $103/BBL AS PRE-OLYMPIC
CHINESE STOCKPILING, POWER SECTOR OIL PULL AND SAUDI POLITICS ADD TO
STRONG FINANCIAL DEMAND. YET, FUNDAMENTAL WEAKNESS SHOULD EMERGE BY 1Q09, LEADING US TO KEEP OUR 2009 BRENT FORECAST AT $83/BBL.
Oil's recent meteoric rise has been fuelled, in our view, by non supply-demand factors and by potential inventory misperceptions. We judge the two most important factors unrelated
to supply and demand are dollar weakening and investors' desire to be exposed to real
assets, leading to increased inflows from passive long-biased index investors.
US demand has been waning for some time - So where is the crude going then? We think stockpiling in China to prevent shortages ahead of the Olympics and full Iranian tankers in the Persian Gulf (reported to be holding 20m bbls of crude) are the likely culprits.
REASONS FOR CRUDE TO REMAIN HIGH IN THE SHORTER TERM INCLUDE:
1) The continuing standoff over Iranian nuclear enrichment and an ongoing war in Iraq, a major physical disruption remains possible, though difficult to quantify 2) An active hurricane
season in the Gulf. While our meteorologist forecasts between 12 and 15 named storms, their path and landfall are impossible to predict at this time 3) Increased summer power generation in the GCC, strong summer distillate demand or a revived US gasoline market due to rebate checks could cause prices to rise further during the summer season.
WE BELIEVE THAT SEVERAL INDICATORS POINT TO WEAKER RATHER THAN
STRONGER OIL BY YEAR-END:
1) A more bearish outlook for the Chinese and US economies 2) The generation of excess capacity in the refining sector 3) Future upstream additions and Saudi Arabia's commitment to building spare capacity.
THERE ARE ALSO BEARISH SIGNALS THAT SOMETIMES GO UNNOTICED IN TALK OF $200/BBL OIL:
1) long-awaited fields such as Saudi Arabia's Khursaniyah, Nigeria's Agbami, and Azerbaijan's Guneshli have announced start-ups. When fully ramped-up, these should add MORE THAN 1.3MN B/D OF LIQUID CAPACITY
2) Refinery additions such as India's 580k b/d Jamnagar facility should bring more
competition to product markets .
3) The dollar, after a long slide, is likely to rebound after indications that the Fed will hold cuts given rising inflation concerns.
4) Dollar-based core inflation looks tamed going forward, undermining the rationale for using oil as a hedge.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
Two factors: If you overcome them then there is no limit for money in the Stock market for you.
Fear
We are all humans and one of the greatest emotions that has a huge impact on our trading is FEAR. The fear of loss, fear of being incorrect, fear of other's or fear of losing money.
You as a trader, must learn to be neutral at all time. Try not to get upset when you have a loss, try not to get too happy when you win on a trade. Just remain neutral. Easier said than done of course.
When you lose you panic, but please we want you to know that losing is part of the exciting world of trading. Think of it this way, "when a tennis players hits the ball there is a good chance the ball will not go over the net !". Think of this when you are trading, you will not always hit a winner but with the correct stop loss protection you will have another chance of taking a good trade.
This is what we mean by having a positive psychology. In circumstance when your emotions take control without a trading system you will most likely suffer from action paralysis. No action is taken, often resulting in staying with a losing trade. This can be painful to watch as the price of your stock goes down and down... and then you start thinking why didn't I get out ??
Let us tell you that the financial market is not for second guessing ! Follow your trading plan to the letter, if you don't you are second guessing and this will cloud your judgement and most of all you will start getting into this habit, as a beginner we don't want you to start second guessing !
Please acknowledge that there are only two possible outcomes to any trade - win or loss.
It is extremely easy for fear to kick in, this happens to all us, this is why it is crucial that you stick to your plan. Sticking to your initial plan, will remove fear of taking a good trade, missing out on taking another good trade just because your previous trade didn't work out !
Be patient my friend when the market does not present you with an opportunity. There are hundreds of daily opportunities in the market, wait for right technical set up and don't over trade either.
Remember that you are in control only of the trade, no one is going to tell you when to get in or when to get out. Don't ask others what to do, they haven't done the home work !
Always have a positive attitude when you take a trade, and don't expect the trade to go in the direction you want it to. Just except the outcome of the trade and stick to your initial plan. Play to win and expect results. When you have a losing trade always reflect on what you have done and learn from your experience. Don't go tell everyone remain neutral and be patient until your next trade.
Greed
We are sure that many of us traders have held a particular stock too long and sold out breaking even. Sounds familiar? Greed changes our way of thinking and just like fear we hold on until the market reserves on you.
Remember that when you invest in the market you are making an educated decision based on your technical analysis. Do not use trading as a form of gambling. Getting to know yourself is the key to successful trading; there is lots and lots of money to be made in the markets, but only if you learn to control your inner emotions.
A rule of thumb to remember "When you run out of trading capital your game is over!". Don't worry keep on reading as you will teach you where to set your stop loss and how to maximize profits by taking low risk entries and gaining high returns.