It's Time to Book Profits

Nov 27, 2020

Editor's note: I hope you will join me in welcoming an ace trader of Dalal Street, Brijesh Bhatia, to Equitymaster as well as the Fast Profits Daily. I'm delighted to have Brijesh on my team. This is his first video, and I highly recommend watching it. Brijesh has an important message for you...


Hello everyone. I'm Brijesh Bhatia.

I'm thrilled to be a part of Equitymaster. You can read my detailed profile here. I hope you will welcome me with open arms.

I'll will record videos for you every Friday in the Fast Profits Daily.

I hope to use my 15 years of experience in the markets to guide you in making fast profits.

In my very first video, I would like to introduce you to my proprietary greed and fear index. It is telling us to book some profits in this market.

Watch the video and please share your feedback. I look forward to hearing from you.

Hi viewers. Welcome to the Fast Profits Daily video. You're seeing me for the first time on the Equitymaster YouTube channel. So let me introduce myself. Brijesh Bhatia here.

I've been into the market for the last 15 years. I started my career in commodities moved into equities in 2012-13 and since then I've been on the equity side, managing both equity, commodities, and currencies.

My core is into the technical side and trading side. So if I just look at what I follow or what type of analysis I do, I am more into the reversal type of a technical structure or you can say a contrarian bet against the markets and I am just doing it with the help of Harmonics, Wyckoff, Heikin-Ashi, Kagi, such types of advanced technical tools which I am using, which helps me develop a contrarian bet on it.

So in this video, what we'll be discussing is, I have created my own proprietary Greed and Fear Index, which is a mix of the breath of NSE 500 which means the stocks which are trading above its 200 day average, exponential moving average, and I've taken Nifty 500 because generally, it covers all large caps midcaps and I would say upcoming bluechips. That's the reason why I have used the Nifty 500 index, which gives me a bunch or a bouquet of stocks which can help me to analyse the breath.

Second, I've added the flavour of RSI the breath RSI, which is very much important and as this is a proprietary index, it really helps me to identify the contrarian bet, went to book profits, when to look to look for reversals.

So just to give glance to you and if you look at the screen, this is the Greed and Fear Index. So if you look at the left hand side which is starting with 0 to 20 in dark blue colour, which in general indicates the markets are into the extreme fear and is the right time to look enter into the markets.

20 to 40 is slightly into fear, and just look at the 40 60 in general a neutral market where both bulls and bears plug into the war. If I just look at the 60 to 75, why have I taken 60 75? If you look at the historical move, there are signs off an exhaustion or it's giving me that something is very much greedy.

75 to 100 I've calculated as extreme greed, which means that it's time to be cautious on the markets. These are the parameters which I have a decided based on the historical moves which this index has helped me.

Now if I just look at the historic move based on this greed and fear index, if you look at the momentum when markets hit a low above 60 on the index, it's time to book profits.

So markets are trading at all-time highs near 13,000 and you might think that market is booming and it's going up higher and higher. I am suggesting to book profits.

See tomorrow, markets can go to 14,000, markets can go to 11,000. It's the market. So there is always a 50-50% chance like when you toss a coin and the reason that I am indicating at current point of time is because markets might go to 14,000 but has your portfolio increased and is it trading at all-time highs? You have to review your portfolio regularly.

At Equitymaster, we are regularly posting on various sectors and stocks which can really help you look into their portfolios.

Now coming on to the historic move of greed and fear index. So let's start with 2008, which is the benchmark. Every trader should analyse 2008 If I just look at the Greed and Fear Index, it was trading at that time it at around 52%. It was a neutral zone, but I just look into 2002 to 2008, it was slow and steadily rising.

So we have at 2002, 44%, 46%, 52% and then we have seen a huge correction into the markets. Though the trigger can be anything. You can say it was a liquidity issue, real estate issue, anything. But if I just look at the greed and fear index, it's clearly indicating something is cautious.

Second, if I just look at this historic move 2014, where markets again has seen a top and we have seen a huge correction, again the greed and fear index was around 72% and even in 2018, it was around 76%. At the start of 2020, January 2020, ahead of the fall, I would say the breath indicator was trading at around 67%. So nearly 70%. So I would against a greed zone is entered into the indicator.

Now what to look with these indicators. It will really help you to book some profits and at current point of time, we are into the November where markets have seen a huge rally from 7,500 back to 13,000 at all-time high. 2020 is definitely different because we have seen 12,000 to 7,500. Then 7,500 back to 13,000. So huge volatility has taken place into the nifty in 2020. So what to look at now?

If you look at November 2020, we are trading at around 81.8%. So nearly 82 which is extreme greed. So what we suggest is one should really look to book partial profits at current point of time because this indicator really will help you take some profits of the table.

What if index goes to 14,000? That's could be the question in your mind. If I just look at the momentum, it's clearly into the bulls court but at some point of time, you should be booking profits in the markets and it is very much necessary.

What if markets falls to 11,000 or even a 10% index fall? It will. It will definitely have a huge impact. So I would say, a current one of them definitely looking to book profits, take some prior partial profits off the table and hold time to book some partial profits and take some money of the table. So that's the thing you should do, looking at the greed and fear index, and these are preparatory indicators, Even if local markets go to 11,000, the stocks might see 20-30% corrections even though in indices are down 10%.

We should not miss this opportunity to book some profits. Current point of time in stocks are buzzing out and markets are into the euphoria zone.

So that's all. Signing off. This is my first Fast Profits Daily video. Do comment in the comments section and follow our YouTube channel. Thank you.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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5 Responses to "It's Time to Book Profits"

MITESH SHAH

Nov 30, 2020

Welcome Brijesh to the centurys best Equitymaster family.
It will be really glad if we can explore newer ideas with ur expertise. i wud also suggest you to add Market Mood Index to EM Universe of stocks category or rather stock wise Stock Mood Index ( Considering Sales, ROE, FCF, debt to equity, promoters stake, Price Momentum for last 3-5 yrs & if possible 10 yrs ). This filter if added to stocks it will add a new flavour to stock investing too & help one stick to fear & greed in individual stocks too. I hope this innovative idea wud help investors / traders too in the new age investing to a great extent.

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Rajendra Talwar

Nov 30, 2020

I just wished to ask you what about the multi bagger equities suggested to us which are supposed to move up many times, if we were to liquidate them now with whatever profits earned on them!

This is very important to address this situation.

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PREMKUMAR R

Nov 29, 2020

Happy to welcome you.

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R Parikh

Nov 27, 2020

To comment am disappointed the least you'll could have done is to give a graph from 2000 till date of so called Greed & Fear Index of his and the Nifty 500..

Can you provide & arrange??

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Ramesh B

Nov 27, 2020

well come Sir! with best wishes for mutually prosperous journey
at EquityMaster! Very well begun !!

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