When it falls to a level that appears cheap, they average down, throwing good money at a bad position.

Even worse, as losses start to mount, the next destructive step is to start taking profits in those stocks which are still winners. In the short run, this makes the investor feel better as he makes several entries in the plus column. But in the following months, the portfolio will reflect the effects of this short-term fix. Very simply, this ill-conceived strategy loads up your portfolio with losses while you discard the winners.

What drives us to this destructive behaviour? In one word: Ego. Too many traders and investors feel that if they pick a big winner they are a genius, but if theyloose they are stupid. Neither is necessarily the case. If you win through poor tactics, you are lucky. And if you book a loss but follow a disciplined approach, you have acted wisely. Have a long talk with yourself when you make a decision. Don't play the market so that you can brag at cocktail parties about your wins. Invest your time and capital in the market because you enjoy the challenge of making a nice return.

Today I will take a look at the banking sector. The index for this sector is facing a strong overhead resistance and could be topping out soon. The relative strength line for the index has been declining, indicating that it was moving up slowly compared to the indices. This is a short-term bearish sign. The weekly momentum indicator for the index are in their overbought zone and with such a strong overhead resistance, we could see the index and the stocks in this sector topping out.

State Bank of India

State Bank is in a major uptrend as the stock has been exhibiting ascendingintermediate tops and bottoms. However, like the banking-sector index, SBI has also been exhibiting a weak relative strength. This means that the rate of change of the stock price has been lower compared to the rate of change of the index in the current intermediate uptrend. Seeing the volume histogram, one can observe that the current rise in the stock was not accompanied by a rise in volumes, which is a bearish sign. This all translates a bearish view and investors could do well to book at least partial profits at these levels.

Bank of Baroda

Bank of Baroda is one of the best performing stocks in the sector. The relative strength index for the stock has been rising and is well above its zero line. The major trend of the stock is up and the stock has been staying well above its rising 30 WMA. However, if the index for the banking sector will face a resistance at the current level, the stock will also get affected, though to a lesser extent. Thus, investors may book partial profits at the currentlevels and hold on to the rest with a stop loss at the 30 WMA.

Oriental Bank

Oriental Bank is in a major uptrend but the stock's relative strength line has been below its zero line, suggesting that the stock has been under performing the indices. The stock has a strong resistance at the 45 level and the current level is a critical one. If the stock is unable to move past this level, there is a greater possibility that the major trend of the stock will soon turn down as its relative strength is already bearish.

HDFC Bank

HDFC BANK is in a major uptrend as it continues to exhibit ascending intermediate tops and bottoms. The stock's relative strength is however bearish, indicating that the recent rise in the stock was at a lower speed compared with the Sensex. Thus, investors may take precaution and book partial profits at the current levels and hold on to the rest. The weak relative strength is a sign of caution. The weekly momentum indicator for the stock is in the overbought zoneindicating that we could soon see a correction.

Bank of India

Bank of India is facing a strong resistance at the 27 level and the major trend of the stock is either down or sideways as the stock has been moving between 18 and 27. Since the past one year, the 30 WMA has also flattened out and is moving sideways. The relative strength index for the stock is weak as the relative strength line has stayed below its zero line. Investors must stay away from this stock.

Global Trust Bank

Global Trust Bank is still below its earlier intermediate top and hence the major trend of the stock is down. The 30 WMA has been moving up and is bullish, but the relative strength line is below its zero line and is bearish suggesting that the stock is under performing the indices. If the sector index faces resistance at the current level and turns down, the weak relative strength stocks will be the first to move down.