Though a trader or an investor may have a good judgment of the major trend, the timing may not be perfect resulting in a loss. Many inexperienced traders, at the time of buying a stock, have no objectives or idea of what policy to use in deciding when to sell and book profit. If the stock goes down, they have no way of deciding when to sell and take a loss. Ultimately they often loose their profits, and their losses run heavily against them.

No trader or an investor is likely to catch the extreme top of a rally or the extreme bottom of a reaction. We all see the stock running perhaps several points against us after we close a position. Even on a perfectly sound and a wise investing position we may see 10 to 15 percent of paper loss in an intermediate correction.

Obviously, if we run to cover without sufficient reasons, we are taking an unnecessary loss or a small profit and forfeiting entirely a chance to register a gain. Thus, an investor or a trader must use a strict stop for all the positions and must liquidate the positions when there are enough reasons for him to do so. Long-term investors who look at the weekly and the monthly charts, must book partial profits if either the major trend of the market, or the sector is weakening as indicated by the long-term indicators.

The balance profits could be booked when the stocks drop below a particular long term trend, following an indicator like the moving average. Currently, though the major trend of the market is up, the indices must go above their earlier intermediate top to confirm a continuation of the major trend. If this does not happen and the indices exhibit a lower intermediate top, we could well see a correction to the major trend. The weekly MACDindicator for the indices has already dropped below its trigger line suggesting that the major trend of the market may have turned down.

However, the indices have yet to confirm the same. They have either to exhibit a lower intermediate top or have to drop below their earlier intermediate bottom, in the next intermediate downtrend, to confirm the same. But as the weekly MACD indicators for the indices have turned down from an overbought zone, we are likely to soon likely to see a correction to the major trend. This must be kept in mind before investors look out for any fresh long positions.

Last week I looked at the domestic pharmaceuticals sector and today I will look at the multinationals in the sector. Usually, multinational pharma companies have always lead the Indian pharmaceuticals business, but of late we are seeing many domestic companies faring better compared to their counterparts. However, many multinational pharma companies which were in a major downtrend in the past few months have turned upand their weekly momentum indicators have turned bullish suggesting that they are also likely to pick up soon. However, if the major trend of the market turns down, we may not see a smart rise in the sector as could be expected when the weekly momentum indicators turn up.

German Remedies

German Remedies bottomed out in mid-1997 and went into a major uptrend by exhibiting rising intermediate tops and bottoms. Since that time the stock has been staying above its rising 30 WMA and the relative strength has remained bullish. It is one of the few stocks in this group which has exhibited a new intermediate top recently and is in no mood to relent. With the major trend of the stock up and as its relative strength line is bullish, investors must hold on to their long positions. The weekly momentum indicators for the stock is bullish and have been exhibiting higher tops, suggesting that the stock is likely to follow suit and higher levels in the stock will be seen.

Rhone-Poulenc

Rhone-Poulenc isanother stock which has also exhibited higher intermediate tops recently and has gone into a new high territory. The stock bottomed out in December 1998, along with the indices, but has recently been outperforming the indices. Rhone-Poulenc has moved past the earlier intermediate top and is in the new high territory. The weekly momentum indicator for the stock is bullish as it has moved above its trigger line and is exhibiting higher tops. Investors must hold on to their long positions in the stock.

E Merck

E Merck is in a major uptrend since mid-1998 as the stock moved above its earlier intermediate top and long-term moving average. Since April 1999, the stock's weekly momentum indicator had exhibited a sell but the stock stayed above the 30 WMA, suggesting strength and when the weekly momentum indicator turned up recently, the stock has again started to move up. Now the daily as well as the monthly momentum indicator are up and investors as well as traders must continue to hold on to their longpositions as higher levels in the stock are expected.

Parke Davis

Parke Davis had dropped below the 30 WMA in April 1999 when the stock as well as the group went through a correction. Recently it bounced back and went into a major uptrend as the weekly momentum indicator for the indices went above the trigger lines in majority of the stocks in this group. The relative strength line, which had dipped below its zero line, has also moved above it suggesting that the stock is performing better than the indices and investors must continue to hold on to the stock. The relative strength line is moving up and with the weekly momentum indicators also bullish, higher levels will be seen.