All the knowledge in the world is worthless without a plan to put it intopractice and rules to give organisation to the plan. In the financial world, this means acquiring the necessary knowledge, defining a business philosophy, instituting a method of money management and sticking by well defined rules to guide your day to day decisions.

The dramatic volatility in the markets that has developed over the past few years, makes it foolish to buy and hold without understanding the importance of moving in and out of the markets or making portfolio adjustments with changes in the intermediate trend.

Scores of sectors in the old economy have been zooming ahead while new economy stocks continue to languish. As we move closer to the budget, we have been witnessing in the past few years that the fertiliser sector have been moving up on expectations of major changes in the policies for the sector.

However, in the past few years, no great changes in the fertiliser policies have come. This year we are again seeing a spurt in the activity in the fertiliser sector and I will today take a look at this sector and see how the stocks are faring. The intermediate trend of many of these stocks are up and have been moving up strongly in the past week or two. As the major trend of the sector depends on the government policies, all long positions in the sector must be initiated with a trading perspective.

Deepak Fertilizer
Deepak Fertilizer has been seeing a strong rise in the past couple of days as the stock moved past its 30 weekly moving average (WMA) and has also closed above its earlier intermediate top confirming a major uptrend. The relative strength line for the stock has also moved above its trigger line suggesting that the stock has started outperforming the indices. However, the recent rise has not been accompanied by a rise in volume which is certainly not a healthy sign. This indicates that even though the major trend of the stock is up, we could see a severe correction after the current run up ends. Thus, investors must stay away from the stock even though the major trend has turned up and the relative strength is bullish.

GNFC
GNFC was one of the first stocks in the fertiliser sector to go into a major uptrend. The stock consolidated sideways above its 30 WMA and has recently gone into a fresh intermediate uptrend. The major trend of the stock is up and the rise has been accompanied by a strong volume which means that the spurt is likely to be sustained and investors must hold on to the stock. The relative strength line for the stock continues to move up and the momentum indicators are bullish. The stock has been exhibiting rising major tops and bottoms since the past few years and this is a very healthy sign.

GSFC
GSFC is also in a major uptrend as the stock had bottomed out in October 2000. Like GNFC, the stock has also consolidated above its 200 daily moving average (DMA) and has now gone into a fresh intermediate uptrend. The relative strength line is bullish but is very close to its trigger line indicating that though the stock is moving up, it is not quite outperforming the indices. The trading volumes have been good but the stock is not quite as strong as compared to GNFC. Thus, investors must concentrate on GNFC as compared to GSFC. The stock has been making lower major tops and bottoms while GNFC has been making rising intermediate tops and bottoms.

Indo Gulf Corp
Indo Gulf Corp bottomed out in October 2000 and has exhibited ascending major tops and bottoms like GNFC. Thus GNFC, and Indo Gulf Corp are clearly the strongest stocks in this sector technically. The relative strength line is well above its trigger line and continues to move higher indicating that the stock is outperforming the Sensex and with the major and the intermediate trend being up, higher levels are expected in the recent rise. Investors must hold on to the stock and traders must trade on the long side.

Zuari Agro
Zuari Agro went into a major uptrend recently with many other stocks in this sector. However, the recent breakout above its earlier intermediate top has not been accompanied by a rise in volume like most of the stocks in this sector and this is certainly not a very healthy sign. The relative strength line for the stock has moved above its trigger line indicating that the stock is performing better than the market, but the weak volume suggest that the investors must stay away from the stock even if the major trend is up.

The weakness in the volume suggest that the recent rise could soon fizzle out and investors could get hurt.