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Sunday, March 16, 2008

Maruti way ahead in mid-sized sedan segment

Country's largest car maker Maruti Suzuki India, better known for its compact cars, has zipped past competition, including Honda and Hyundai, in the mid-sized sedan segment this fiscal on the back of its successful model SX4.

The company, which has been focusing on becoming a full-scale player to outgrow its small-carmaker image as a part of parent Suzuki's global strategy, has managed to grow 53.2% in the A3 (mid-sized sedan) segment during the April-February period.

According to the latest data by Society of Indian Automobile Manufacturers (SIAM), MSI's sales in the period stood at 41,799 units as compared to 27,283 units in the same period last year.

The growth has enabled the company to speed past Honda Siel Cars India (HSCI), which was at the number one slot in April-February period of the previous fiscal. HSCI sells City, its popular model in the segment.

In the ongoing fiscal, HSCI's cumulative sales stood at 34,029 units as against 35,300 units in the corresponding period last year.

Hyundai Motor India comes third in the segment with 29,146 units sold in the period as against 25,147 units a year ago. The company sells two models - Accent and Verna - in the category.

The fight for the fourth place in the segment is a close one, between Ford and Tata Motors that have respectively clocked sales of 26,485 units (down from 34,681 units last year) and 26,281 units (29,949 units last year) during the period.

Ford has Ikon, Fiesta and Fusion models in the segment, while Tata Motors has Indigo and Indigo Marina.

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Understanding Short Term Trading

Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.

Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.

Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.

Types of Moving Averages

1) Simple Moving Average (SMA)

SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.

2) Exponential Moving Average (EMA)

EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.

The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.

A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.

In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.

Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.

Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.