So we just hang in?

A friend writes “So we just hang in?” on the Indian stock market. I don’t track the Sensex or the local stocks in the Indian stock market, as I live in the U.S. But I do track IIF which is an India fund ETF. What has been happening to the IIF is what has been happening to the Indian stock market; and that is a broad reversal. So we just hang in?

Let us begin by looking at the IIF daily chart below done with Metastock software and an expert software trading system.

I see an exit Sell signal on the chart November 16th ,2010, when IIF was at $27.41. See the second red vertical line on the chart. That is when I would have exited on IIF. I would not be in the broad Indian stock market at all until conditions were better. IIF is now at $21.41; a drop of $6.00 from November and pain as we see our money going away over the last few months. This is why I like to use technical analysis and trading systems. They point the way to the door so that we can protect our money to make gains another day.

What would I do today if I was in IIF and saw this chart? I would get out. The indicators say the market is headed down and until it changes and generates an Up signal, I would stay out. We really cannot predict how long the down trend will last or whether this would continue for a long time. Perhaps it will turn around soon and I would lose some money had I stayed in and missed the immediate reversal. But it is better to learn technical analysis and follow systems in a disciplined way. That is the value I see in stock technical analysis.