"It is never a good idea to put all your eggs in one basket,". It means that limiting your investments to just a few companies greatly increases your risk, especially if one or two of your holdings experiences a meltdown or falls in bear grip.
So, one should use multi market analysis & look at the correlation between two or more asset classes. This is called Intermarket Analysis.
Case Study for USDINR
Report on 28th Sep2017 - Dollar Superman - Up -Up & Away
Expected that dollar rupee has resistance between 65.95-66 Zone & we shall look for a dollar slip from 66 to 64.80-65.20 zone - which was witnessed not once but twice the level of 65.20-65.25 where USDINR is forming support as expected.
This correlation helped in understanding that Nifty was perfect long or buy call in 9685-9700 zone ( if you remember we picked Nifty at 9715 for 9785-9800 zone & suggested that any further weakness or selling in Nifty is advisable only below 9800 - if Nifty sustains below that level).
Technically it was as well@9685 on 28th Sep2017 & Expected Stronger Rupee from 66 to 65.20 was another clue for Nifty Bulls.
RBI may keep the interest rate unchanged (Status quo) which has been discounted in the price moving from 9700 to 9900 so far. Hence, we have to be careful as Dollar taking support at 65.20-65.25 zone can hold further Nifty up move which was witnessed since 28th Sep2017 (200 points jump from 9700 levels)
Post RBI decision at 14:30 Hrs@4th Oct2017 - Traders should be careful for long positions in Nifty as any sustained move below 9900 - can react sharply downside or become volatile - pushing dollar rupee upside above 65.30 & can attempt 66.00-66.10 zone next.
It was sustained move below 9900- Bulls to be careful means any sell position only below 9900 mark & Dollar Rupee move above 65.30 mark.
Abhishek H. Singh, CMT
Growth Director - India