To survive as a market professional, you must be right often enough to consistently cover your expenses without consuming your investment capital. In other words, at minimum, you must preserve capital to stay in business.Though this may look self evident, it has implications that may be all too easy to overlook. The principle of capital preservation of capital implies that before you consider any potential market involvement, risk should be the prime concern. Only within the context of the potential risk should the potential reward become the determining factor in taking a position. This is what is known as the risk/reward ratio.

Thus, when the risk is the prime concern, the investor must first look at the performance from an absolute standpoint rather than a relative one. For many investors this is not the case. Their goal is to outperform the averages. If the market is down 15 per cent, but their portfolio is down only 10 per cent, they think they are a success. In terms of performance, there is only one valid question: "Have you made money or not?" If so, then it is appropriate to increase the percentage of capital at risk. If not, then it is time to cut back. Any other approach will lead to capital consumption.

The next principle is - consistent profitability. To gain capital, you have to be consistently profitable. You have to preserve gains and minimise losses. Therefore, you must constantly balance the risk and rewards of each decision, scaling your risk according to accumulated profits and losses. Thus, the odds of consistently being successful will increase. Most people might think that pursuit of superior gains involves aggressive risk taking. On the contrary, it is foolish ever to ignore or underweigh potential risk.Profits, once accrued, are essentially the same as capital and must be preserved. But once you have achieved a comfortable level of profits, it is appropriate to increase the size of positions by risking a portion of your profits. If you win, you will dramatically increase your returns. If you loose, you are still profitable, and can continue to pursue consistent profitability.

Many sector have been bottoming out in the past few weeks and are, in the process, moving up sharply now. The markets are in a process of constant rotation. Though the indices have been moving up since the past ten trading sessions, stocks have been pausing and correcting before moving up. This is a bullish sign indicating higher levels for the indices and the stocks in the sectors, which have bottomed out.

Today I will take a look at the hotel sector. A few stocks in the sector have already bottomed out as I had pointed out a few weeks back and other may bottom out once the bullish activity from the forward section spills over to the cash section. Till such time, investors must continue to pick up long positions in the most active stocks and those which have been exhibiting a bullish relative strength.

EI Hotels
EI Hotels bottomed out last may and surged ahead sharply in the last intermediate uptrend. After attaining a high of 270, the stock pulled back towards its 30 weekly moving average (WMA) and took a support at its long term moving average. The relative strength for the stock has been bullish as the relative strength line has been staying above its trigger line since the time the stock went into a major uptrend. The stock has again formed an intermediate bottom and started a fresh intermediate uptrend on Thursday. This means that the stock is poised to move up in the current intermediate rise and higher levels will be soon seen by it. Investors can pick up long positions at the current levels.

Indian Hotels
Indian Hotels is also in a major uptrend as the stock has closed above its earlier intermediate top in the earlier intermediate uptrend. After consolidating above the 30 WMA in the past few weeks, the stock has again gone into a fresh intermediate uptrend giving investors another chance to pick up long positions. Once it crosses the resistance level of 250, higher levels will be seen and the momentum will also increase. The trading volume in the stock has improved suggesting that the bulls are quite strong. The relative strength line, which has been moving sideways along with the trigger line, has now started to improve indicating that the stock has started to outperform the indices and higher levels will be seen. Like EI Hotels, the stock has gone into a fresh intermediate uptrend on Thursday and investors can pick up long positions in it.

Hotel Leelaventura
The major trend of Hotel Leelaventura is sideways as the stock has been oscillating about its 30 WMA and this moving average has been moving sideways. The stock is poised to go into a fresh intermediate uptrend and unless it is able to close past its earlier intermediate top with a rise in volume, the major trend will remain sideways. The sideways major trend of suggests that the stock is in the process of bottoming out, but investors must not enter in this phase as they will get trapped in the sideways mode. Once the stock bottoms out and goes into a major uptrend with a spurt in volume, they must look out for long positions.

ITC Hotels
ITC Hotels is also moving sideways about the 30 WMA. Hence, the major trend of the stock is sideways. Its relative strength line is moving along with its trigger line suggesting that the relative strength line is neutral. The stock could go into a fresh intermediate uptrend if the activity in the forward section spills over to the cash section. However, the trading volume have been very thin and the jobbing difference will be quite high. Investors must stay away from the stock as it is not one of the leaders in the Hotel sector.