These scripts will become Oversold tomorrow.

[sattimes]

The following post is my personal view and may differ from other members.

Please refer to this page: http://www.twonahalf.com/rsiintro.htm
There is a screen dump here. I have traded BHEL based on the indications of SOT, on the day where it is marked on that chart. One day ahead, the SOT had predicted a price point where BHEL would become oversold (2214.00), I bought the stock when it was trading at 2205, the stock went down to close at 2144. But from the next day onwards started going UP. I made some 5% in the stock in 5 days flat.

Why did I rely on the RSI levels? Firstly RSI is a very strong indicator and works very well for liquid stocks, secondly BHEL is an Index Stock. An index stock does not become oversold very soon, if it does, it doesn't remain at those levels very long, unless the story is absolutely BAD. Suzlon is a Nifty stock too, so one can take a call...

Once the people would have seen their EOD data at the end of the session, they would have realized that BHEL has become oversold, so buying was going to come in.
What was my advantage? My advantage was the SOT, which told me in advance at what price the stock was becoming oversold


Having said that, there is NO Guarantee that the stock will not further go DOWN. But that's the game of risk to reward, and I can take a risk in a NIFTY stock. I would have definitely not considered such a buy in the month of MAY when the carnage took place, but this time around it was OK because the overall market was UP.

For a safter trade, one would want to wait for tomorrow and see the volume action. If the volumes pickup, then one can take a position.

Regards

MANOJ T

hi manoj,

ur explanation is nice. but i am unable to understand the advantage which u r talking abt.

ur SOT predicts when the scrip will become oversold and u will buy at that price. the people who use EOD data find it oversold and buy next day. Now i dont see any advantage of ur SOT over the other fellow's action.

for eg, u bought suzlon at 1019, but the fellow who uses EOD, buys next day at opening price(say) for less than rs1000.

ur advantage has turned into disadvantage. expecting the clarification from u

regds
Satish

 

[ping_manoj]

hi manoj,

ur explanation is nice. but i am unable to understand the advantage which u r talking abt.

ur SOT predicts when the scrip will become oversold and u will buy at that price. the people who use EOD data find it oversold and buy next day. Now i dont see any advantage of ur SOT over the other fellow's action.

for eg, u bought suzlon at 1019, but the fellow who uses EOD, buys next day at opening price(say) for less than rs1000.

ur advantage has turned into disadvantage. expecting the clarification from u

regds
Satish

You are right in a sense. But then what if the stock hits the oversold rate and bounces back up.
Some time back I traded on SESAGOA when the SOT said it will become oversold at some 819 (if memory serves me right). It touched this amount for a brief period of time and bounced back from those levels in the same day. One might have lost on such kind of trade if he/she did not know the price point at whihc reaction may come.
I made this trade and benefitted from it in some 5%+.
There is always a point of view and once can use the one which most suits him. What you are refering to, I might think of it as "exact bottom fishing" it may or may not work.

Do you see the advantage of the SOT here?

Your suggession pls....

Regards

MANOJ T