I can help you with stock chart reading

This note is directed to short to intermediate traders. But, long term investors, U should read too.

Most of U have a question in your mind. If I don't buy now, when do I buy. Will I miss the move. Some stock XYZ was 150 a couple of weeks back and now it is 50. It is so cheap. So, why can't I buy it. I have couple of examples explaining why not and indicator(s) when U should.

Before I delve into the (real) examples, I just want to make a statement. Any thing can happen in the market. All options are open. They just have different probabilities.

Examples (from US market):
1. This example is from US 2000 bull market. Nasdaq was around 5000. It dropped to 3500. People thought all the stocks were cheap. So, bought more. Then it dropped further. People thought, the market was doing similar things as before. It drops and comes back. Till date, it never did. Nasdaq is around 2000 now.

2. During that bull market period, people bought a stock JDSU for $160. Now it is $3.00. After so much selling, JDSU was known more for Just Don't Sell Us. Here is the link if U want to check out the stock. Like JDSU, there are several US stocks that are no where the price near 2000 year.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9

3. Here is a mutual fund from the bull market era. Was around 100 during that time. Now under 20.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9

4. How about Japanese market. What a slump. Just recently, it started picking up.

I can give U more examples. But, I guess U guys got the point. Now the question is, when is the right time to enter. Just as doctors use stethoscope to check heart beat of a sick patient, we have EMAs to check our falling markets (Its a patient now). So, lets see how the market (BSE500 or Sensex or Nifty) is doing using 8 (short), 50 (intermediate) and 200 (long term) day EMAs.
1. Below 8 day EMA. Bearish for short term
2. Below 50 day EMA. Bearish for Intermediate term.
3. Below 200 day EMA. Bearish for Long term.
4. 8 day EMA crossed down 50 day EMA. I use this for shorting.
5. 8 day EMA has not crossed down 200 day EMA. So, there is still hope for the market.
6. 50 day EMA has not crossed down 200 day EMA. This comes after step 5. This is the worst case. At this point 200 day EMA is sitting above 8 and 50. We don't want this to happen.

From the above, if you scale from -5 (bearish) to 0 to 5 (bullish), the market is around -3. So, what do we want to see if the market has to become better.

1. Market must come above 200 EMA.
2. 8 day EMA must cross above 50 day EMA.

Let the above 2 happen. Then, I will put tons of stocks for U to buy. Until, then keep the powder dry. Have the cash.

Common Sense Note: Don't feed a sick patient who has lost weight. Let the patient recover from sickness. Then we feed.

For all the people who are investing for long term. Don't think long term means, buying and holding. Long term means, buying and doing home work at each and every step. Home work on the stocks fundamentals. Did the fundamentals change? Did the fundamentals change in the market conditions. Did U consider interest rates that are rising globally? U have to consider not only stocks fundamentals but also underlying economic conditions.

Hi VV!
Very good write up! Keep them coming.
God Bless You.
Disciple.

Hi VV,

What a simple way you have put the things! keep it up.

Regards

Hi VV,
You were right on target. Very informative post for beginers like me.
Thanks,

Dear sir,
Wanted to post a word of appreciation right from the beginning of the thread but held back not to spam the thread with irrelevant stuff .Now I cannot help but record my admiration for your simplicity and clarity of approach and above all the discipline to stick to your model that is exemplery.I dont know (nor do I care) whether you are senior in age or experienced but I salute the way you present trading to be done no ifs and buts just the pithy core.Please dont mind these words just carry on with the great thread.

Thanks and regards

Kannamthanam

Hi VV,

Never read such wonderful explanation any where. Nice to have educative tutors like you in the forum.

Thanks,
Balaji.

Hey vvpnteru i need some help ,

Can u tell me if zen technologies and markans pharma are good pics . Fundamentally they're highly undervalued . I need your opinion

Harsh

They are all beaten down. Getting close to zero. But, I can't buy. About fundamentals and long term story, you should some ask someone else in the forum. I can only help U with TA. They are bad from TA point of view.

On another note, thanks guys. Ur notice is an encoragement.

Sir your daily input would be billion times appreciated, approx market thoughts or anything you feel worth mentioning... hope I am not extending my welcome...

Currently, there is nothing to write on the market. It is in oversold condition. Just as in bull market it can stay in overbought condition for long spells, in bear market it can stay oversold condition for some time. What it means to a trader:

1. Can't buy
2. Can't sell short either. I am not talking about day trading. In day trading, U can do either based on the signals. Bad thing in India is, you can't short and keep it more than a day.
3. So, the only option is keep quiet and stay out.

Therefore, coming to daily input, there is nothing to analyze. U could analyze the the levels the market will hold. But, U can do that out of interest. Other reason could be trying to determing the turn in the market. I try not to catch bottom or top. Too many traders got burnt trying to do that. I will leave that to pros. So, just relax and read books in this gloomy time.