I can help you with stock chart reading

Thanks VV.

So what are the stocks you currently recomend, that are moving with the market. Would be great if you can share your list of screened stocks.

You mentioned about the EMA in case of RIL, can you explain that a bit more what do you really mena there....what it means for the price moement or trend.

Thanks,

Hi vvonteru,
I appreciate u for starting this wonderful thread.
I have learnt a lot from this thread and hope to learn more.
I am still a beginner and i am still learning how to read the charts.
U have given that itc is in overbought condition, i want to know how to find out that a stock is in overbought condition and there is going to be a pullback.
u have given that ATR of ITC is 8, i want to know how to get the ATR from the charts.
U have given that reliance and itc are looking strong.
I want to know what in reliance and itc charts make them look strong.
I know that i am asking too much but if u can explain it will be very helpful to me.
Thanks in advance.
SIMPLEMAN

I was following Reliance Industries and wanted to recommend. I forgot. Recently, I did not recommend any stocks because, the market has still not reached a point of confirmed trend. I am looking for 8 day EMA crossing up 50 day EMA for indexes. When I recommend some stock in this thread, I am cautious and want to make sure there is high certainty. I did not scan recently. I will do that and put up a list if you want to choose.

EMA check
-- There is a reply if you go back 4 or 5 pages on checking health of the market. I use 3 EMAs. Short term EMA (8), Intermediate term EMA (50) and Long term EMA (200). Uptrend is confirmed when EMA 8 > EMA 50 > EMA 200. In other case:
EMA 8 < (crossed down) 50 - Bad (Down Trend started)
EMA 8 < (crossed down) 200 - Worse (Down Trend Confirmed)
EMA 50 < (crossed down) 200 - Bear Market Confirmed

I use the above criteria to look for trends. I like Reliance Industries for
1. EMA 8 > EMA 50 > EMA 200.
2. It is in Oil & Gas sector which trades independently of the market.
3. Had a nice pull back for entry couple of days back.

A stock can be overbought or oversold condition for long time. Normally, stocks move in waves (like waves in ocean). You buy when the wave is down (pull back). When there is strong demand, the stock continues to stay in overbought condition. But, eventually, there will be profit taking and the stock pulls back.

ATR
-- I use Amibroker and ATR is a function I call. But, here is a link for calculating ATR.
http://www.stockcharts.com/education...indic_ATR.html

Reliance Strong
-- See the explanation above. ITC chart looks similar.

Thanks VV,

Looking at the indicators when do you recommend Buy....looking at the 4 cases you cited.

EMA 8 > EMA 50 > EMA 200.
EMA 8 < (crossed down) 50 - Bad (Down Trend started)
EMA 8 < (crossed down) 200 - Worse (Down Trend Confirmed)
EMA 50 < (crossed down) 200 - Bear Market Confirmed


Similarly when do you say sell and book profit. So incase of reliance since EMA 8 > EMA 50, does that mean there is going to be a pullback - would you define this as overbought situation.

So at EMA 8 > EMA 50 (crossover) should one sell or wait for further uptrend.

Appreciate if you can explain this using the RIL case.

Thanks

can u tell me about Gammon India

If you buy when EMA 8 > EMA 50 > EMA 200, you can avoid lot of false signals. What this may mean, you are not catching the trend early. You are not catching the bottom. Risk is less. I don't know about reward. You can make money when you follow this technique too, instead of catching bottom. Now you are asking why people buy at bottom. People who do that fall into different category players.
1. So called Long Term players. They look at P/E ratio of a stock and buy some shares.
2. Short term traders who look at the oversold market and make short term trade.
3. Amateurs/Gamblers who look at a price of a stock and compare before the stock has fallen and think it is cheap and buy it. But, they don't have an exit plan.

When do you sell/profit. This has to be defined by you. Stop/Profit exits must be based on your risk level and comfortability. For example, I could use risk based ATR, support, % risk, loss amount etc. Similarly, profits can be taken by trailing stop and let the market hit your stop. Or using % profits. Please read Van Tharp's book on 'Trade Your way to Financial Freedom' on Exits.

8 EMA crossing down 50 day EMA is an absolute sell condition. Most people buy at 50 day EMA. If that buying did not salvage that stock, then it is going down. Holding that stock doesn't make sense. Think about it. If people used this simple technique, they would have been saved in last months downslide. 200 day EMA is a buy for funds. They might help. But, you should wait for the stock to come back with 8 crossing above 50 for buying again.

RIL cannot be said to have overbought codition, as there was a pull back recently. Overbought condition can be seen using oscillators liek Williams, Stocastics, RSI. If the stock remains above 80 for some duration, it can be considered overbought.

Gammon India
-- It is in absolute bottom right now. You can't sell (short) this as it is already in oversold condition. I wouldn't buy it either, because, this stock did not respond to the recent upside of indexes.

Stocks Setup (No Entry at!)
Reliance
SAIL
ITC
COLGATE
AMARA RAJ BATTERY
DABUR INDIA
RELIANCE CAPITAL (CMP=490. ENTRY NOW at 520. ATR=40. If you want to be safe, leave this entry and wait for next one)

You can determine the market strength based on the no. of stocks that come up in the scan. A month back, I used to get tons of stocks ready for entry. I had to look on how to eliminate the stocks from the list to display the best. Now, I only got 7 stocks as setup, not even ready for entry. This explains the strength of the market.

mr vvonteru, thanks i am a fan of you, YOUR TRADE KNOWLEDGE IS SUPREME. SWING TRADE IS ASTYLE DIFFICULT TO HANDLE, RECENT COMMENTS BY YOU ON DR ELDERS'BOOK PROVE THOSE GREAT TRADERS LEVEL U HAVE REACHED, would you comment HOW TO HANDLE LOSS?
oilman5 [youngoldfo2000@yahoo.co.in}

Please don't compare. I didn't mean to undermine Elder. I just pointed that the book was not so great. Out of the 16 trader's methodologies, I only liked 1 for more analysis. Others are mediocre and the way they traded looked as amateurs. Not worth so much money for the book. But, Elder is different. I just pointed what is missing in his Tripple Screen Methodology. He does not consider market and sector into consideration in this methodology. Not that he does not look at them when he actually trades. But, if some one followed the methodology based on his previous books, they would not know to look first for market and sector direction. Neither he talks about how to put stops and take profits. So, Elder's first 2 books are a good start. You should read Dave Landry's books for Setups and Van Tharps book for Money Management and Exits.

I didn't understand your question about 'HOW TO HANDLE LOSS'. What do yo u mean by that. When you enter a stock, you know how much you are risking. You are accepting that risk. If you are not accepting that risk, then you shouldn't be in that stock. You should accept loss or gain as same. Remember, just because you made gain in a stock doesn't mean you are running away with the money to the bank and never coming back. You are still in the game and playing again. For example:

Lets say in a span of 6 months you made 20 trades. To make it simple, lets say you made 15 wins and 5 loses (this is hard to achieve). You might be happy when you made those 15 wins. But, if you do not have good trading strategy, money management and mental strength to stick with your defined methodology, you might give back what you gained in the 5 loses. The example is to show you how the result of not 1 trade matters but over multiple trades.

So, strive to achieve consistent results, risking less and focus on accumulation. In the initial stages, defining and streamlining the process is more important than making money. Don't gamble. Use smaller positions.

THANKS MR VVONTERU, IT PROVES U USE TRIPPLE SCREEN CONCEPT, U R AN ENGINEER.U HAVE HIGH DEPTH ON ENTRY AND EXIT.AS ONLY AFTER RISK CALCULATION U ENTER, 1-2-3 /SUPPORT OR PULLBACK BUYYOU USE, DISCIPLINED ENOUGH AND DEFINITELY SENSE OPPURTUNITY,AVOID UNCERTAIN SITUATION GREAT ....SALUTE TO YOU oilman5[youngoldfo2000@yahoo.co.in]note perhaps you have still i am sending 1. http://live.tradingmarkets.com/p75876641 NEXTONE http://live.tradingmarkets.com/r64036361 ANOTHERONE http://live.tradingmarkets.com/p84961054 ....i used to learn from tradingmarkets.com. if link dont work , setting has to change to activate link . Not worth so much money for the book. But, Elder is different. I just pointed what is missing in his Tripple Screen Methodology. He does not consider market and sector into consideration in this methodology. Not that he does not look at them when he actually trades. But, if some one followed the methodology based on his previous books, they would not know to look first for market and sector direction. Neither he talks about how to put stops and take profits. So, Elder's first 2 books are a good start. You should read Dave Landry's books for Setups and Van Tharps book for Money Management and Exits.

I didn't understand your question about 'HOW TO HANDLE LOSS'. What do yo u mean by that. When you enter a stock, you know how much you are risking. You are accepting that risk. If you are not accepting that risk, then you shouldn't be in that stock. You should accept loss or gain as same. Remember, just because you made gain in a stock doesn't mean you are running away with the money to the bank and never coming back. You are still in the game and playing again. For example:

Lets say in a span of 6 months you made 20 trades. To make it simple, lets say you made 15 wins and 5 loses (this is hard to achieve). You might be happy when you made those 15 wins. But, if you do not have good trading strategy, money management and mental strength to stick with your defined methodology, you might give back what you gained in the 5 loses. The example is to show you how the result of not 1 trade matters but over multiple trades.

So, strive to achieve consistent results, risking less and focus on accumulation. In the initial stages, defining and streamlining the process is more important than making money. Don't gamble. Use smaller positions.[/quote]

by the way,i lose not using strict stoploss., and as i play break out. normally i am 80%time wrong, so i plan to switch style
oilman5