I can help you with stock chart reading
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Mr VV: Aftek Infosystems
Dear VV,
Can you take a look at the Aftek charts. I know you won't like its long term chart, but I like the stocks fundamental: I personally feel it is a multibagger in a year or two. Recently, it has been hammered to its year low, but it is in a short term uptrend. Saint has made prudent comment regading it---basically to avoid it, tecnically speaking. I'm intersted in the short-term chart: recently it has been trading with excellent volume, Merrill Lynch etc.. I've entered the stock at 45,
2000 shares!
Kumar
Dear VV,
Can you take a look at the Aftek charts. I know you won't like its long term chart, but I like the stocks fundamental: I personally feel it is a multibagger in a year or two. Recently, it has been hammered to its year low, but it is in a short term uptrend. Saint has made prudent comment regading it---basically to avoid it, tecnically speaking. I'm intersted in the short-term chart: recently it has been trading with excellent volume, Merrill Lynch etc.. I've entered the stock at 45,
2000 shares!
Kumar
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Harmad,
Here is my suggestion for you to consider. There are two steps you need to think about before taking a position. They are:
1. Setup
2. Entry
Does not matter if you are using Technical Analysis or Fundamental Analysis. Lets take Fundamental Analysis, since I know you use it. You look at a company's fundamentals and find that company provides multiplied growth quarter after quarter and year after year. You like the management of the company. Its P/E ratio is low compared to stocks within that sector. So, you determine that it is a well run company and available at low cost. You determine that you want to invest in it. So far, you just have a SETUP.
Now you need determine the condition when you will enter a position in the stock. You don't want to enter when the stock and its sector is tanking. When the market itself is tanking. At that point, it does not matter how good the stock is, how cheap the stock is etc. The conditions have to be right. I will get back to you with some examples if there are any entry conditions from Fundamentals perspective. I know from technicals point of view if you want to consider.
1. Buy only at 50 day EMA. 50 day EMA is the heart beat of the stock.
2. Buy only when 8 day EMA crossing above 50 day EMA. This is more stringent than 1.
3. Buy when some stocks in the selected sector are also having condition 1 or 2 satisfying. Using this condition, you are making sure your stock is part of the group. More safety net.
4. Buy when Market Indexes are satisfying 1 or 2. More safety net in addition to 3.
I like to follow conditions 4, 3 and 2. But, you could choose to be lax and only select one of the above conditions. Thats fine.
I like to give example of farming. Farmer determines to use a particular seed because of its high growth and higher output (SETUP). But, the farmer chooses conditions of season and weather to finally plant the seed (ENTRY). He doesn't do it in summer when there is no rain. If he does, inspite of the seeds higher output, he may get lower result or nothing. Why, conditions have to be right!!!
Enough said. TVS Motors has been in continuos downtrend. Draw a trend line from peak of 170 to current price. The stock is below the trend line. Until it crosses this trend line, there is no hope. If it does, we can see some change in trend. May not be up. What is different in this downtrend versus other stocks is, the downtrend is slower along 50 day EMA. That means, less chances of correction. More the stock goes away from 50 day EMA, high chances of correction.
Aftek:
Read above about Setup and Entry.
Draw a trend line between 140, 120 and 100. If that line is broken, then consider for Entry. For your current position, get out if the stock comes down from current trading range between 50 and 60. If it goes up, consider point around 70, where the trend line touches. That may act as resistance. If it goes beyond 70, then you got your multibagger. If not, it comes back to trading range of 50 to 60, I would come out of the stock.
Here is my suggestion for you to consider. There are two steps you need to think about before taking a position. They are:
1. Setup
2. Entry
Does not matter if you are using Technical Analysis or Fundamental Analysis. Lets take Fundamental Analysis, since I know you use it. You look at a company's fundamentals and find that company provides multiplied growth quarter after quarter and year after year. You like the management of the company. Its P/E ratio is low compared to stocks within that sector. So, you determine that it is a well run company and available at low cost. You determine that you want to invest in it. So far, you just have a SETUP.
Now you need determine the condition when you will enter a position in the stock. You don't want to enter when the stock and its sector is tanking. When the market itself is tanking. At that point, it does not matter how good the stock is, how cheap the stock is etc. The conditions have to be right. I will get back to you with some examples if there are any entry conditions from Fundamentals perspective. I know from technicals point of view if you want to consider.
1. Buy only at 50 day EMA. 50 day EMA is the heart beat of the stock.
2. Buy only when 8 day EMA crossing above 50 day EMA. This is more stringent than 1.
3. Buy when some stocks in the selected sector are also having condition 1 or 2 satisfying. Using this condition, you are making sure your stock is part of the group. More safety net.
4. Buy when Market Indexes are satisfying 1 or 2. More safety net in addition to 3.
I like to follow conditions 4, 3 and 2. But, you could choose to be lax and only select one of the above conditions. Thats fine.
I like to give example of farming. Farmer determines to use a particular seed because of its high growth and higher output (SETUP). But, the farmer chooses conditions of season and weather to finally plant the seed (ENTRY). He doesn't do it in summer when there is no rain. If he does, inspite of the seeds higher output, he may get lower result or nothing. Why, conditions have to be right!!!
Enough said. TVS Motors has been in continuos downtrend. Draw a trend line from peak of 170 to current price. The stock is below the trend line. Until it crosses this trend line, there is no hope. If it does, we can see some change in trend. May not be up. What is different in this downtrend versus other stocks is, the downtrend is slower along 50 day EMA. That means, less chances of correction. More the stock goes away from 50 day EMA, high chances of correction.
Aftek:
Read above about Setup and Entry.
Draw a trend line between 140, 120 and 100. If that line is broken, then consider for Entry. For your current position, get out if the stock comes down from current trading range between 50 and 60. If it goes up, consider point around 70, where the trend line touches. That may act as resistance. If it goes beyond 70, then you got your multibagger. If not, it comes back to trading range of 50 to 60, I would come out of the stock.
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For condition 3, IT index. Be sure to check stocks that are part of IT index. Recently, I bungled with OILGAS index. Index was showing good only because of 1 stock, i.e., Reliance. Thats no good. You can get information on the stocks in a index from BSE or from NDTV site. Search in this thread on NDTV.
For condition 4, follow BSE500. Sensex only tracks 50 stocks. Thats no barometer to check the entire market. Infact, I got side tracked and started following Sensex. However, since Sensex and Nifty are followed through in general, be watchful of important levels. Like 10,000 for Sensex.
Stops and taking Profits are something I am still struggling with. I have come along and learnt the following:
1. There can be multiple SELL conditions to get out of a position. Consider the following:
1.1 STOP gets hit for loss or profit.
1.2 TIME STOP gets hit. You give a stock certain time frame to move. If it doesn't you take out the position.
1.3 At each end of day, you look at a stock chart. If its not behaving the way you want it to, you take it out. Or should we?
2. STOP has to be a minimum 2 * ATR. ATR is the average true range which captures the daily volatility of a stock. Think about it. You have choosen a stock from SETUP. Don't you want to give benefit of doubt. You don't want it to be taken by daily noise. You STOP's first objective is to not be taken by daily noise. Secondly, your STOP has to be at a point where you feel the SETUP doesn't exist anymore. Using this theory, I like to use STOP below previous base.
3. I found Chandelier logic of STOP. It does well with handling STOPS but not so good with capturing profits. It is based on 3 * ATR.
4. Profit taking: I used to follow 50% profit taking when initial risk is met. You would read this at the beginning of my thread. Recently, I read Van Tharp's book (One of the best book I read so far. Setup and Entry are clearly explained). I stopped taking 50% profit. I am experimenting with moving the stop with 100% position. Once the profit target is reached, I reduce the STOP to capture the profits.
For condition 4, follow BSE500. Sensex only tracks 50 stocks. Thats no barometer to check the entire market. Infact, I got side tracked and started following Sensex. However, since Sensex and Nifty are followed through in general, be watchful of important levels. Like 10,000 for Sensex.
Stops and taking Profits are something I am still struggling with. I have come along and learnt the following:
1. There can be multiple SELL conditions to get out of a position. Consider the following:
1.1 STOP gets hit for loss or profit.
1.2 TIME STOP gets hit. You give a stock certain time frame to move. If it doesn't you take out the position.
1.3 At each end of day, you look at a stock chart. If its not behaving the way you want it to, you take it out. Or should we?
2. STOP has to be a minimum 2 * ATR. ATR is the average true range which captures the daily volatility of a stock. Think about it. You have choosen a stock from SETUP. Don't you want to give benefit of doubt. You don't want it to be taken by daily noise. You STOP's first objective is to not be taken by daily noise. Secondly, your STOP has to be at a point where you feel the SETUP doesn't exist anymore. Using this theory, I like to use STOP below previous base.
3. I found Chandelier logic of STOP. It does well with handling STOPS but not so good with capturing profits. It is based on 3 * ATR.
4. Profit taking: I used to follow 50% profit taking when initial risk is met. You would read this at the beginning of my thread. Recently, I read Van Tharp's book (One of the best book I read so far. Setup and Entry are clearly explained). I stopped taking 50% profit. I am experimenting with moving the stop with 100% position. Once the profit target is reached, I reduce the STOP to capture the profits.
Last edited:
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