I've seen stocks trading in a congested zone for 6-7 months... then spurt up as much as 300%.. then go back to previous levels again.. thought all that play was coz of 'perception of market participants'; called 'Operator' in layman's language: gang of promoters, HNV's, funds etc. Ya I c that one can describe such behaviour by 'fundamentals' alone.. and charts have nothing to do with it. Ohh I thought that for a crash there needs to be created euphoria.. I was ignorant about FA valuation ...wonder why horse betting is associated with the mrkts (
http://www.traderji.com/technical-analysis/9870-secrets-professional-stock-market-speculation.html)
Ya such manipulations do happen (This is also something Fundamentals protect you from while Technicals don't - both the blatant and not-so-blatant manipulations) I have seen more 'sheep' get 'slaughtered' by buying into penny stocks with no Fundamentals but great Technicals! (i've seen stocks quoting below their face value being designated as 'hot tips' Fundoos tell me don't touch even with a l-o-n-g pole no matter how good the technos look)
But i may also add here that periods of consolidation is also natural (both for stocks as well as mkts when the techhies say the stock or mkt is 'ranging') These are periods when the weak hands sell out while smart money accumulates (buying in small lots so that prices don't shoot up) Once the supply stops the continuing demand drive prices up. Everytime you see such a consolidation pattern you wonder which way the stock would go from hereon (i.e. breakout or breakdown from the 'rectangle', 'triangle', 'wedge' or whatever else figures in techie parlance) Here i've found fundamentals can provide a clue If the fundamentals remains good the stk is likely to breakout rather than breakdown (in fact i've noticed longer the period of accumulation better, more flying the breakout) I can cite Jain Irrigation as a recent example (where i was recently stopped out at 470) Didn't do much for a long time ranging between 230-250 but i was confident of a breakout based on my fundoos and when it did breakout ...
BTW i came across an excellent article on horse-betting in this forum (don't remember who posted it). But the essence of the article was since the majority loose money in horse-betting then to be a winner BET AGAINST THE MAJORITY i.e. go against what the majority thinks is right & you'll make money! Such contrarion style of investing do exist in stk mkts Why now you even have Contra funds! (Sugar can be a good contrarion bet at this juncture as the long term picture remains good; so one can take advantage of the short term bearishness and buy at better values I have an eye on Shakthi Sugar as it also has an alternate Auto comps biz with good cash flows Provides a Fundamental hedge Also they have recently raised fresh money Means high int debt will go down & the reduced int outgo will add to the company's bottomline Now where are my charts ...)
ya i c that the May correction was gud... it brought down some stocks like hell and they continue to trade at same levels... guess the fundamental of those companies were changed during the crash(span of some days). People keep asking me that they bought shares of a company after gud results then why did it came down
Agreed that in the short term markets do behave in an irrational manner more often than not But in the long run it does give each one what they deserve Overvalued stocks (ahead of their Fundamentals) move down while the undervalued lot moves up (same for the mkt as a whole Overheated mkts cool down & vice versa) This is the beauty of the markets - the order in the apparent chaos, the harmony in the apparent disharmony Those who fail to read it go either
or
The undervaluation is actually an opportunity for value investors to buy. I bought KEI Inds for 290 (deemed myself lucky to get such a fundamentally sound stock at such a throwaway price) Has moved up Still hoding Have a target of 600+. Same story for MICRO TECH.
Many friends asked me wether to buy sugar stocks when they spurted up last friday by as much as 17%.. I posted a chart on my blog for them. damn! why does it works!
The negative outlook in sugar is a short term one The long term fundamentals still haven't detiriorated specially when you consider the ethanol story (India has the potential of becoming the world's 2nd largest ethanol exporter after Brazil only if the govt allows it) I guess the short term punters are also betting on the ethanol story So you have these spurts in sugar stocks everytime oil prices move up Still my fundoos tell me don't buy into a sector where the near term sectoral outlook remains hazy (& worse, dependent on the policies of a populist govt).
Recently my fundoos have also been pricking me about IT stocks & other export oriented sectors given the depreciating dollar (it's telling me that the 'perceptions' of CV & his ilk may soon change!
It's urging me to get into more domestic-demand driven sectors. I know i can't ignore it's nagging for long (for my own good).
I like da dude's writing style
Thanks. I wish i could develop the casual, matter-of-fact style of the Motley-Fool website.
wen did I say this guy does not believes in fundamentals?!!
Oh come on lohiya ... I need your help in facing CVs vociferous attacks (he's so good with words!)
PS: I am also not throwing or grabbing anything
hail FA!
That's the bottomline If you don't believe in Fundoos So be it No big deal Just learn your Technos well & you'll do better than mere survival I just believe in keeping those windows open (great fan of Tagore & nothing to do with being a Bongo!)
By the way don't know how ethical (even if legal) it is to keep advertising your private Blog in a public forum Leaving that to your conscience & good sense. No offence friend.
Regards,
Kalyan.