Trading Strategies Using Technical Analysis

[crown]

VJAY,

I had mentioned about this earlier. Whatever swing trades I do, I do it off the charts and by witnessing that stock in real time. It's about identifying shift in supply and demand in real time.

I use charts to map out the key daily, weekly support and resistance levels. Once this is done, I move on to the stock to check it quotes in real time. When the stock approaches those levels, I like to witness its behavior. If prices remain stable, I initiate the trade keeping the nearest support level as stop loss. It's not a system generated trade. It's easy to write this method, but it is a bit complex to execute. With good amount of screentime, any trader should be able to apply this method in real time. All it takes is some practice.

Tc

Thanks Raunak Bhai for sharing

It will be like the Chart of Cipla, if I can take it as a live example.

It has taken good support from 305 levels and with reasonable volumes.
For the past three days the chart is in consolidation phaze having support at 312 and 310.

Therefore, if one find the Cipla trading near its support levels like at 315, he can take an intraday long entry with the stoploss of 312. Therefore, first requirement is to keep watching the script during its intraday movements. Second, one has to be amply experienced and knowledgeable to understand if it is having intraday up-trend or not. Third, initiating the trade with full acceptance that it may trigger the stoploss.

Chart is below for reference.

Uploaded with ImageShack.us

 

[crown]

VJAY,

I'll try and put up TItan or Colgate as an example so that you can understand the concept better. Just give me some time. I have to answer Amin's and SaiVenkat's query in detail first. During market days, I could not answer their query as it demanded detailed explanation. Once I do this, I'll put up the example.

Rest assured, it should be done before our markets open on Monday.

Tc

Raunak Bhai

I have just made an attempt in this regard with Cipla.

Hope I did it appropriately.

Regards

 

[saivenkat]

VJAY,

I'll try and put up TItan or Colgate as an example so that you can understand the concept better. Just give me some time. I have to answer Amin's and SaiVenkat's query in detail first. During market days, I could not answer their query as it demanded detailed explanation. Once I do this, I'll put up the example.

Rest assured, it should be done before our markets open on Monday.

Tc

Awesome friend, how you keep track of things.. Thanks a lot for remembering my query and giving you valuable leisure time during the weekends in answering my queries.

Saivenkat

 

[bhurasandip]

Hai Rounakji,
Going thru this thread I came across a strategy "3-4 days Swing Set Up" do we need RT Data for this strategy.
One more querry is what is "Dual Time Frame" in trading & how it is helpful.
Thanks.

 

[prajapatikirans]

It is very interesting view and very good ananlsysis..

Good work

 

[SwingKing]

How to Pick right stocks for Swing Trading

Essentially, Swing trading is a way of trading where we try to capture some percentage movement of a stock in either direction in order to profit. However, it is essential we try and pick the right kind of stocks in order to capture some percentage move. If we don't identify the correct stocks, we are essentially increasing the cost of trading by paying commissions for stocks which are not destined to move. As trader's we certainly don't want to be in this scenario. In this post, I'll just highlight some methods to swing trade the right kind of stocks. So, lets begin !

Every stock has a different inherent character. This is precisely we need to research in depth to find out which stocks have the typical characteristics which suit Swing trading. Before moving forward, lets us predetermine what we require in swing trading. For a Swing trade to be successful, we would require such stocks which tend to move more frequently in either direction. Basically those stock which exhibit significant volatility. Taking this concept in mind, we can then build a system around this and swing trade profitably.
There are essentially two ways in which one can determine which stocks to trade profitably. The first way is the Beta methodology and I will discuss this method in this post. In future, I'll write about the second technique.

Beta methodology is essentially filtering out those set of stocks which move more than the underlying index in terms of volatility. For example, a stock with Beta rating 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market.Hence, if a stock's beta is 1.5, it's 50% more volatile than the market. As swing trader's we want to be in stocks which exhibit Beta ratings of over 1.5. For our market, such stocks would typically be a DLF, Unitech, Rel Capital, Hindalco, JSW, IBrealest etc. However, please bear in mind that trading high beta stocks is a double edged sword. If stock begins to go against you, then the loss could be more than what you would undertake in a low beta stock. Hence make sure to keep tight stop losses.

How to incorporate this in your trading

I hope by now, you understand why it is almost quintessential to select the right kind of stock. Going forward, you would need to adopt this in your trading plan. The best way to do is to weekly review which stocks in the index are exhibiting the highest beta rating. Be sure to calculate the Beta figures on at least 100 days of trading record. I would however encourage you to calculate beta over a period of 6 - 12 months of data. Remember, if the stock does not move, your account will certainly not move.

Tc

 

[SwingKing]

If EPS is 864, and Book value is 894 means, what impediments are there for the stock to remain in 483+ levels.

Kindly take not this a criticism, but actually i want to understand why the price of the scrip is lagging.

*Why the operators have untouched this stock?

* Is it not guaranteed that a shareholder of this stock will get 864 or 893 when company declares dividend. Then why is the mad rush in volumes absent here? Has it been un-noticed?

* The Company knows very well that the Eps and BV are higher than Mkt price? What could be its impact on them in the functioning of the company?

* If the company is to declare dividend at this point of time, which means they should pass on the ( rounded to 400)400 odd rupees to shareholders.

* Why is it the company not declared dividend? Will it be due to the reason, for lack of reserves (486 cr) or they shelving the funds for future expansion of the company? If so have anyone come across any such news or rumors?


Saivenkat

Read this carefully. To understand what you have asked, you need to understand what price mechanism essentially is.

In theory, price is considered efficient statistic. This means, at the very moment, price has discounted all the information available in the market and hence has reflected all the necessary details required for a 'static' price quote. However, in real world, where this assumption is not met most of the times, price mechanism is not sufficient to communicate all the necessary information. Markets are faced with uncertainty and information asymmetry and hence market cannot allocate resource effectively under such circumstances. This is somewhat similar to what Akerlof, Spence and Stiglitz have suggested. Markets do not function on Information. Markets function over Information Asymmetry. The point where market faces uncertainty and information asymmetry, resource allocation cannot be carried out effectively. When resource allocation is not carried out effectively, then arises the discrepancy between what is being witnessed and what should ideally be witnessed.

In this particular case of Hind Composites, I would go with what the price is actually reflecting. There is no way that Institutions and other Research Analysts have not spotted what you indeed have. The difference is of Information. You certainly have information which they have (PB, EPS, PE), but they have some information which you don't have. This is practical Information Asymmetry. And this is precisely the cause why the stock is thinly traded, not moving with volumes, not attracting huge money. To use this in your investment, what you can do is keep this script on your watch list. If this script, continues its momentum, keep going with it. Fundamentally you already have the target of 800+, see if technically you can come out with some sort of similar targets. I had a look at their financials, and let me honestly say that company's fundamentals are a bit unclear.

Keep watching, keep trading but never argue with the price.

Tc

 

[crown]

Raunak bhai

Can we also use comparative relative strength (to see if the stock is moving along with the market) as an additional filter for filtering the stocks for swing trading ?

Thanks

 

[SwingKing]

Raunak bhai

Can we also use comparative relative strength (to see if the stock is moving along with the market) as an additional filter for filtering the stocks for swing trading ?

Thanks

Yes you can Crown.

Tc

 

[SwingKing]

VJAY,

I'll try and put up TItan or Colgate as an example so that you can understand the concept better. Just give me some time. I have to answer Amin's and SaiVenkat's query in detail first. During market days, I could not answer their query as it demanded detailed explanation. Once I do this, I'll put up the example.

Rest assured, it should be done before our markets open on Monday.

Tc

This is how Colgate was executed. I have marked the Weekly,daily and hourly resistance on the chart. Once these were taken out, there was nothing more to do. Its as simple as that. Simple things work much better than complex things. Things to watch out here were,

1. Stock moved up in May June.
2. Consolidation (price and time wise) for the next 2 months.
3. Breakout with good volumes. Resistance penetrated.
4. Excellent risk to reward

Tc