Friday, February 13, 2015

How to trade earning in Indian stock market

Trading in earning  days is one of the easiest ways to make amazing profit in short span of time. Sometimes you can earn 2 % and above within seconds. I would like to share some of the acquired insights when I traded with some of the earnings.

A few days before earning day, the stock may either correct or does not show any movement in any of the direction. On earns day comes the revenue as well as the profit estimates broadcasted by CNBC TV or ET NOW. The stock may open high or low depending upon the estimates. If the estimates are higher than what the street expects, then the stock may go up slightly. When earning is released and shown on TV, you will see a huge price change with a sudden spurt in volume.

You need to pay attention to little things before entering the trade.

First check whether the results beat or miss the estimates and by how far it did.

Now watch the stock movement you need to watch for 2 to 3 bars to get a clear understanding of stock movement and trade with the trend. You can either go with this trade as a positional buy since the stocks which beats estimates usually gets brokerage upgrades in the next day and stock gains further. If volume is too much then you can go for delivery and keep the stock for 3 to 4 days and get the maximum profit possible on the stock.

 If price oscillates and does not give any clear direction stay away from trading.
It is not advised to take the trade before the earning is published because it is quite risky as well as boring to hold the stock till results.

After beating estimates of the street SBI gained 7 % today, Since the stock was near monthly lows the buying was so intense. You can hold it for targets of 320 within a few days.

http://www.b4uindia.com/billing/aff.php?aff=380

Monday, February 9, 2015

Understanding the previous bull run of Dec 2014 to Jan 31 2015

Understanding the previous bull run is very important because we need to know how it turned out into a huge correction. The market is correcting much more than expected. 8600 levels was the estimated correction. However, we have overshot it. The reason for the bull run was change of economic scenarios such as lower crude price with low commodity prices, political stability, the same Indian growth story as well as the beginning of rate cut cycle. When foreign money came into Indian markets most of the DII's were net sellers of stocks. DII's sold banks mostly.

MonthFII (Rs. Crore)DII (Rs. Crore)
Gross
Purchase
Gross
Sales
Net Purchase
/Sales
Gross
Purchase
Gross
Sales
Net Purchase
/Sales
January-201597,928.9189,388.158,540.7633,785.1640,316.91-6,531.75
 
Till 9th February data as follows.










TOTAL                            28,243.77             30,006.07      -1,762.30       10,675.18      10,198.26                476.92 


DII's where the clever guys who used this bull run to cash out and they are buying the stocks again that too at lower prices. DII's sold banking shares in that bull run because they felt it was overvalued. Now these stocks have corrected more than 12% in average. They are just following a simple theory, sell when prices are high and buy when the price is low. Only few disciplined traders and investors can practice this. During a bull market, we always expect to gain more and more, but the realty is that the market will correct some points. This is what we call Elliot wave theory. For every upmove there is a counter downside movement. Always expect this and buy in that dips.

Nifty at 8550 levels does not show any kind of consolidation mode. It seems like room left for further slide. We hope that it can start retreating from 8300 levels. Earnings were not as impressive as expected. Only budget is the hope left for the market.

Buy in to Pharma, IT as well as few FMCG companies as a defensive play since we do not know where we are headed as of now. Few stocks are worth buying at current prices are as follows.

  1. Britannia Industries is a buy at CMP 1885.0 for a target of 2150.
  2. Bharath Forge is a buy at CMP 1068.0 for a target of 1340.
  3. Wockhardt is a buy at CMP 1315.0 for a target of 1700.
  4. Yes Bank is a buy at CMP 800.0  for a target of 900



Many of index weights are corrected to now and you can try entering into Axis Bank, Tata motors as well as Cairn India.

Thursday, January 29, 2015

ECB to pump 60 billion.

US Federal Reserve and the Bank of England announced plans for quantitative easing in 2009. This cleared the way for economic recovery in the US and UK.
QE programs of the U.S. Federal Reserve likely contributed to:
  • Lower interest rates for corporate bonds and mortgage rates
  • Higher stock market valuation, in terms of a higher price-earnings ratio for the S&P 500 index
  • Increased inflation rate and investor's expectations for future inflation;
  • Higher rate of job creation
  • Higher rate of GDP growth.

Similar effects can be expected in the ECB Stimulus. Investors cheered the ECB’s commitment to flood the eurozone with more than €1 trillion ($1.16 trillion) in newly created money, sparking a rally in stock and bond markets and sending the euro plunging.

Capital flight from European countries will be creating bubbles in emerging markets. Investing in Europe is not the best option when considering the better growth opportunities in the emerging markets. India can expect a portion of their ECB stimulus invested in our capital markets.





Tuesday, January 27, 2015

Nifty target for 2015

Nifty continues its bull run without any doubt about its target. After breaking 8500 levels nifty has touched a fresh high of 8900. 400 points gain within a few trading sessions. Nifty can easily touch 9000 in this bull wave. 9300 can be possible if we receive fresh capital inflows to India.

 Global investment bank Citigroup in its latest report raised the December-2015 target to 9,850, at 16x Dec16. UBS raises Nifty target to 9,600 for 2015.We may overshoot the above mentioned targets and shoot up to 10000 mark considering the favorable economic situation.

However, it is not a good time to enter into market as most of the stocks are at 52 highs and above. We need to wait for some correction. Today nifty shown a sign of not ready to correct at current levels. We need to wait for few trading sessions understand the future movements and direction of the market. Be ready to book profits in this week itself.


Thursday, January 15, 2015

RBI cuts repo rate ahead of Feb 3 policy review resulting in 216 points gains in Nifty

All stocks were in green when the market opened in the morning. The rate cut has been just a beginning. We can expect further rate cut and similar rallies in the stock market. Stick to Financials, auto and real estate.

Trade deficit during December fell sharply to USD 9 billion from USD 16.8 billion in November 2014. This is an icing on the cake. FIIs bought shares worth 1,738.24 crores. We can expect further momentum in the market. This will be the pre budget rally.

Yes bank can test new highs as the stock target was revised by Bank of America Merrill-Lynch raises Yes Bank Target Price to Rs. 1,050​. Currently trading around 813.




Wednesday, January 14, 2015

Stocks to focus on 15/01/15

Metal stocks are in downtrend. There exists an opportunity to short sell metal stocks.

Hindustan Zinc (CMP-153) is a sell for a target of 143. S.L is 160.
150 is major support level.However a huge price volume action can cause a break from the support level.

Sesa Sterlite (CMP-186) is a sell for target of 180. S.L is Major support level is already broken. Further slide is expected in this counter.




Saturday, January 10, 2015

ECB plans for bond purchase to boost the economy

European Central Bank is planning for a 500 billion euros ($591 billion) worth bond purchases. They have not decided on the specific class of asset , only AAA-rated debt or bonds rated at least BBB minus, the euro-area central bank official said. . A 500 billion-euro purchase program would take the ECB halfway toward its goal of boosting its balance sheet to avoid the deflationary threat. ECB is also buying asset-backed securities and covered bonds.

Euro-area consumer prices fell last month for the first time in more than five years. The euro traded 0.2 percent higher at $1.1811 at 4:16 p.m. Frankfurt time. The yield on Spanish 10-year bonds climbed 5 basis points to 1.72 %. Its Greek equivalent dropped to 10.1%

 Euro-area consumer prices fell on an annual basis last month for the first time in more than five years and ECB fears of a deflationary issues.  ECB intends to expand its balance sheet toward 3 trillion euros. Current balance sheet is about 2.2 trillion euros. Banks must repay more than 200 billion euros in loans early this year.

The far-left Syriza party continues to hold lead in polls ahead of Greece’s election scheduled on January 25th. This lead seems unlikely to be overturned in just two-and-a-half weeks as per the expert opinions. The firebrand Syriza leader, has been toning down his anti-European rhetoric. He now says no “unilateral” decisions will be taken on Greece’s obligations to its creditors, a signal that a Syriza government would not surprise markets with an immediate default. Mr Tsipras’s message to voters is simple: a promise to end four bleak years of austerity with a splurge of social spending.

QE will be a good news for the Europian Union as well as for the world markets. However as predicted in the previous posts Euro will be depreciating further.


Friday, January 9, 2015

Nifty Next week

Nifty is expected to continue the momentum if results meet the expectations of the street.

Infosys earning was better than expected and the stock price climbed 5% today.

Indusind bank, axis bank, LIC housing finance, Bajaj auto,reliance earning will be the key drivers for the market.

Now expect another gap up tomorrow in Nifty, going by historical data and traders should watch 8325-8320 range where next level of resistance lies.

Buy above 8303 Tgt 8328,8350 and 8372.

Top trading mistakes

1. Trading without a game plan : many of them enter a trade hoping that share will go up certainly, however not sure how high will it go. One should assume several things before entering a trade. They are as follows.


 Is there any upside or downside left on the stock? You should analyse this according to technical analysis or seeing the sentiment prevailing in the stock.  normally a stock moves 3% up or down in a day.

What is the possible target? What is the Stop loss that you should keep?

2.  Another mistake is not following the game plan. Changing game plan shows emotional instability in trading. If emotions rule you in trade, you should not trade.

3. Taking two many positions which you can not monitor: You can monitor 2 to 3 stocks at a time . So limit your positions to what you can control.

4. Not booking profits: A penny in the pocket is better than a dollar in the bush. So unrealised profit is just a illusion. In trading the maximum probability goes in favour of loosing. So you should be quick in booking profits because it is a rare opportunity.

5. Letting the looses run and close the position expecting it to go in favour of your position. Accept lose and try in next time. You can not win always.

6. The biggest mistake is proving that you are correct. In stocks only market is correct. There are millions of people trading, you are a worm considering the vast network of traders. Accept it and act accordingly.

7. Trade your emotions instead of signals: buy when you are greedy and sell when you are afraid.

Apart from the above mentioned mistakes there are lot of crazy mistakes that every trader must have come across. 




Thursday, January 8, 2015

How to trade using Moving Average Convergence and Divergence(MACD)

MACD uses two moving averages. They are two Exponential Moving averages. By subtracting longer period MA form shorter period MA we will get a line that oscillates above and below zero called MACD line. 

An increase in gap between the MA's creates a falling MACD and vice verse. The gap between the 2 MA's is the momentum.

MACD comes along with a histogram and it is very easy to interpret. When MACD crossover occurs that is when trend reverses and you can enter in to a position.

 If MACD cross over occurs in the upside plotted in the histogram, you can buy the stock. If it is crossing downward, then you can enter a short position.

Please watch the below mentioned video to understand the trading using this indicator.


Wednesday, January 7, 2015

How to trade using Simple Moving Average.

       

A simple moving average is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes and long-term averages are slow.

SMA can be used to predict trend, decide exit and entry points etc.

You need to use 50 SMA and 30 SMA to analyse the trend(Industry standard).

If short term SMA is above long term SMA, stock is in uptrend and vice verse.

You are buying the stock at a fair value in terms of SMA if you buy the stock close to its SMA.

In the above mentioned chart of SBI, the stock entered a uptrend when price crossed the 50 day SMA, For July,September SMA and price was crossing each other several times indicating a side ways movement. Again SMA cross over happens and new uptrend begins. Once again stock can go side ways or downways if it break the 296.00 (50 day SMA).

Tuesday, January 6, 2015

Why Market plummeted today

The massive mess that we seen on the market today is due to concerns over the economic strength of europe. Euro is sliding and it touched a nine-year low against US dollar. Euro will slide further.


Greece was in debt crisis from 2009. They have trouble in paying back the debt. On 2 May 2010, the Eurozone countries, European Central Bank (ECB) and International Monetary Fund (IMF), later nicknamed as the Troika, responded by launching a €110 billion bailout loan to rescue Greece from sovereign default and cover its financial needs throughout May 2010 until June 2013, conditional on implementation of austerity measures, structural reforms and privatization of government assets. A year later, a worsened recession along with a delayed implementation by the Greek government of the agreed conditions in the bailout programme, revealed the need for Greece to receive a second bailout worth €130 billion (now also including a bank recapitalization package worth €48bn), while all private creditors holding Greek government bonds were required at the same time to sign a deal accepting extended maturities, lower interest rates, and a 53.5% face value loss.

Again the same parties provided third round of funding to greece. However as like all the times greece did not full fill the austerity measures provided to them.

Greece recorded a Government Debt to GDP of 174.90 percent of the country's Gross Domestic Product in 2013. India recorded a Government Debt to GDP of 67.72 percent of the country's Gross Domestic Product in 2013

It is also revealed that greece had set up a deal with goldman sachs to hide its debt. Italy also in the radar of such a deal. Portugal and Ireland may follow greece.

If Greece does not full fill debt obligations,the debt owning banks from Germany and France as well as IMF will be in slight trouble. A debt default from Greece will cause higher intrest rate loans to remaining europian countries. Europian Central Bank is thinking serious about a quantitative easing which will even cause euro to slide further.


We may face some reduced capital inflows from abroad. However domestic economy is safe and keep buying stocks in this dip. SBI is a buy at current rate. Accumulate private and good PSU banks. They are going to fetch you good returns in the coming quarter.






Monday, January 5, 2015

JACKPOT CALL FOR 06/01/15

                                         
 Sell Idea cellular for first target of 146 second target of 143. Dont sell if stock remains near 150.00

Spectrum reserve price has increased to 20% from previous expectations. So Idea has to spend much more than expected. This is going to ruin there balance sheet. Bottom line performance will be a tough job for idea. Chance of FII selling shares as 3 year growth is limited.

Sunday, January 4, 2015

                                    Nifty next week




Nifty is near very crucial point as per Ichimoku Cloud and big move is round the corner. Also 20/50 SMA are converging any break above 8310 can see explosive move on upside and break of 8214 can see move below 8174/8120. Nifty gave the explosive move today and closed above the resistance of 8310 and 61.8% retracement of 8374. 8288/8300 is good support zone and dips near this shall we bought into.

FIIs are back from holidays and we can expect a bull run in the market. CAD deficit of current financial year target is expected to acheive 99%. It is a good indicator of sound economic background which can support the growth. PM has announced that he will not interfere in banking system which sounds positive for the economy since political pressure was behind the kingfisher loans.

Next week the biggest movers could be private banks. Axis bank may test 525.00, Public sector banks are also in the hot list. Spectrum pricing and can bring up buying interest in telecom stocks.







Thursday, January 1, 2015

Stocks to buy on 2/01/15

Muthoot finance is a buy for target of 220.00, S.L is 208.00.

Watch out for enough volume in the morning and buy in pre open market if it suites your risk apettite.