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

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.

Month	FII (Rs. Crore)			DII (Rs. Crore)
	Gross Purchase	Gross Sales	Net Purchase /Sales	Gross Purchase	Gross Sales	Net Purchase /Sales
January-2015	97,928.91	89,388.15	8,540.76	33,785.16	40,316.91	-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.