Stocks on Breakdown

Stocks on breakdown after trading on 30th January 2008 are as follows :

NSE Code	Close	% Ch	2 day Swing	5 day SWING		20 day Swing	Previous		Mov. Av.		RSI		ADX
				Entry	Action		Sup	Res	20d	50d	5d	14d
ARROWGROUP	65.55	-5.00%				Exit	67	98	81	64	14	40	31
ASIANELEC	430.55	-8.88%				Buy > 590	460	527	491	463	32	42	19
BANKBARODA	392.25	-3.79%				Buy > 501	396	450	438	417	35	42	32
BPCL	359.40	-5.55%				Buy > 557	363	444	440	434	17	32	21
DHAMPURSUG	67.70	-4.24%				Buy > 108	70	77	88	81	10	30	28
EDUCOMP	3648.75	-7.93%				Buy > 5679	3700	4300	4416	4101	31	40	34
EMKAY	274.95	-5.08%				Exit	276	335	336	294	19	37	35
GANDHITUBE	216.65	-3.48%	Exit	----	Buy > 241	Hold SL 200	219	241	229	212	41	47	21
GEMINI	183.40	-7.91%				Buy > 309	193	209	244	229	28	36	26
HINDSANIT	63.35	-9.95%				Buy > 104	64	76	80	80	27	35	27
KCPSUGIND	21.15	-4.73%				Buy > 35	22	24	28	24	18	34	31
LITL	483.15	-8.87%				Buy > 840	491	565	664	656	31	35	34
LOGIXMICRO	210.15	-4.74%				Buy > 375	211	263	288	319	18	28	39
MAHABANK	77.40	-3.97%				Buy > 97	78	87	83	81	38	44	27
MAHLIFE	635.90	-6.85%				Buy > 878	650	745	766	760	32	39	34
MAHSEAMLES	391.20	-5.53%				Buy > 660	403	460	513	542	25	30	40
MORARJETEX	49.05	-4.94%				Buy > 77	49	52	58	0	33	40	31
MSPL	52.85	-4.95%				Buy > 89	53	59	67	68	21	33	21
NAHARINVST	28.25	-3.25%				Buy > 55	29	31	40	38	16	31	37
ONWARDTEC	27.90	-3.79%				Buy > 52	29	42	38	38	13	26	31
PENINLAND	89.80	-6.46%				Buy > 167	90	103	127	133	33	37	20
PIDILITIND	172.55	-4.96%				Buy > 202	173	186	180	188	41	43	21
PRECOT	120.85	-6.32%				Buy > 199	123	140	150	148	26	34	29
PTL	139.00	-4.89%				Buy > 181	141	159	159	153	23	38	22
RCOM	612.40	-4.48%				Buy > 845	614	676	712	715	32	36	31
REVL	250.25	-3.68%				Buy > 370	251	297	293	296	30	36	26
RIIL	1727.15	-4.16%				Buy > 2936	1750	2458	2245	2083	18	34	22
ROLTA	247.40	-7.44%				Buy > 385	256	300	321	341	25	31	33
SHREYAS	85.15	-4.06%				Buy > 159	86	115	118	112	24	34	37
SHRINGAR	77.35	-4.39%				Buy > 135	78	89	104	105	29	35	32
SPARC	94.30	-4.89%				Buy > 163	95	110	125	125	17	30	32
TFL	31.30	-4.28%				Buy > 56	32	36	41	39	8	28	30
TVSMOTOR	41.40	-5.37%				Buy > 79	42	45	59	65	19	26	36

Importance of charts

No algorithm or trading system can substitute visual inspection of chatrs. Algorithms, can at best, only make filtering easier. Since there is always a risk of loss in stock markets, any trading decision must be taken only after detailed study of charts.

Buy and Sell signals

These are generated using custom designed swing trading algorithms. As one can never know with certainity the extent of gains or losses, the concept of trailing stoplosses is used.

If a stock is in a downtrend, a buy signal is generated if the stock closes above it's "N" days highest high. The trailing stoploss is the "N" days lowest low and will change everyday till an exit is given. Here "N" refers to 2 or 5 or 20 days. Obviously a 2 day swing will generate more signals than a 20 day swing. For best results, use the 2 day or 5 day swing to buy only if the stock is trading above the 20 day swing low.

The methodology is similar moving averages / crossovers. The advantage is reduced whipsaws and more efficient stoplosses.

Above signals work best with trending stocks and are useless with rangebound stocks.

Rangebound trades, whipsaws and false signals

All technical indicators will fail in rangebound stocks / markets and will generate whipsaws and false signals.

Whenever a swing trade results in a loss, it means the stock is rangebound. At this point, one should study the chart and identify areas of support and resistance. Only a break above these levels will create a new trend.

Support and Resistance levels / targets

This is nothing but a "peak" and "trough" based on 5% change. These levels form the basis for calculation of targets.

A break above a "peak" gives a resistance break. Similarly a break below a "trough" generates a support break.

Targets are calculated using Fibonacci retracements.

UP targets = Support + X *(Resistance-Support)

DOWN targets = Resistance - X *(Resistance-Support)

Where X equals 0.382 or 0.5 or 0.618 or 1.618 or 2.618

Depending on formation of support and resistance, targets are automatically calculated. Because of the methodology adopted, it is normal for the stock to trade significantly higher than the target. Once the stock corrects, the new "resistance" is defined and targets automatically calculated.

Oversold and overbought stocks

Interpretation of this is difficult and shd be done in the context of the prevailing trend.

Overbought means great strength. It does NOT mean stock will correct immediately. It is normal for a stock to remain overbought for considerable periods of time.

Oversold means great weakness. It does NOT mean stock will rally immediately. It is normal for a stock to remain oversold for considerable periods of time.

In an uptrend, oversold stocks present a good buying opportunity near supports (buy on declines). In a downtrend, one shd exit overbought stocks (sell on rallies).

Intraday support and resistance levels

This is for daytraders only and can be unreliable due to freak trades.

• Pivot point = P = (H + L + C)/3
• First area of resistance = R1 = 2P - L
• First area of support = S1 = 2P - H
• Second area of resistance = R2 = P + (R1-S1)
• Second area of support = S2 = P - (R1-S1)

----- With due apologies and full credits to vfmdirect.com