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Thursday 31 January 2008

Stocks on Breakout

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

NSE CodeClose% Ch2 day
Swing
5 day SWING20 day
Swing
PreviousMov. Av.RSIADX
EntryActionSupRes20d50d5d14d
BLKASHYAP1846.654.20%   Buy > 20801725184518361844635222
CMC878.003.81%   Buy > 147078787410781096473838
GEOINFO188.4510.14%   Buy > 282135175195204664819
IMPEXFERRO21.504.62%   Buy > 3418212424554422
INDOCO274.053.73%   Buy > 365254269292298574327
KRBL135.355.00%Hold SL 124135Buy SL 111Hold SL 109109133146127585034
MANGTIMBER29.303.17%   Buy > 4325293335493725
MUKTAARTS163.853.90%   Buy > 242141164188189474130
RAYMOND364.255.47%   Buy > 471280360383401604733
SKUMARSYNF134.155.96%   Buy > 17190130143150564633
WSI111.355.00%   Buy > 14690107115109625121

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

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Disclaimer : Recommendations or suggestions given here are totally free. Care has been taken to give correct advice / information / recommendations / suggestions /tips. We take no guarantee that the mentioned analysis will work to your benefit. Since we are involved in the market, we take pleasure in giving the best for the benifit of all. We have interest in the market and may or may not have positions in some or all of the stocks that are mentioned. We do not have any clients as such. These views are purely personal. We do not take any responsibility in any profits or losses that any one incurs as a result of these views / suggestions / recommendations / advice / tip /etc. Please do your own due diligence before initiating any trades as a result of this information.

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