Stocks on Breakout

Stocks on Breakout after trading on 21st February 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
3IINFOTECH	130.80	4.64%				Buy > 136	111	128	123	133	77	56	32
ABAN	3953.05	3.61%				Buy > 4024	3765	3938	3702	4318	72	52	38
ADHUNIK	194.65	4.96%	Hold SL 173	168	Hold SL 148	Buy SL 143	143	189	170	194	81	59	26
AEGISCHEM	293.05	14.47%	Hold SL 253	260	Hold SL 207	Buy SL 203	253	274	256	290	78	58	24
AFTEK	57.75	6.45%				Buy > 63	53	56	55	71	75	48	34
ANGAUTO	129.85	13.55%				Buy > 142	113	122	120	142	79	54	19
BHARTISHIP	632.80	4.24%				Buy > 730	583	630	623	706	68	48	33
CAMBRIDGE	56.05	5.85%				Buy > 65	53	56	56	73	64	42	27
CENTBOP	57.20	14.86%				Buy > 61	49	53	53	58	78	56	30
DECOLIGHT	26.80	3.68%				Buy > 28	23	27	26	33	67	47	27
FINCABLES	86.90	5.91%				Buy > 116	81	85	90	104	61	41	29
FOURSOFT	39.90	4.04%				Buy > 45	36	39	40	46	57	46	21
FSL	56.10	9.46%				Buy > 58	46	54	52	63	84	52	32
GTCIND	427.30	19.41%				Buy > 429	335	370	374	517	82	53	42
HEXAWARE	79.70	10.16%	Hold SL 67	72	Hold SL 62	Hold SL 60	60	75	68	75	86	62	37
HINDALCO	188.75	6.58%				Buy > 191	147	188	171	188	73	57	24
INDOCO	294.10	10.61%	Hold SL 253	265	Hold SL 253	Buy SL 230	253	277	264	288	84	62	21
INFOTECENT	259.30	5.21%				Buy > 283	230	255	250	274	70	52	37
INGVYSYABK	325.50	6.01%	Hold SL 295	326	Buy SL 295	Hold SL 275	295	323	306	321	77	57	14
KESARENT	71.70	3.91%				Buy > 102	63	69	83	83	46	40	28
KSBPUMPS	352.30	7.13%				Buy > 425	322	349	338	397	71	48	21
LOTTEINDIA	323.95	5.01%				Buy > 430	301	323	345	387	54	40	30
MINDAIND	169.00	3.74%				Buy > 192	148	167	171	196	59	45	27
NIITLTD	119.85	7.15%				Buy > 136	101	117	115	129	74	52	15
PONNIERODE	43.95	4.52%				Buy > 45	35	42	40	48	75	53	23
RSSOFTWARE	32.60	10.88%				Buy > 35	28	31	30	36	78	54	39
SAGCEM	392.30	4.09%	Hold SL 351	293	Hold SL 351	Hold SL 253	351	381	334	345	77	66	23
SATYAMCOMP	456.90	7.94%				Buy > 500	419	446	419	416	76	63	22
SAVITACHEM	285.90	5.50%				Buy > 345	250	285	285	335	69	45	42
SELMCL	260.90	5.01%	Hold SL 228	237	Hold SL 198	Hold SL 164	228	255	222	175	84	70	39
SONATSOFTW	43.55	3.94%				Buy > 45	37	42	41	47	77	53	28
SURYALAXMI	39.35	3.15%				Buy > 43	33	39	39	48	64	45	29
TEXMACOLTD	1532.50	5.00%				Buy > 1570	1275	1515	1440	1592	80	55	37
WIPRO	431.70	5.04%				Buy > 474	403	431	423	461	66	49	45

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