Rain Calcing Inv hns

A couple of people were asking me about raincalcing.
hourly turning up, yearly up, daily, weekly, monthly trends down.
So you have the potential for a very long term bottom if this works out. Macd is actually turning quite bullish.
The monthly charts have monster supports @ 25.5-21

Buy inv hns above 35, supports 33/31/28/25
Targets 36.7/39/40.23/43/46 timeframe 2-3 weeks.
How you chose to manage the trade is up to you.

My suggested risk management plan is using the levels of my fibonacci system.
RAINCALCIN, Analysis Date:5/4/2007
Close/cmp:32.95
Swing : Up=Buy ( 5.000% sensitivity)
T1:34.2583 T2:35.7956
T3:38.3038 1xR:38.15
ImpulseTargetZone:39.8411-42.3494
SwingHigh:35.0 CMP:33.0
SwingLow:31.0 SLPivot:31.8
2xAtr14Stop:2.89684
Narrowsl:31.75
WideSl:29.77
Lower Chan:32.648 Upper Chan:36.1221
ResLine:34.6665
How to trade:
Buy above swing high or above 0.5 retracement level for early entry
Sl : use narrow or wide sl or the support line

Pattern:IHSunc:1
Retracements :34.95-31.75
0.236:32.5052 0.382:32.9724
0.5 :33.35 0.618:33.7276
0.764:34.1948

If you are convinced of the fundas with respect to its peer group then just buy. The market can be stupid for extended durations.
If the long term fundas of this stock are good this stock could easily be forming a major bottom here with a target of 52-56 sl of 20.
Timeframe 2-3 years.

p.e of maybe 7 right now: don't have full details because the people who asked for this stock didn't give them to me so i just eyeballed it, not my best value pick but looks ok.

If you ever need advice on a stock
Feel free to ask me on niftytradersinc@yahoo.com
But before you ask me for a price target you have to understand how I think.
I can read a chart and give you the levels+targets, sl/support/res etc
I cannot turn lead into gold.
The same chart pattern can have different consequences depending on the fundamentals involved.
If all the charts start moving the same without regards to fundamentals then it is a sign of market complacency and potentially a big correction ahead.
I would rather be long on gold when its at the price of lead
and short on lead when its at the price of gold.

A breakout on a good funda stock like rcom/bharti/tcs/infy/realince is more likely to be an impulse meaning you will get followup in the upward direction after the first breakout allowing you to follow the trend longer and make more money.
If you try to follow the trend on a horrible funda stock. What might happen is :
Wave c up will come, you will keep your stoploss below w1 top or below w2 lows and you will get stopped out later @ near break even or a small loss.

A breakout in something like a weak sugar which is making losses is likely to lack w5 type followup. The only strong sugar right now is renuka. i think it is still trading at 8-10x fy08e, its getting ready for a w5 now it seems. i don't know how its making profits, but its supposed to keep making profits in fy08.
W3/Wc the eternal debate, my filter? fundamentals.
So if anyone ever asks me for technicals keep this in mind before you ask
I need
fy07eps
fy08eps
fy09eps
book value
debt/equity
current ratio/quick ratio
I need these values for not just the stock in question but also for one stock in the same peer group (same size, same sector).
If you cannot make the effort to look these values up for me. Then please do not expect me to look up the charts for you.
I am quite content to trade stocks which I understand both technically and fundamentally.
Unlike other people who will be polite and say ok, or I'll look it up for you later , I'm just gonna ask you to do this before I look up the stock.
I'll make an exception if you have strong insider news but then if you have insider news why on gods green earth would you need a technician's view???
:)

Divis labs valuations?

Divis: need a funda report on divis covering fy09
the only report i have is covering fy08eps = 125
growth rate of almost 30-40%
fy07e=97
my elementary fair value range = 2813-3880.
Its not approaching upper end of range it a short for a target to middle of the range.
Same way with the longer term trend channels on the eod charts. Anyway since the stock is strong+high beta it might not form its top before the market.

On the charts i got a resistance trendline near 3800 then 4000 somewhere
3800 could give a small dip few %
4000 could give a 20-30% drop.

Buying in delivery vs trading in fno

Colgate= insanity call usually i don't like to brag , but I'll make an exception.
Otherwise people just don't remember how truly good my calls are sometimes.
Also keep in mind when people start bragging, the move is almost over
Colgate might go sideways soon near 400-408-416-424.
The stock is not going to + infinity. On my intraday charts big gap 360-380.
Not visible on eod data, but i really don't think it traded in the 360-380 zone for long based on my intraday data. I think once this whole split euphoria is done with stock will be back to 360 levels , but that could take a while.

I would have booked half at 1x risk target in colgate near 384 and would look to book remainder near 400-408.
COLGATE, Analysis Date:5/3/2007 3:53:59 PM
Close/cmp:351.05
Swing : Up=Buy ( 6.000% sensitivity)
T1:380.103 T2:407.333
T3:451.386 1xR:383.95
SwingHigh:360.0 CMP:351.0
SwingLow:297.0 SLPivot:336.0
2xAtr14Stop:8.08446
Narrowsl:336.05
WideSl:321.20
Lower Chan:338.541 Upper Chan:382.938
ResLine:387.02
You can use a trailing stop to exit below the upper channel line, or book half now, book some at 400-407 etc.
This stock is running wild on the news of the split right now.


T1/1x risk done, T2/T3 still open, t3=insanity target, go short there if seen.
When you buy in delivery you pay full cash for a stock up front.
You can hold for eternity.
If you buy in fno then you have to pay the cost of carry. Which is usually close to plr, Basically you are asking someone else to buy the shares for you
While you pay very small margins.
What does this mean?
You are borrowing money from the market.
Suppose you have to pay say 1% premium for 1 month that is 12% cost of carry per year!!!
IF i give a call like colgate and say buy in delivery target 20% in a year
Its safe to take in delivery, while market might have temporary bouts of insanity like the recent move.
The target is 20% in one year!! If the stock does 20% in 1-2 months great you got lucky you made (20%-2%) (coc)*leverage factor(say 5) = 90%
If stock stays flat for 1 year you lose 60%!!!!!!!!! That is the risk even if the stock is flat!!
If stock goes up 20% in one year , then you would make (20%-12%)*5=40% in a year.
But the risk you are taking is enormous , 60% risk if stock stays flat!!
Imagine if stock were to be down 10% at end of one year.
(-12-10)*5 = -110%!!!! You are out of the game gone, with just a 10% drop in stock price.
The price you pay for insane returns in fno, is insane risk.
:) fno !=delivery. Understand the cost of carry before you try to make big positional plays in fno.

I know some people who went long on colgate in futures and made some crazy amount of money. Please do not count on being so lucky every time.
If the call is in delivery. Please take it in delivery.
Initial call was at 340, next breakout of 360 but it never gave an entry there, just gapped up like crazy.
Now imagine if 1 year target is 400-420 and the stock does 420 in this month itself, guess what the stock will do for the rest of the year?
P.S : funda targets have a way of getting overshot
Look at divislabs. No fundas at this stage are there??
:)
p.e of 40-50
but I suppose results will be blockbuster, a bit like praj results maybe 50-100% growth. Anything less would kill the stock.

Keep trading breakouts

Remember what I said , 'we're off to the races'??
The action is not in nifty
The goal of the bulls is to keep nifty within 4000-4240 to keep sentiment intact and keep getting breakouts in individual stocks.
don't trade nifty right now
Trade either the extremely strong breaks w5
trade fresh breaks, w3/wc etc.
I'm only counting waves post local lows of nifty at 3600. Not doing the entire history of the chart.

If a stock does gap down or break down it should be shorted on rallies, like cipla/icicibank can be shorted provided one is long on some other stock in the same sector. No naked shorting in a bull market, not worth the risk.
Trade stocks for ending of consolidation, end of w4 (check previous list of consolidating stocks, colgate?? 340 anyone?? gapped up to target zone 384. The madness of this bull market is very much back)

Now does anyone understand the word titans??
Huge bears @ nifty 4240 not your ordinary dalal street bear.
There is tons of supply in nifty at higher levels 4184-4200-4220-4240
This has to be absorbed before we can do 4440.
We might consolidate 4220-4040-3980 max dmg expected.


But at the same time bullishness in the right counters could give u 10-20-30%
for instance
litl, offer @ 200-240
if it was worth 200-240 why is it not worth that much now??
Thats how a bull should start his thinking.
Then look for facts to refute this.
For instance are fundas worse than they were before offer?
I have bull friends who are stuck at 200-240.
We can help them by buying and taking litl right back to atleast 200 if not 240

support 168/160 sl 155/150
target 176/184/192/200/208
LITL, Analysis Date:5/4/2007 11:43:59 AM
Close/cmp:171.7
Swing : Up=Buy ( 4.000% sensitivity)
T1:159.087 T2:161.613
T3:165.701 1xR:174.9
SwingHigh:164.9 CMP:171.7
SwingLow:158.2 SLPivot:155.0
2xAtr14Stop:2.48731
Narrowsl:155.00
WideSl:148.83
Lower Chan:149.347 Upper Chan:156.816
ResLine:153.434
Litl just did 1x risk target 175
if it pulls back to 155 gr8 gr8 buy
If i knew fundas i would already have bought, still waiting for some kind of funda clues. I'm not very good at following the chart alone.
I always get stuck between w3/wc. :)

LITL: bottom formation??

Litl
Offer price 200-240
listing 280
Like most listings that list at a premium this went into a deep correction

Stock has been a mega underperformer
buy setup is near 157/164

Targets 168/176/186/194/200
sl 150

Need a funda report to justify buying a massive underperformer though
Only very recently has outperformance started.
Is this a bottom?

Wave theory the language of the market

To appreciate the market one must appreciate the
the alphabet (ohlc/v)
the vocabulary (zigzags)
the phrases (chart patterns)
the sentence : wave theory (elliot wave google for it)
the punctuation marks, failiures, extensions, gaps, whipsaws, candlestick patterns


If you need help with any of the following just go to
www.4shared.com
and search for books related to the subject u want to study.

Random

A good trader is like a diamond.
The strength of a good trader comes from having withstood huge pressure.
If you haven't suffered big losses yet, then you probably havevn't developed the tough exterior yet. Nifty is expected to consolidate 4000-4200/4240 then head for 4440.
Since 'w2' of the move was a sharp expecting either flat or triangle or a complex correction of some sort.
Up till 4240 or so first then down a bit 4100-4040 maybe no new lows then 4440. Next big topping out level is 4440 then 5550 or so.

Ever heard trump regarding real estate? "Location, location, location".
When it comes to trading: "Stoploss, Stoploss, Stoploss"
Beginners are concerned with being right. The pros are concerned with risk management. The logical stoploss for bullish count is 3900 w1 top.

See my top picks for w4 moving up
colgate 340 sl 336
hll 200 sl 198
same setup on both: colgate gave almost 6-7% in two sessions
while hll weakened on results
same technical setups different fundas/reactions to results.

See auropharma 660 support region narrow support 669 or so whipsawed for one day
Wide sl 654 held perfectly on closing basis, did 704 in 2-3 sessions.

rcom support 448 held sl 447 and 440: did 480 in one session on good results.
Fresh move is brewing in rcom, support 466 target 480-484-515 soon.

tcs was given as a pick at 1205: sl 0. So its not a TRADE its an INVESTMENT. Even as market was dipping, clear view on tcs it grows at 30% anytime it comes under p.e of 30 it becomes a 'value' buy. The investment is based on forward eps expectation of 50-55 rs for fy08 and target of 30x fy08 for next year.
Tcs is trying to break clean nof an eod triangle, 1270-1320-1370-1440.

idbi was given as a breakout call above 84, sl 80/78
retested breakouot pt after hitting my res at 88-90 and now trying to break clean of channel, above 92 might open 94-102-114. Breakout traders might want a piece of idbi now but the dip was at 82-84.

hcc earlier died, why? bad results
hindlever? same : results not good enough
a technician cannot see the bad news coming all the time.
cipla for instance triggered a breakout before it crashed on bad results
for next 5 years every time someone tells me that breakout trading works and charts reflect everything i will give the example of cipla.
If insiders know that the market has lots of breakout traders wouldn't they like to trigger a breakout so that they can go short in an even bigger quantity???
The market is designed to break every pattern, for every pattern there is a counter example.
hns is reliable? what about w4 hns
triangle is reliable? what about a terminal triangle?
pivot break is reliable? what about the gartley or abc correction?
trendline break is reliable? what about the wolfe wave
that is the beauty of the markets, for every idea there is an opposing idea
There are always some peopple who will come and take the other side of a trade without proper regards to fundamentals or technicals.
Any and every pattern can fail. The only thing that saves you is the stoploss for the pattern.
Thats the main reason patterns are so useful they tell you entry/exit/sl

Living in an insane world

I am not supposed to forward funda reports from this particular group that I subscribe to , this is just to show an example of the insanity that is our world.
No offense to group owner, I know he doesn't moderate reports. He is involved in a charitable cause to forward reports so everyone can share their info/views in one forum. People who read the reports are supposed to use their own brains. This is just a bad quality report and one has to see the bad to find the good sometimes. I am making an example out of the bad report so people can understand what a good report looks like.
Refer to my previous post on aftek to see what a true value buy looks like. Granted its a different sector, diff size company but learn the gist, the purpose of p.e/earnings yield/roe/roa/roce etc and adjust risk premiums based on either historic earnings volatility or stock volatility etc.
If you need a good book read something by or something on Graham/Buffet etc.

Sample report which makes no sense to me. This is an example of dressing up a wolf in sheep's clothing and saying come sheep hug this other sheep.
Investors are a bit like sheep. They are usually afraid of the wolves in the market so they look to technical+funda analysts/reports/news for guidance.
In this world of fast food everyone wants a quick fix, hardly anyone takes the time to learn the tools of the trade, proper technicals (trend, dips, channels overbought/oversold, targets/retracements, pullbacks, breakout after pullback)
proper fundamentals.
P.E
P.E.G
ROCE.
ROE

read my old post on canslim
on my other blog niftytraders.blogspot.com

So here is the report and my critique of it read on only if you are bored. When I get annoyed i blabber.
Please find attached our 4QFY07 Result Update on IDFC.
The key highlights are:
· IDFC has reported a net profit growth of 15.7% y-o-y to Rs 851 mn for the quarter ended March 2007. The result were inline with our estimates at the top line but was below our estimates at bottom line mainly due to higher than expected operating and provisioning expenditure.
· IDFC has posted a strong balance sheet growth of 50% y-o-y to Rs 179.8 bn. During FY07, incremental gross approvals & disbursements increased by 23% & 19% to Rs 130.5 bn and Rs 72.1 bn, respectively.
· The Board has approved a plan to raise capital through issue of equity or quasi-equity instruments upto USD 500 mn equivalent INR over next 18 months period to fund balance sheet growth, meet regulatory norms and to increase its seed capital in the asset management business.
Valuations
At the current market price of Rs 104, the stock is trading at 20.6x FY08E and 18.2x FY09E earnings. On P/AB, the stock is trading at 3.6x FY08E and 3.1x FY09E adjusted book value. We reiterate our "Buy" recommendation based on FY09E adjusted book value.

Why is idfc a buy?? why should it be worth so much??
why 3.1x book or higher
why fy08/fy09 adjusted book and what not
What is cagr for next 5 years.
P.s if cagr for next 5 years is > 30% then fine the levels this report talks about are fine

When people start talking about fy08/fy09 valuations
I worry, is the report trying to prove that its cheap on fy08/fy09 valuations?
Or is it at target fy08/fy09 valuations?
What is the peer group??
Can you give me other stocks in the same sector and show me a comparison to justify valuations?

Why can't i put my money in a value pick
or a growth pick? is IDFC A value pick or a growth pick?? IF its a growth pick why is the p.e.g over 1? why can't i buy growth at value levels i.e p.e.g of < 1

TCS is avaialable for p.e.g if <1 why can't i buy tcs??
why do i have to pay p.e.g of > 1 for idfc??

Now i am doing this because I don't follow banks , the ideal comparison would be with a financial institution only and not with tcs.
The point is fy08/fy09 valuations DRIVE ME CRAZY
IF WE ARE BUYING AT 20x FY09 , YIELD ON INVESTMENT OVER 2 YEARS is < 5% with god knows how much risk. Maybe i don't know the abcs of funda investing, BUt if stock is growing at 16%
WHY WOULD I PAY MORE THAN 16X TRAILING OR 16x 1 year forward?
FAT CHANCE OF ME PAYING 20x forward
Why would I buy for 3-4x book?? Why not 0.8x or 1.6x book??
If I wanted to purchase this company outright how much would it cost me?
If I was a billionaire who could purchase this company outright and run it, would I buy this?? Is the return on investment justified??
Would the person who wrote this report, invest his life savings in this company?
Or are this analyst and his associates already long and looking for an exit?


If stock is trading at 20.6 fy08e and 18.2fy09e
@ 104 rs then fy08e is 5
and fy09e is 5.7

Current eps is 4.2
5/4.2= 19% growth
5.7/5= 14% growth
my common sense p.eg system tells me if stock is growing at 20%
then I will buy at 20% trailing earnings

NOT 20x FORWARD EARNINGS

concrete case
tcs 1260
42 eps TRAILING , FORWARD IS 52-55!!!
30% cagr
I will buy at 30*42
NOT AT 55*30, THAT IS NEXT YEAR's TARGET

Fundamental analysts and technical analysts sometimes use a lot of mumbo jumbo to confuse poor investors. Same way that technical analysts tote breakout buying. Pullback buying has returns superior to buying breakouts but no one talks about buying dips or quantifying dips.
Read alexander elder for learning how to trade dips

READ THIS CRITIQUE , tell me if you disagree
Maybe I don't know my fundas , maybe i am the idiot.
I am always interested in learning a new trick or two.
But please SOMEONE show me why idfc is a BUY at 97 @ 18x fy09 earnings when growth rate is less than 18% per year.
What is the return on investment over 1-2-3 year timeframes.
What is the downside risk?
What is the reward?
Is there a 'fundamental trade' i.e buy setup here.
Leave your comments in the comment section.

Nifty valuations.

excelent sanjay: i read in economics times nifty is 12 yr over bough (mean calculation) in last week

Raja: overbought with respect to mean pricing of last 12 years??
Raja: did your economic times also mention that india inc is growing at highest pace since independence?

Anyway even i think its overbought
since the growth is fast
but the price of nifty is in line with growth.
20% growth in earnings expected 20 p.e already
My only issue is i can see nifty giving 20% gains by next year with downside risk of say 10-20%. So the market still looks ok. You get one quarter where IT misses estimates and this rosy picture could get very ugly in a second.
But for now fundas intact. Risk 10%-20%, reward 10-20% nifty still needs to go up 10% before it becomes a sell. Right now it might be a hold but its probably not a place to be doing fresh buying either. Your money might be safer in a fixed deposit till november.

I still don't know exactly why p.e.g of 1 is used as fair value. I suspect it has to do with long term dcf/interest rates. If anyone has some good literature on the subject do send.

I guess I should build a mathematical dcf model using initial growth rate, avg growth rate and terminal growth rate.
I have been meaning to do this but I am too damn lazy.

If someone can check sensex figures do let me know as well.
Whats sensex p.e right now? close to 20?
and whats sensex forward p.e?

Hmmm I just googled
it looks like a calculator already exists
http://www.moneychimp.com/articles/valuation/dcf.htm

I used eps of 200 for nifty
growth rate of 12% for next 5 years (8% gdp +4-6% inflation)
and terminal growth rate of 8%
+ return on appropriate index = 11% default
it tells me nifty fair value= 4687
I don't know how to work the numbers


Any funda experts out there????
I'd like to learn how this is done :)

REL

If buying support/bottom fishing buy with sl below 493
System: (Trend follower)
Stock Name: REL
Buyarea=507.647
Support1 :511.22 Support2 :507.14
Resistance1:529.56 Resistance2:543.40
ATR(14)=13.8406
Target1:514.567 Target2:521.488
Target3:529.792
SL1:504.879 SL2:493.806
Sl1 to be employed on closing basis

My system says long
How to trade? Buy at buy area use sl on closing basis and
trade for the targets also only on closing basis

Or look for intraday breakout above 512 sl u will have to derive from intraday levels/floor levels and you can target 520-529-544.
Please check results /funda angle to make sure no big moves cooking on either side before trading.
I think results came out recently so no mega moves expected now.

This is a retracement move
Retracements :471.1-534
0.236:519.156 0.382:509.972
0.5 :502.55 0.618:495.128
0.764:485.944

Trend following i.e bottom fishing with the trend has low accuracy but very high reward/risk
Trade can easily become a breakout trade in your favour in a bull market.
I remember someone gave a breakout trade on this above 520
What about all those bulls stuck at 530?
Are we going to abandon them in this bull market??
Or will we hold 484 and go for 550-650 :)
Lets find out.

Aftek infosys: Value stock

I think this stock was brought to my attention originally by prem
near 56-60 levels
http://www.valuenotes.com/Valuechase/valuechase_aftekinfosys_24jun06.pdf?ArtCd=85778&Cat=C&Id=122
This is a multibagger in the making on the funda side
When chasing a small/midcap keep in mind 10% of portfolio and 2% max risk rule.
Since this stock is wild. Lets say you want to use a stoploss below 52 week low
that could be a 30% risk from cmp. If you are only allowed to risk 2% of your total capital on aftek then you may only buy 100/30*2 = 0.6% of your portfolio or so.
Also i am not giving a stoploss so the actual risk i am asking you to take on this trade is 100% of price paid. One can consider limiting exposure to as low as 1-2% of capital (since 0.6 might be too tiny), if investing as i am suggesting. That way you can buy and forget it and let it grow on its own and still sleep easy.

"Company growing at a CAGR of > 40% over last 6 years

Price to Book Value (PBV) ratio of 1.27 as compared to 4.8 for peer IT companies

PE of 6 against the Industry average (Peer Co.) of approx. 23

Profitability ratio (PAT / Sales) of 33% against 17% enjoyed by Peer
Companies

Debt Free Company with Cash and Bank Balance (incl. Loans to Co.) of Rs.46 per
share besides investments, business virtually available free for Rs.10-, PE of
Rs.1-

Investments in Technology companies with strong business models and huge
potential

Total Foreign holding of 35% as of March 2006"

Morgan stanley has bought as high as 80-90.
Now you can either say morgan stanley is stupid or you can think the way i like to think: morgan stanley is thinking the stock will touch 160 in a few years.
Btw morgan stanley bought at my first funda target, when prem said buy at 56-60 I said our first target should be p.e of 10. 9 rs eps we bought at p.e of 6 so 10 p.e target = 90.
Check the high made in the recent bull run. Make no mistake, the funda investor outperforms the technical investor in the long run. This stock will go much higher as long as the fundas are intact, i.e as long as growth continues.

Has anyone bought this on my reco??
Someone was complaining to me that 90% of my calls underperform the market
What do you guys think? Do my calls underperform the market. Leave a comment.

At what price did I reccomend aftek ? Is it underperforming the market?
Will it underperform for any significant period of time? How does one measure performance? The pros use capm to measure performance, alpha/beta which this someone has never heard of.
I had bought aftek in delivery recently @ 56 in recent panic but got out too early in a quick rally to 64 based purly on nifty levels because I needed to free up some cash. I am regretting the early exit now :).

aftekinfo+prithvi are my next two roltas in the making! Rolta was my top value pick at a p.e of 5 80 rs per share 16 rs earnings. The stock now has maybe 40 rs earnings and trades at 400 +. Also keep an eye on my other value pick jstainless reccomended at a p.e of near 5 when it was at 120, everyone was saying buy sail on technicals
(sail was also @ 120 then but p.e of 9-10) and I was saying buy jstainless on fundamentals. I still believe jstainless will outperform over a slightly longer timeframe. Mixing technicals+fundamentals can be a problem. I got my market timing wrong since I was so obsessed with the fundas that I was long in jstainless during feb/march correction. As a result I didn't hold for the long haul.
Rolta i bought 80 and sold at 100 twice. This time I'll try to stay in prithvi/aftekinfo for a slightly longer term view.

Train of thought

To fully appreciate the train of thought of this blog, join me and my friends in our daily conference.
The bullish calls
hcc/voltas/idbi/rcom/tatatea
were given originally at 96/88/86/404-410-420-448/620-648-708
Then you'll know at what point the bullishness changes into bearishness and vice versa :)
or just follow the trading system
@ http://niftytraders.blogspot.com

As for bearishness i only shorted once my rising channel broke near 4105.
Until then I was still trying to pick the bottom.
If we get back above 4105-4115 or so then the automated system will also be turning long so thats around when we would be mega bullish.

Vision: Twin peaks
Double top? 4225-4240?
not saying double top+crash, just double top + dip
the job of the bulls is to keep us above 3900-4000 long enough that we can form a base and knockout 4240 to go to 4440

Question

Would a short term chart pattern if filtered with fundamentals be more profitable than a short term chart pattern without fundamental filtering??

The question is which stock will move higher on that same inv hns or double bottom
a) a stock that has cheap valuations + high growth rate (p.e.g <1)
b) a stock that has expensive valuations+ high growthrate (p.e.g=1)
c) a stock that has expensive valuations+ low growthrate (p.e.g>1)
d) a stock that has cheap valuations + low growthrate (p.e.g=1)

Leave your ranking on top mover in the form of a string in the comments section
for instance b,c,a,d?
or a,b,d,c
etc

Colgate

http://www.investopedia.com/articles/basics/05/052005.asp
colgate roe 60%
whats roa though??
why is the funda report giving me only roe, trying to hide something?
anyway 340 is my support results were ok i guess since stock isn't crashing
Growth rate of 20% or so in colgate.
Stock might give 20% in a year if you can hold patiently.

Sell in may and walk away?

Market is at record levels
Its the month of may
The month most famous for record volatility (i.e crashes :) since the crash is usually a lot more volatile than the rally)

Get into 50% cash around 5/10 or 5/12 and stay nimble.

Defense is the best form of offense.
There are lots of shorting opportunities if you look around, why not trade a little short. Always remember the stock chart overrides the index chart. (same way that stock fundamentals override macroeconomic fundamentals)

The first thing I did before I put money into stocks was understand the fundas.
Read my old post on canslim on my other blog: http://niftytraders.blogspot.com.
Didn't take me too long , I think i remembered most of my economics from 9th standard and assorted reading I had done. P.E I had read in the books and I came up with my own version of earnings yield within 5 minutes when I was trying to convince my dad to loan me money to invest. I told him if you put your money in the bank its only 5-6%. If you buy a stock at a p.e of 6 then your share of the earnings are almost 16%. (At that time rolta was at a p.e of 5-6, look at the stock price now, these days you can get prithvi/aftekinfo for a p.e of 5-6, check back where these two stocks will be in 2-3 years)

The way i see it right now, nifty is at maybe 20x earnings?? and 20% growth expected??
So upside maybe 20%? risk maybe 10-20%?
Its not a screaming buy, but its a hold I guess. If we can take the market 10% higher then its probably a cleaner sell.



The next thing I studied was market cycles before I put any of my money into the market.
a) mars vesta cycle (just search for mars vesta cycle its a 4 year cycle or so)
b) lunar cycle (search google for lunatic markets or spiral calendar)
c) Dow from november to may cycle (or in Indian terms Diwali to republic day to pre tax march cycle, the most profitable time to be invested in the Indian market is between Diwali and new year)


http://biz.yahoo.com/cnnm/070430/043007_markets_sellinmay.html?.v=2

"
Money invested in the Dow stocks in the "best six months" and then switched to fixed income in the "worst six months" over 56 years grew to $544,323. But money invested in the Dow in the "worst six" and then switched to fixed income in the "best six" compounded to a loss of $272."

Be both long+short

When trading this market look for shorting opportunities.
Some stocks might have bad results might double top or form lower tops.
Just make sure you are on the right side of the mob.
13/21 ema
Only short stocks which are below these.

Remember while nifty might make a new high and touch 4440 once 4260 is crossed, there will be stocks that will not be able to tag along for the ride.

Check out icicibank unfilled gap down.
Might have had bad results or something
sbi is holding 13 ema so maybe long sbi short icici??

hdfc looks like its holding inv hns breakout + 1660-1670 area
can try long on that

I had a crazy vision earlier, posted it a week ago. Bulls/Bears in a battle but there were some bigger entities , the ones i call the titans. Operators, fiis , mfs whatever you want to call them. Big guys are out there with lots of cash. some big moves are brewing and since all the money will pile into very few counters the moves in the counters that do move will be obscene both on the upside and downside.

rcom above 448 might head for 484-515-600, 5-8% moves at a time roughly.
indhotel is showing weakness, below 144 will continue weak , keep an eye on it.
I would suggest to only go short in a bull market if you are also long on something. Otherwise the reward might not justify the risk.

Nifty flat correction unfolding possibly

Nifty got good suppot near rising gap up 4035 area + 13 ema
So maybe we're doing a flat correction and lows are already formed. i.e we go to 4240 then come back to 4000 or something then head much higher.

keep an eye on auropharma+rcom+reliance+bharti
these are my top picks in case market starts moving up
tcs can also show strength once it resolves eod triangle above 1270 can already see the potential for 1320 , check last post :) no matter what market does tcs is a buy at 1200. Understanding the fundamentals of a stock can give u the courage to buy a stock when the public is ignoring it and its selling a relatively low valuations.
if tcs goes to 1200 buy 1150 buy more 1050 b fully invested.


old quote :
"w4=volatile moves
stocks which can retest old highs or go higher after a correction are the leaders
like bharti/reliance but they must do their corrections first.
Also the late laggard breakouts which are only now giving breakouts w3/wc
or the early movers which went sideways earlier and are not trying w5 are your prime candidates for upmoves. The point is since nifty is out of its 3900 trading range the same pattern will be tradeable on stocks , breakouts will work.

i.e hll early sideways corrective still unfolding will break up soon
colgate same story , aurobindo also already in sideways phase and will break up before nifty."

hll check results reports and general consensus before attempting to buy it
some kind of supports 195-193-190-186 etc
don't know exactly which one will hold.
Can look to buy new eod highs.

Number systems

As human beings we are taught simple mathematics in high school
The mathematics of the arithmetic scale
where
2-1=1
3-2=1
And where we believe that the distance between 3 and 2 is the same as the distance between 1 and 2
As traders we need to understand the true scale of nature the logarithmic scale.
The distance between 1 and 2 is only half the distance between 2 and 3

2/1=1
3/2=1.5
i.e ln 3- ln 2 = 2*(ln 2 - ln 1)
reason is if I invested 10,000 rs at 1 rs per share and it moves to 2 i made a profit of 10,000 rs or 100%!!
Now imagine a late comer joins the party at 2 rs per share and invests 10,000 rs
For this chap to make 10,000 rs profit or 100% the share has to go to 4 rs not 3rs.


Did anyone ever wonder why the market faced res at 4244 and topped??? i remember posting the log channel a long time ago on this site.
the % gain from 2600 to 4244 was exactly equal to the % gain from 2307 to 3773
S&P CNX NIFTY, Analysis Date:12/29/2006 4:18:15 PM
Close/cmp:3966.4
Swing : Up=Buy ( 13.200% sensitivity)
T1:3614.86 T2:4244.68
T3:5263.59 1xR:4951.25
SwingHigh:3,773.6 CMP:3,966.4
SwingLow:2,307.9 SLPivot:2,595.9
2xAtr14Stop:285.781
Narrowsl:2,595.95
WideSl:1,865.81
Lower Chan:2868.43 Upper Chan:4276.5
ResLine:5456.23

This was a logarithmic swing projection
if the same computation had been done on arithmetic scale
the high would have been predicted at 3733-2308+2600 = 4061 or so
which by the way also gave us a high. So i wouldn't say arithmetic is useless , its a shortcut but the true structure of the market is visible on the log scale.
reason is in the short swings log/arithmetic will be very similar anyway.
so while log can still be accurate on the short swings like arithmetic , arithmetic cannot be as useful on the large swings as log.


Once you appreciate this fact you will understand why the fibonacci tool of amibroker and metastock are pathetic. They only give arithmetic projections :)
Want a fibonacci tool that does arithmetic/log levels?
I have one but i'll only put it up for sale if I get 5 enquiries , price is 10,000 rs for chart pattern detection+fibonacci analysis rolled into one.

View on pharma + efficient markets anomalies: gap trading

Gaps are Efficient market anomalies.
A gap once created is an important point of support/resistance
If the market could see the future perfectly there would be no gaps.
When sudden news hits that is unexpected or a move in the trend occurs that is unexpected you get gaps.
The market is telling you that until the gap is intact you have support/resistances from people who might be on the wrong side of the gap.!
lic watch 150 region for support.
should hit 156-160 sometime next week, already went there once.
nifty futures gap up 3986-4037 is still intact and while i would like to see 3987 it might not be forthcoming.

Few days ago reccomended
Long aurobindo near 662 old spike lows with a hedge of short wockhardt @ 439
Reasoning : auro had good news at 708, formed top drifted lower on low volumes
Wockhardt had good news at 440 and started drifting lower.
Subsequently wockhardt hit 417 which was the target for the hedge. After that wockhardt became a pullback buy @ center of channel with target of upper channel

After wockhardt hedge was closed cipla hedge, short near 216-219 , target 215-214-210-208-180
The ideas were gr8
the execution was horrible.
made 2% in wockhardt, 0 in cipla+ auro.
so much for trying to outsmart the market :)

Auro is now up to 700 in futures.
Wockhardt could have been reentered long near center of channel 418 now at 430+
cipla is trying to consolidate near 210-215 and might attempt a dead cat bounce 224-240 region. For now trend is rather sharply down in cipla could go as low as 180 where value buying should be done regardless of what trend followers tell u.
I think over next few months a portfolio of pharma stocks would outperform cipla :)
Long all pharma except cipla type of trade.
Sell all rallies in cipla the numbers were very weak. Especially considering the high p.e at which it trades. When you do a high wire act , meaning purchase a stock above sensible valuations. there is very little room for error and your safety net , i.e value region is far far away.

Nobody is talking about this but drug makers are also exporters, don't they get hit by stronger rupee just like tech?? Why was pharma not bashed earlier along with tech?
I don't get it. Did pharma exports suffer because of weaker rupee? Still don't have an answer to these questions
Anyway
nicolas results down qoq, guidance up
wockhardt flat , guidance up
auro not out yet
cipla down qoq, guidance down
so wockhardt is looking strong both on the charts and on the p.e front and on future prospects+current prospects. My top pick in pharma would have to be wockhardt now.

DIVIS was my top pick @ a p.e of 20 near 1200 when no one was interested in it.
People will be cheering wockhardt on when it gets an eps of 32 sometimes in the next few years and is trading at 640-720+. P.S divis is trading at a p.e of 40 right now.
Unless you can justify 40% cagr for next few years , its not worth 40x earnings. Lets see next hedge could even be short divis near 3721-3774 maybe on 'good' divis results or after a sell signal comes.

No stops for fundas, the only stop is a change in the underlying funda trend.
Notice i said funda trend not a funda fluctuation. same principle as technical trends
one bad qrtr doesn't necessarily mean 4 more bad quarters, the guidance is as important if not more important than the actual results.

Different degrees of trading skill

1) Level 1: Buy on a whim , sell on a whim
2) Level 2: You realize that maybe there are some patterns. So you buy/sell news or on calls given by 'experts'. At this stage you probably try to focus on accuracy of trades. You obsess with being right.
3) Level 3: You realize market doesn't always go up on good news and down on bad news
You start seeing support/resistance/chart patterns and the 'trend'
4) Level 4: You realize that some stocks even when they break support are strong and others even when they break resistance are weak. You pay attention to not just the short term trend but also the long term trend (long term trend is usually connected to the fundamentals).
5) Level 5: You come up with plans, entry area, stoplosses, targets (fundamental or technical).
6) Level 6: Your understand that just because someone is right more often than wrong doesn't make him richer. You understand the importance of risk management

Expected profit (n trials)= (Avg profit * % profitable - avg loss * % losses )* n
You spend time on testing ideas before you use them. You stop following what everyone else is saying and instead start appreciating the underlying probabilities.
Most people start following a trading system at this point and learn to keep their emotions in check by following what their system says.

7) Level 7: You subonscious is aware of all of the above and trading is instinctive. You feel the good vibes in a stock's chart/fundas/news instead of having to trust someone elses view. You trade your own view consistently and profitably with minimal effort.

Tests on expertise:

http://scientificamerican.com/print_version.cfm?articleID=00010347-101C-14C1-8F9E83414B7F4945
http://www.sciam.com/article.cfm?chanID=sa006&articleID=00010347-101C-14C1-8F9E83414B7F4945&pageNumber=2&catID=2

Need intraday Dow jones data to test some stuff

I need to get my hands on intraday dow jones data somehow.
As much of it as possible.
If anyone has it msg me on yahoo: niftytradersinc@yahoo.com

Just in case nifty's rise is a wave c look to trade short on something
There is money to be made on the short side for the next few days atleast. Regardless of nifty's trend w3 or wc, you never know till its over
So far nifty has always obliged with w4
The mood of the markets at 3556 this time was a lot like it was at 1900
Though 1900 the valuations were different. The same sort of setups happened on the charts.
Even at 1900 nifty morgan stanley was saying 1700 or something silly and this time they were saying 3200.
Well market didn't care much for their forecast instead market chose to respect the 200 sma support.
Simple technicals , until we are above 200 sma: bull market continues.


Regardless of what your wave count is
Buy into tech companies,
cycle degree w3
CAGR 30% for a few more years atleast, they are still in their growth phase.
ex. tcs trailing 4 qrtr eps 42 cmp 1230-1260 (30x)
next year expected eps 50-55.
If next year the guidance is for 65+ and 50-55 is achieved then tcs would be trading at 1500-1700 next year.

Exactly how efficient are the markets+Do trading systems works

I coded an efficient market based trading system.
Now this system works brilliantly on the Indian markets but fails to work on the u.s market data that i have.
The foundation of the system is that if the main index is bullish then there will be bullish influences on stocks at certain levels and the other way around for the short side. ("a rising tide lifts all boats") The system gets in and out quickly: holding positions for barely 2-3 days.
The risk adjusted returns are almost 3-4 times that of buy+hold nifty.
Perhaps every system is designed to fail in the longer run?
Technical analysts are always searching for techniques which will outperform the risk adjusted returns of the indices. The only issue is.
A trend following system loses money in trading range mode and a trading range system loses money in a market that is in a breakaway move.
The market never announces what mode it is in.
Trading range or trend?

For those who are wondering adx is too laggy to tell anything. The indicator itself loses money in mechanical tests.

Other interesting discoveries. the bill williams fractal breakout trading system works better on u.s markets than it does on indian markets.
Alexander elder tripple screen doesn't work with eod breakouts but can be used with intraday setups to trigger entry.
Donchian channel breakout don't work too well anywhere.

The medieval alchemists failed to turn lead into gold but laid the foundation for modern chemistry. Perhaps the modern trading system developer is doomed to fail in creating something that works all the time but will lay the foundation for a true AI.
The problem that is being attacked is not just entry/exit/sl signals. What is needed is a way to figure out the dna of the market. The underlying structure at any given time based on technical data/fundamental data and perhaps even news.
A purely mechanical system will not work. Unless you run a backtest for a trend following system on a trending market and a range trading system on a ranged market you are bound to get poor results over extremely long timeframes.

The bottom fishing picks of 3556 nifty all gave decent returns 10-20%
on pure fundas (aftekinfosys, aloktextiles). While the breakouttrades also did their targets: tatatea, hcc, rcom. Infy, bottom fishing at 200 sma failed to return much while tcs bottom fishing near 1200 region gave mediocre returns as well.
So net net, I don't really think my calls are outperforming the market by much.

Now what I need is
access to ridiculous amounts of funda data in a format that i can use
+ access to daily news
then I'll be able to move on to the next step in my journey of trading system development.
Mostly done making systems for now.
The only conclusion I can give right now is
a) trend following systems work in trending markets
b) contrarian systems work in range bound markets
c) "the trend is your friend until it bends" i.e false breakouts+range
and the problem remains , you never know which to use. Perhaps the right strategy is to check the fundamentals of a stock and figure out whether profit/sales are flat/growing and use that as a filter. You might miss the boat on the initial breakout when the first breakout quarter results come but you should be able to get on board after one quarter.

Look at dow jones charts 2000-2006 the trading range would have killed 90% of mechanical trend following systems on the eod charts.