Friday, August 15, 2008

The Nifty Caught at Moving Average

The Nifty is at high values and in overbought region. It tried to stay above 4600 but couldn’t stay for overheard pressure is very high. Now it is just above its 20 day moving average. It is now in a situation where its next move will clearly tell whether it has changed the trend from up to down or it deferred that to a future date.

Looking at the below chart it is clear it is behaving normally by falling every day after reaching the highest point in two months. It did like that many times in this year from January. Both the moving averages 20 day and 50day are at the same value. If you look at the right side of the chart it becomes clear that it changes trend downwards after dipping below them and making fake recovery for few days.

nifty char, national stock exchange symbol

Image Source



I cannot say anything about this routine behavior except suggesting to getting out of the markets as soon as possible.


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The Fate of SELMCL from here on

The stock has not yet shown signs of any recovery as it hasn’t stopped making new lows. Why I am concentrating more on this stock is because it is an exceptional stock compared to any other stock.

Its long term trend is temporarily changed to down trend. Presently it if forming lower lows and lower highs indicating the pain is not yet over.

Just take a look at this chart. It is clear that it is facing pressure from a distressed seller. The high volumes coupled with its ability to make lower highs and lower lows prove that point.


fate of selmcl from here on


So I expect it to break down further in the coming days/weeks, if not on Monday. We can clearly see that it had traded for a long time in the part (April) around 400 and that served the purpose of being a stop for the last three days as it is still hovering around that level.

In the same way I expect it to retrace back to 500 after many weeks as it traded around that value for many days in June and July and it had been resistance in May. That implies clearly that it can become a resistance in the future also.

My next bet on this stock is to enter after it makes a quick recovery from the lowest low and consolidates for few days. I will then post here at what price to enter and exit.



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Breakdown of SELMCL

Let us take a look at how SELMCL did after the last post.


breakdown of selmcl

After two days of high percentage gains because of breakout from trend, it started showing retracement. As with any stock making new highs, the end will always involve all time high and a close below the previous day’s close. That too it should have a black candlestick. It normally behaved after that by opening high and closing down by the end of the day. But worst part came after an upmove day where it gained ten percent on Aug 7.

It was clear that it is consolidating but the next two days were not as expect. Normally its range would have been diminished and would have entered into a range trading pattern with different high and low values. But from August 8 onwards it was falling terribly and had two lower circuit days of 20% with huge volumes ever. Lot of trading activity happened in this stock. That clearly told its long term trend has changed in just two days. That is disastrous for any investor.

Though it happened as a sudden surprise I figured out the reason after these two large black candlesticks. It was affected by the Russia-Georgia war. Not that it is directly affected. But because it is just following the Russian markets ever since it was listed on bourses.

It is a garment export company with major markets in Russia and Middle East. This is one stock that was not at all affected by the mayhem in the general market rocked by US economic crisis. The reason was clear. Its markets are emerging and are not dependent on the US economy but rather US and EU are now heavily dependent on these countries. It is all to do with their oil. India is not like that. Both for oil and for export markets it is heavily dependent on US and EU. SELMCL was an exception this. That is why even though it listed in August 2007 within a year it made a low of 77 and high of 735.

There after it behaved as Russian markets are behaving everyday. We can confidently say that in the long term it is still good no matter what happens with Indian economy in general.




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Sunday, August 3, 2008

SELMCL broke through the roof!

I didn’t notice when it happened. Just one week back I was looking at this stock trading around 515. I had noticed that it was bouncing repeatedly from 490-500. I felt this could be strong support. After leaving home on Friday, I got cold and fever. I couldn’t track it/any stock in the next week. But I felt that the support can be used as stop loss and buy the stock at 510-525 without fear.

Before I could recover and do anything the stock had its day on Wednesday and Thursday of this week. It gained from 520 to 675 in just a week. In two days the stock went up nearly by 30%. As I used to say there will always be a 25-30% move in stocks making new highs in a bull market, it has just proved that. Sad part of it is that I tracked it for many days and at the right time I had missed it. Nothing is worse than this.


Let me show the chart. The stock broke out with terrific volumes in just two days.

selmcl broke through the roof!

It rose from 510 to 675 in just two days. And if you ask me how I could have known to take advantage of this, just look at the candlesticks it was making everyday.

A white candlestick always indicates bullishness and we should be alerted by seeing it for preparing to buy. A black candlestick serves the opposite purpose. But that should be used after the stock made its upmove.

Here the stock made its new 52-week high of 631 on July 10. Thereafter it started consolidating with minor volumes. Everyday there was a black candlestick formation. Clearly it repeatedly bounced whenever it went below 500.

Anyway this game is over for now. We cannot expect another good move till 3-4 weeks. Till then just watch for the bouncing point and just enter a little above that price. Always remember stoploss if it goes through the support instead of bouncing. We can find such opportunities every quarter. A 25-30% gain can really be made. That doesn’t mean we should gamble without a stop loss. It should never be done. Once it falls through the supports just get rid of the bleeding stock.

Same thing can be expected with RNRL and ArevaT&D, the upcoming players. RNRL is a speculative play because UPA govt has won with SP’s support who are friendly to Anil Ambani. We can notice this speculation already by looking at the volumes of RNRL. It was just dead before with 20m average volume. Now it became live with 50m volumes and more. It rose from 60 to 100 in few weeks. Now it can be expected to reach 150 in the coming months easily as it got lot of attention. Any dip can be considered as opportunity to buy. But always look for supports.




ArevaT&D is consolidating now and bouncing from 1600. These are good stocks in the sense that even if the markets go down because of bearish outlook these will get support because of lower prices. Once market in general bounces, they will make up moves.



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Areva T&D for long term play

Areva T&D is one stock that is going to benefit very much form the nuclear deal. I have found several references to support this. And I have a feeling that it is not good to waste any more time. I plan to enter capital into this stock before this stock proves that it indeed is good for long term.

It is a global player in transmission and distribution of power. With nuclear deal going ahead, it might benefit from it. Areva T&D India is its subsidiary.


Look at recent news item:

Areva plans big play in India's nuclear power sector

After IAEA unanimously cleared India-specific safeguards agreement, World's largest nuclear power firm, Areva NP of France said it was gearing up to enter India's nuclear power sector in a big way and plans to float a separate subsidiary for it.

Areva has two separate companies-one for nuclear power generation, Areva NP and another for transmission and distribution, Areva T&D.

Source: http://economictimes.indiatimes.com/News/News_By_Industry/Energy/Power/Areva_plans_big_play_in_Indias_nuclear_power_sector/articleshow/3320652.cms

Both subsidiaries will benefit if the parent company starts engaging in nuclear power.

Its home page:

http://www.areva-td.com/home_tdmain/US_57_Homepage.html

In the past, Business Standard has reported this stock on June 21 2008 when it made up moves with good volumes. Volume is an important parameter to be considered when judging any move in a stock. Without volume any move will be temporary consolidation.

I am producing the BS report. It comes in stock watch section.

Areva up on nuke deal survival hopes


DALAL STREET SPIKES


BS Repoter / Mumbai June 21, 2008, 0:35 IST




Areva T&D moved up by 2.24 per cent to Rs 1,367.60 after media reports said that the government might try to save the beleaguered Indo-US nuclear deal. Areva is one of the major global players for making nuclear power reactors.

The scrip opened at Rs 1,350 and went on to achieve Rs 1,416. It hit a low of Rs 1,341 during intra-day trades. A total of 55,404 Areva shares changed hands at BSE. The scrip has gained 2.89 per cent in the last week and has fallen 13.26 per cent in the last one month.


A chart from nseindia.com. I couldn’t get older data as it changed its name from Areva to ArevaT&D on July 14. Even with older name I couldn’t get data older than June 30.



A look at icharts.in data shows a better picture. The stock is clearly in uptrend.


As the volumes show, it moved up till July 23 with huge volumes till 1800 and found resistance there. After that it is consolidating with lesser volumes. Next move (legit) can be expected anytime soon as the price is nearing the red line (20 day moving average). A price near 20DMA = 1540, can be good to buy. It has bounced once on 25 July from 1600 and on 1 Aug also it bounced from 1600. It seems 1600 is strong support and if it is not broken we can safely enter the stock with stop loss at 1575 and wait till it makes its next upmove. That must be associated with good volumes. It need not be as high as previous times. Once a stock establishes or reverses a trend with sudden surge in volumes, it doesn’t need such volumes to continue the trend. Many stocks have shown such behavior in the past.



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