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How to do SIP (Systematic Investment) in Stocks?

“History is written by the winners” -Napoleon Bonaparte I won’t be writing about the SIP which is already covered in the public doma...

Sunday, August 3, 2008

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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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