CHART WATCH

CHART WATCH

SEE THE PICTURE AND TELL THE STORY

EXERCISE- 5

Charts are Graphical representation of price movement of anything over a period of time. The trend depicted by these charts is governed by the forces of demand and supply.  ‘History Repeats’ is a dictum that is operative in the markets also. Markets include all kinds, such as Stock, Commodity, Crude, Metals, and Foreign exchange etc.

I have started using names for the patterns in the charts. Watch them with attention.

* To enlarge the chart Double click by keeping the cursor above the chart. 

Market Lesson 3  :   Buy around  ‘Support  Line’

What is a ‘Support Line’?

When you drop a ball on the floor it hits the ground and bounces back. The floor here acts as support for the bouncing ball. Similarly in stock market when there is a free fall in the price (comparable to the ball) of a stock, it may stop at one level and bounce back. The imaginary line at which the price stops from falling further is the support line.

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Support line

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Support line is a level at which bulls (i.e., buyers) take control over the prices and prevent them from falling lower. Support levels indicate the price, where the most investors believe that prices will move higher.

There is nothing mysterious about support: it is classic equilibrium formed by supply and demand. But investor’s expectation change with the time, and they often do so abruptly. The development of support and resistance levels is probably the most noticeable and reccurring event on price charts. The penetration of support levels can be triggered by fundamental changes that are beyond investor's expectations and control (e.g., changes in earnings, management, competition, Scams, War, Natural calamity, etc.) New expectations lead to new price levels. Also there are support levels which originate due to emotional factors.

The supply line shows the quantity (i.e., the number of shares) that sellers are willing to supply at a given price. When prices increase, the number of sellers also increases as more traders are willing to sell at these higher prices.

In a free market, these lines are continually changing. Investor's expectations change, and so do the prices.

The foundation of most technical analysis tools is rooted in the concept of supply and demand. Price charts for financial instruments give us a superb view of these forces in action.

Note:  It is very difficult to catch the exact bottom while buying. That is why I have mentioned it as “Buy around Support Line”.

Observe the following charts where the price is coming down as a water fall. Guess at what price level it will hit the ground and start bouncing.

About the charts: (Dated 24.11.2010)

1. NIFTY Chart – Daily

2. Century Textiles Chart – Diversified 

3. Century Enka Chart – Diversified 

4. Bombay Dyeing Chart – Textile 

FAQ:

1. What is meant by “BOURSE?”

     Bourse refers to an organized market.

     The Stock Exchange.

2.  Who is a “BULL?”

      The person who believes that the market  

      will rise. A "bull" is an investor who buys

      stocks, for selling it at a higher price.

3.  Who is a “BEAR?”

      The person who believes that the market will

     decline. A "bear" is an investor who sells his

     stocks, and  buying it back at a lower price.

4.  Who is a “STAG?”

     A stag is an investor or speculator who

     subscribes to a new issue with the intention

     of selling them soon after allotment to

     realize a quick profit.

Can we anticipate the line of Support in advance? Is there any method or Model to predict it? To get an answer for these queries you have to wait till we reach the Advanced Technical Analysis Module.

Dr.Felisleo

25.11.2010

The Art Of Money Management For A Novice

CHAPTER 5 : Get   Familiar   with   “Stock Market jargon”

Wisdom is a weapon with which a man may ward off destruction;

It is an inner fortress which no enemy can assail.     

                                                            Thirukkural  -  Verse 421

Stock:

The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders.

Shares:

The stock of a business is divided into shares, the total of which must be stated at the time of business formation. Given the total amount of money invested in the business, a share has a certain declared face value, commonly known as the par value of a share.

Stock Market:

A stock market or equity market is a public entity (a loose network of Economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price. There are securities listed on a stock   exchange as well as those only traded privately.

Stock Exchange:

The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization, specialized in the business of bringing together buyers and sellers of different organizations, to a listing of stocks and securities together.

NSE:

The National Stock Exchange of India Limited (NSE) was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.

NIFTY:

The S&P CNX Nifty (Nifty 50 or simply Nifty) is a composite of the top 5 stocks listed on the National Stock Exchange (NSE), representing 24 different sectors of the economy. It is a simplified tool that helps investors and ordinary people alike, to understand what is happening in the stock market and by extension, the economy. If the Nifty Index performs well, it is a signal that companies in India are performing well and consequently that the country is doing well. Nifty is the flagship index of NSE, the 3rd largest stock exchange in the world in terms of number of transactions (Stock Futures).

It  is calculated as a weighted average, so changes in the share price of larger companies  have more effect. The base is defined as 1000 at the price level of November 3, 1995.

BSE:

Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform.

           Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.

SENSEX:

The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE. SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing large, well - established and financially    sound companies across key sectors. The base year of SENSEX was taken as 1978-79.   Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology. The "free-float market capitalization-weighted" methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones uses the free-float methodology. One can identify the booms and busts of the Indian equity market through SENSEX. As the oldest index in the country, it provides  the time  series  data over a fairly long period of time (from 1979 onwards).

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 Viewer’s  Voice  &  Author’s Choice

DR.KPS

   Your blog is just superb. It looks like you have spent a lot of time designing it. The sun rising background is pleasant and it conveys a lot of meaning. It is just wonderful and teaches us the basics.

     

Mr. RN

Very interesting to go through your blog. 

1. As suggested in the blog, PPF is the best investment option today. That should be the first option for everyone. On should complete every year the Rs 70000 quota.

2. Second best option is increasing Provident fund contribution to the maximum eligibility limit, if one is employed.

3. Third best will be the MIS of post office. The interest will work out to 8.5% approximately (considering the bonus). The maximum limit is Rs 4.5 lacs per individual (9.0 lacs if it is a joint account with one's spouse)

4.Fourth could be the banks as suggested in the blog

  5.Deposits of AAA and AA companies

6.Debentures

7. MF of good track record in the SIP route (Do not fall for fresh IPOs

Gold is not an investment at all. The liquidity, when one needs the money is nonexistent. Most of the jewelers do not purchase Gold from us and give us money. They will only exchange old Gold for new Gold.

Banks do not purchase Gold and give us money.

Gold is a non performing dead asset.

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With this, the first part of the teaching module “The Art Of Money Management for a Novice” is getting over. From next week onwards the second part “Asset Building through Equity” starts. I will try to make it as simple as possible. At the same time I would like to make it more informative. It demands great alertness to pick up the trading concepts and then applying it in the actual market. Hope you enjoy the forthcoming lessons. Happy Learning First and then Investing.

Dr.Felisleo

21.11.2010

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Dear viewers

I think the time has come for some kind of an interaction.

You can send all your Queries, Suggestions and Opinions to the following ID.

Email:   panleoinc@in.com

Whenever the author finds time, your queries will get reply either in personal mail or in the Blog.

All Rights Reserved – “Pan Leo Inc.”

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CHART WATCH

CHART WATCH

SEE THE PICTURE AND TELL THE STORY

EXERCISE- 4

Charts are Graphical representation of price movement of anything over a period of time. The trend depicted by these charts is governed by the forces of demand and supply.  ‘History Repeats’ is a dictum that is operative in the markets also. Markets include all kinds, such as Stock, Commodity, Crude, Metals, and Foreign exchange etc.

I have started using names for the patterns in the charts. Watch them with attention.

* To enlarge the chart Double click by keeping the cursor above the chart.

Market Lesson 2  :   Sell on the “Break Down” 

What is a Break Down?

A price movement  going down below an identified previous level of support. This is usually followed by heavy volume and increased volatility. A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, it is likely to continue dropping until it finds another support level. A support break signals that “bear” won the battle.

A breakdown is the bearish counterpart of a breakout.

About the charts: (Dated 16.11.2010)

  

1. NIFTY Chart – Index is nearing the support line.

2. BHARTI  AIRTEL – already given a Break Down Move – Is it going to sustain down move?

     Telecommunication Stock

3. PANORAMIC UNIVERSAL – Given a Break Down move at Rs.42 and has moved steeply down.

  Originally IT Stock now diversifying in to Hospitality (Hotels)

4. IVRCL IFRA – Has shown a clear Break Down. Likely to go down steeply.

  Infrastructure Stock

Break Down Types :

Let me classify the Break Downs into two categories based on the duration. (Duration refers to the time taken by the stock/commodity/Metal/crude etc to start a clear upward move after reaching the bottom.)

Break downs clearly expresses the loss of investors’ favor for the time being. How long it will take to return to investors’ favor is a difficult question to answer. To understand it, we should try to analyze the cause responsible for the breakdown.

Short term Break Down:

 If the factors are “seasonal” or include “normal market forces” then the downward journey will be of short duration.

Long Term Break Down:

 But if the downward move is due to bad performance of the company as well as the industry as a whole then it may take several years for recovery.

Hence it is prudent to sell the stock whenever you observe a clear Break Down signal.

** NOTE:

To be a successful market operator the first formula you should know is “Buying on Break Out and Selling on Break Down”. All high net worth large scale operators know this and will follow this rule. So as a small investor you should be able to outsmart those big players and be ahead of them in buying and selling. Will it be possible?

The answer is “YES”. It requires a lot of fine-tuning of all technical tools required to foresee the market turnarounds well in advance. “Early bird catches the prey” and the “Early investor makes more money”.

FAQ:

2. Does it require lot of money to invest in Stock Market?

Answer:  

No. Even few hundred rupees are enough. Timing is more important. MRF and McDowell were quoting less than ten Rupees during late seventies. Hero Honda was available for less than ten Rupees during late eighties, Jaiprakash industries (now JP Associates) and Garden Silk Mills were available for less than ten rupees during late nineties.

Hence you should be on the lookout for high value stocks available at throwaway prices to invest.  

What are the tools required and how to fine tune them? Who are all the fellow players in the arena we have to encounter.

We will discuss in the near future.

Dr.Felisleo

18.11.2010