Stocks Archives - Page 3 of 23

Sintex Industries: Follow-Up To Breakout With Volume

January 27, 2015 by B.Krishnakumar Leave a Comment

This is a follow-up to the the earlier post. If you have not read the earlier one, please click here to read it now, in order to get the context of this post. I could have written this post a couple of days earlier (and would have made far more sense from trading perspective) but refrained from doing so, for the fear of violating regulator norms. This post is just to drive home the point that after breakouts, price does a retest and would offer a better entry. Have a look at the daily chart featured below.

Price corrected after the breakout. Notice how price corrected to the breakout point highlighted in the previous post. This phenomenon happens across all time frames. Is there is a reason why price turned where it turned during the correction? Be my guest and have a look at the 15-minute chart posted below.

It is not surprising that the price retested the prior breakout area in the 15-minute time frame. Take note of the green wide ranged bar and spike in volume. Price comes back and seeks support right at the selling tail formed on Jan.19 at 2.15 PM. Price seldom halts because of some harmonic pattern, moving average or fib ratio. It halts where buyers or sellers turn aggressive. The tools mentioned above help us facilitate in identifying those areas and not the other way round.

Hope you will think twice the next time when you are confronted with the urge to chase price thinking that you will miss out on the move. It is difficult, but please develop this habit.

One little clue before signing off: If price seeks support at a prior selling tail, is it not logical to expect a prior buying tail as a potential resistance area? I see selling tails near Rs.137 formed in Jan-Mar 2011. The context for remaining bullish would diminish vastly if the price falls below the recent swing low of Rs.103.

Disclosure: I own shares of Sintex Industries and my risk management parameters are in place. This post is not meant to provide any view or opinion on Sintex Industries. The objective is to highlight how price behaves.

Indian Rupee: Another Update

January 21, 2015 by B.Krishnakumar Leave a Comment

Hope you found the earlier update on USD/INR pair informative. Click here to read the earlier update. This is an extract from the earlier update “My expectation is that the US Dollar could see a sharp spike up to Rs.63.50-64 if it clears Rs.62. Will it clear Rs.62? I would bet on that event until the US Dollar falls below Rs.59.50”

The US Dollar rallied to a high of about Rs.64 in mid-December and has since been trending lower. If you note the above extract from the prior post, I had deliberately used the word “Spike up” to denote that the upward move would accelerate and you can see the acceleration from Dec.10 to Dec.16.

Think, I have taken enough efforts to highlight that the USD/INR pair has moved per script! Now let’s look at what MIGHT happen.

Similar to the accelerated move up, there is a case for a sharp fall lower for the USD (Rupee to appreciate) in the short-term. For those wondering why should price could accelerate, please study the price patterns and let me have your observations.

The US Dollar is tracing out a series of lower highs and lower lows recently and until there is a move above the Dec.16 low of Rs.62.85, the trend is likely to be weak for the US Dollar. The immediate support for the pair is at the origin of the recent move – Rs.60.20-60.50. Whether the US Dollar slide would halt at Rs.60.20-60.50 or not is not something I would like to GUESS now. Let’s address that once price visits the zone.

PLEASE NOTE THAT THIS POST IS MEANT TO BE ENTIRELY FOR EDUCATION PURPOSES ONLY. I DO NOT TRADE CURRENCIES AND HAVE NO EXPOSURE TO THE PAIR DISCUSSED HERE. ANYTHING MENTIONED IN THE POST IS NOT MEANT TO BE MY VIEW BUT JUST AN OBSERVATION OF PRICE ACTION AND BEHAVIOR. THE PURPOSE OF THE POST IS TO EDUCATE READERS ABOUT READING & INTERPRETING PRICE ACTION and NOT TO SHARE OR PUT OUT ANY VIEW.

Sintex Industries: Breakout with Volume !!

January 20, 2015 by B.Krishnakumar 5 Comments

Regular readers of this blog and my posts elsewhere would be aware that I suggest not to chase price, especially breakouts of well-advertised levels. Let’s consider the case of Sintex and understand how the pro-money (call it operators, HNIs, FIIs or anyone else with enough money to move price) work. The idea behind this post is to show how price/volume can be misleading and green candle with huge volumes need not necessarily be a signal to jump on board.

Have a look at the daily chart of Sintex featured below. The data is updated until Monday, January 19, 2015.

It is apparent from the above chart that the price closed near the day’s high, with huge spike in trading volume. This price action backed with increased trading volume would have enticed quite a few traders to buy the stock first up this morning. Why? If price breaks key resistance of Rs.105 then it means a breakout. What is the sanctity of Rs.105? Have a look at the weekly chart featured below to understand the importance of Rs.103-105 zone.

Am sure, Sintex would have popped up yesterday, in the regular scanner that most traders run at the end of the day. The price action and volume was compelling enough to go long first thing today else we end up missing the move. How many of you bought this morning? Am sure quite a few and many would fail to admit they fell for the bait.

I have no problem in admitting that I have fallen prey to this phenomenon and ended up buying at the day’s high and even at 52-high in certain cases, only to realise that I was handed a lemon. Have a look at the updated chart of Sintex which includes today’s price action.

Notice the selling tail or the wick. What does it indicate? Now pay attention to the volume. The traded volume today was almost 89% of yesterday’s volume. So, it was an equally high volume day but price retreated from the day’s high of Rs.111.20 and closed at Rs.107.15. The close was a good 3.6% from the day’s high.

The pro-money will do whatever it takes, to trap gullible traders, in their search to get relatively cheaper entry. Just imagine, if everyone was desperate to buy this morning, who will they buy it from? You need a seller for every buy or vice-versa right! Think!!

Even at the cost of ending this post abruptly, I am not going to post any further information / analysis. Not for a moment am I saying that Sintex has hit a peak and would start selling off. Am not giving any opinion or analysis about where this stock is headed.

Am also not saying that breakouts are always a failure. Please do not bother to send mails / reply showing examples of where breakouts worked like a charm. They do work, but try to understand where the move originated and the source of the actual breakout would be retested more often than not.

I appreciate comments / questions and will try to respond as quickly as possible.

Larsen & Toubro: Time To Include in Portfolio

November 19, 2014 by B.Krishnakumar 2 Comments

A look at the charts of Larsen & Toubro indicates that it is still not late to include this stock in the portfolio. Adding more does not come across as such a bad idea either. Let’s take a top-down approach and start off with a look at the monthly chart.From the above chart, it is clear that the price is now headed to the upper blue line at Rs.2,100-ish. The expectation is that this move towards Rs.2,100 would not take much time as the incremental distance to be covered is not that big.

The stock could get into a different orbit once the price scales above the upper blue line. Let’s discuss higher targets in a different post after the price crosses that blue line. Until then, let’s stick to the short-term target of Rs.2,100.

I could have wrapped up this post right here by giving the stop loss level, but decided to go a step further to highlight what I can read from the daily chart. I have received a few mails asking for tips to read price.

Take a look at the daily chart above. It is just not surprising to note that price was rejected at Rs.1,633 on September 8. There was a huge gap and more importantly, a decision was made in late July that the stock was expensive and price fell thereafter.

Whenever price revisits a prior decision-point, the first revisit will invariably offer a resistance or support as the case may be. In this instance, it acted as a resistance because there were still buyers who were trapped and waiting for an exit option to bail out.

The second revisit of this zone happened a couple of weeks ago on Nov. 7. And the residual selling was absorbed. Notice how price again was repelled but the follow through to the downside was very marginal, suggesting selling was not rampant.

The last clue (there are so many others as well) I want to highlight is the long buying tails witnessed recently. And look at where the tails happen. Can you tell me why price took support and bounced at where it did on Nov. 10 & Nov. 17?

I would abandon the bullish view on the stock if the price falls below Rs.1,350. Now, please do not trouble yourself by highlighting that the risk is too high if one buys at the current market price. I am aware of that. Where you to want to buy and how you manage your risk is something that you can answer and handle!

Please note that the basic idea is to channelize your thought towards price reading. Once you understand what moves price and how to identify decision points, you will then be surprised that any technical analysis tool works like a charm.

I want A Trade: Want It Right Now !!

November 16, 2014 by B.Krishnakumar Leave a Comment

I am sure (at least hope) that the title of the post resonates with a few, especially the ones relatively new to trading or learning technical analysis. Many fall prey not only to the overwhelming urge to identify that secret tool or indicator / methodology but also to the compelling urge to hit a trade using the just learned tool / indicator.

Then, we are also a victim of the mindset that hit the trade right now or price will run without you to the moon or sub-zero as the case may be. We succumb to this pressure only to realise that our entry was the high or low for the move.

Ever wondered why this happens? You can pick and choose any tool / indicator / methodology and everything works and WILL yield profits on a consistent basis. Then why are we often confounded with questions such as Which is the best indicator, which is the best time period for moving averages, is simple MA better or should be we use exponential MA!

The reason is simple – we are anxious to hit a trade right now. This urge becomes so very overwhelming that we fail to address the need to understand the tool / methodology that we are using to take the trade.

Have you ever asked yourself these questions?

Did the price stop because of the moving average on the screen or something else?
Did the Fibonacci retracement or projection cause a turn in price?
Or was it because of some harmonic pattern
Or something else (and the list is endless)

We never bothered about these questions because our mind is preoccupied with the predefined rules and we just want to take the next trade with what we just read.

To move forward in the road to consistent profitability, one should first take efforts to understand the logic and purpose behind the indicator or methodology. Ask yourself why this indicator works and when it works and when it doesn’t and why so.

“Start with Why” as Simon Sinek says. Visit his blog www.startwithwhy.com and listen to his TED videos.

Once you realize that price fluctuates and there will always be another opportunity just round the corner, the urge to hit a trade immediately would be eliminated to a big extent. Am also reminded of the following quote from the movie “The Mechanic”:

“VICTORY LOVES PREPARATION”

So, my purpose of putting some digital ink to this post is to convey that please do not be in a hurry to take a trade. Understand the tools you use and more importantly, introspect which time frame suits you as a trader. Only you can answer this question and this probably is the one of the most important question to be addressed!!