Markets weak on Friday, but global cues positive

Blog meant for 7 May 2018 Monday

Dear friends,

Nifty fell on Friday too by 61 points and closed at 10618. The Asian markets were weak on Friday, but European and US markets were up by around 1 %. Our markets may open slightly positive due to the positive global cues.

Nifty is in Hold zone for short term.

The indications for individual stocks for short term only are –

DON’T BUY –  MARUTI, SBI, VEDANTA

WAIT TO SELL – TITAN, AXIS BANK

HOLD – M&M, RELIANCE INDUSTRIES, TCS, ITC, YES BANK, INFOSYS, HDFC, ASIAN PAINT, HDFC BANK, HINDALCO

Long term investors should continue to invest every month without missing for any reason. Even a small amount invested regularly becomes a big amount many years later.

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Question of the Day – 

In short term we usually follow the Red line to Red line concept for buying and selling.

My question is ‘Why we need to wait to sell till the indication comes to sell (i.e when it touches once again the red line)? Why can’t we sell when it gives indication of fall after reaching certain high value?

Answer – 

This is a good question and a common we receive in our Workshops too.

The question is why we should sell only when the Sell indication arises (at point of touching red line) instead of selling when it has gone high and starts falling from there.

There are two ways we can approach or decide –

1. Sell at a particular point when it has gone high and starts falling a bit and book the short term profits.

2. Sell only when it touches the red line.

In Point 1 – Suppose you bought a stock at Rs.100 when the buy indication arose and then it went up for next few days and it reached Rs.110. After that, it starts falling and reaches Rs.107 and after some more days, it falls to Rs.104 when it touches the red line.

Hence, we may have made 4% profit in one month or so rather than 7 or 10%.

Many investors feel that we should have sold at 107 or 110 itself. But the question is how do we know that 107 or 110 is high. Suppose the stock fell from 11o to 107 and then again started rising and went to 116. At such time, would you not regret having sold at 107.

Nobody knows which is high or low until after the particular situation happens.

Investors regret having sold at 107, after seeing the stock at 116 and feel that they have made a mistake of selling early. On the other hand, you will feel that selling at 107 is correct is the stock does not rise after that and falls to 104.

Hence, you can use two techniques / approaches to sell –

1. Sell as per red line to red line technique and earn whatever profits it gives you.

2. Sell at a pre-determined profit percentage such as 7 % or 10%, 15% etc. and not regret your decision if the stock rises above that and gives more profit.

Please note that you can never buy at the lowest and sell at the highest.

All the best!

Dr.Bharath Chandra and Rohan

Please do not comment on the blog. Any questions or clarifications can be asked by sending us an email with your registration number given to you during the Workshop. Questions without quoting registration number will not be answered.

(The above comments are only the personal views of the authors of this blog. Please do your own research before taking any investment decisions. The reader of this blog must understand and take full responsibility for the Profit or Loss made by taking actions based on the above views)