Profit booking for our markets today

Blog meant for 3 May 2018 Thursday

Dear friends,

A volatile day for Nifty as it went from negative to positive and then back negative for the day. Finally, Nifty closed 21 points lower at 10718. Asian markets closed with mixed results, European markets are all positive and US markets are flat.

US Federal Reserve is meeting tonight to discuss their decision on interest rates in the US. Their decision will have an impact on the entire world and hence it is always an important news for all markets.

Nifty is in Hold zone for short term.

The indications for individual stocks for short term only are –

DON’T BUY –  MARUTI, SBI

WAIT TO SELL – HINDALCO

SELL – VEDANTA

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

Long term investors should continue to invest every month without missing.

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Question of the Day – 

Considering a scenario where I have already invested 100% of the capital allocated for short term and now those stocks have moved to HOLD and there are 2-3 new stocks that have come up as JUST BUY.

Please advise on the following for better profits:

1. Shall I sell the not so moving ones from HOLD zone and buy the ones that moved into JUST BUY.

2. Hold on to the already invested stocks till it moves to sell ZONE

3. Take a partial approach – sell partly from the HOLD zone and buy some that moved into JUST BUY.

Answer – 

This is a very good question and it might be a doubt in many investors’ mind. The answer to this question depends on case to case but we will broadly give you an idea of how you should approach such a situation.

Suppose, we have allocated Rs.1 lakh as capital for short term trading and the entire amount has been invested already in few stocks for short term.

Now, after this, suppose another 1-2-3 companies give Buy indication for short term, then what can we do?

1.Shall I sell the not so moving ones from HOLD zone and buy the ones that moved into JUST BUY – 

Although this option sounds logical, the problem which could arise if we sell the shares which have not moved up much after buying is that after you sell, it could suddenly pick up and you may miss the opportunity to make profit by selling early even though the stock was in Hold zone.

2. Hold on to the already invested stocks till it moves to sell ZONE

In this option, you are hoping for the stocks you have bought to continue to appreciate and give you good profits. This approach may be the best since you bought as per the Buy indication and until the Sell indication arises, better to continue to hold and the stocks that we already own may give us sufficient profits.

3. Take a partial approach – sell partly from the HOLD zone and buy some that moved into JUST BUY – 

This option is the middle path to the above two options where you sell half the shares you own and book some profits and buy the new shares which are showing Buy indication now hoping that the new purchases will give us more profits than the ones we already held. In this option, if the new shares bought do not appreciate much but falls after buying and shows Sell indication, we may have to sell them. In the meantime, the ones which we had partially sold may appreciate further and we may regret having sold half the shares too early.

As you may have noticed, each case may be different since sometimes, we may sell a stock early and that could be the right decision and the new shares bought could appreciate and give us profits.

Other times, the shares we sold may appreciate and the new shares bought may fall, thereby making our decision look foolish.

Ideally, if you have Rs.1 lakh capital and you have already invested it in some stocks for short term, may be you can follow Option 2. But, this option need not always be right.

This is all part of the interesting aspects of stock market where there are no universal laws like in science with respect to short term.

In long term, we can be quite sure that a leading company which is growing profits and its market share over the year will give good returns for investors.
However, in short term, various techniques and scenarios may lead to different results at different times.

Short term trading is almost like a One Day match in cricket where on a particular day, any team which performs well can win against the strongest team also whereas long term investing is more like Test match cricket where the true fundamentals and quality of the team and players will ensure good performance in matches and it is difficult to suddenly win a test match without a good set of players who perform well consistently.

Intra-day trading is like a 20-20 match where anything can happen in a short span of time. On a particular day, if you are lucky, you can be a hero and make good profits but on a difficult day, you can make huge losses too. But usually, there will be more days where you will struggle to make money (or will make losses) and hence the losses will always be more than the profits you make and hence the net result in intra-day trading will be a loss. Hence, never attempt intra-day trading since it is not worth your time, money and the tension you will undergo.

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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)

About the author

Dr. Bharath Chandra

Hi there! This is Dr. Bharath Chandra & Rohan, International Trainers & Success Coaches. We have addressed more than a crore people on Stock Market, Personality Development, Wealth Management and Financial Planning over the past 35 years.

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