What did I learn today?
The concept of volume
Whenever market makes a new high or low, it should be preceded with good volume. Otherwise the strength is declining
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RBI Policy is on 8 Feb, SO lesson learned today is that.
Before big events, market will remain sideways and premiums will remain high also. Chances of decay is also very less.
Stay away from this kind of market. Be it options buyer or seller.
Example:
Today:
Day Before Budget
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Stocks go up due to a catalyst.
Most of the time that catalyst is earnings.
Find the stocks with good earning catalysts and you are good to go.
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Earning Quality > Earnings
You need to manually check for earnings quality.
No screener can do the job for you.
I am absolutely convinced that Investing based upon fundamentals will give you much better results than investing based upon charts
Let’s understand this with an example.
Fundamentalists invest when they see that stock is going to breakout from consolidation due to earnings or any fundamental change.
Say price is 50 rs
Return when price is at 100 ------- 100%
Return when price is at 200 ------- 300 %
Return when price is at 300 ------- 500%
By the time, a chart based traders get his hands on this stock is when the price is 100rs.
Lets analyze the returns.
Return when stock is at 200 - 100%
Return when the stock is at 300- 200 %
Can you see the difference in returns ?
It is mostly half for a technical investor.
Example:
See the chart below of UCO Bank
Most of the technical investor will only invest after Nov 2022, as the stock is in uptrend and giving a weak pullback.
But the fundamental investor will invest based upon the quarterly result, see the below data
When June 2022 quarter results were out, fundamentalists were ready to invest in it as the result was too good and that too a quality result.
Technical analysts got the price at around 20.- 90 % return at the top
Fundamentalists got the price of 12 — 200% return at the top
Did you see the difference, why most rich people in the world are fundamental investors?
Comment below with your thoughts.
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How to identify range bound markets:
- Most candles have wicks
- Day High and Low getting rejected
- No follow through to the candles.
- Small sized candle formation.
Strategy for range bound markets:
- Create strangle
- Create straddle
- Go directional by shorting calls and puts at range extreme with target of another extreme
What else you think , comment below.
How to double your money through different asset class in India?
- Large Cap Equity Mutual Funds
Historical return : 12-15% ( past 10 years )
Time to double your money- 72/15 = less than 6 years
Risk- medium
- Small and MId cap Mutual Funds
Historical return : 15-18% ( past 10 years )
Time to double your money- 72/18 = 4 years
Risk- High
- Debt Mutual Funds
Historical return : 6-9% ( past 10 years )
Time to double your money- 72/9 = 8 years
Risk- Low
- Public Provident Fund (PPF)
Current Rate : 7.1%
Time to double your money- 72/7 = 11 years
Risk- Low
- Bank Fixed Deposits
Historical return : 5-7% ( past 10 years )
Time to double your money- 72/7 = 11 years
Risk- Low
- National Pension Scheme
Historical return : 9-12 % ( past 10 years )
Time to double your money- 72/12 = 6 years
Risk- Low
- Gold
Historical return : 10% ( past 10 years )
Time to double your money- 72/10 = 7.2 years
Risk- Medium
- Real Estate
Historical return : 8-10% ( past 10 years )
Time to double your money- 72/10 = 7.2 years
Risk- Medium
- Exhange Traded Funds ( ETFs)
Historical return : 10-12% ( past 10 years )
Time to double your money- 72/12 = 6 years
Risk- Low
If there is a strong rejection on both the sides, there is a very high chance that market will remain range bound for the day.
Example-- todays chart
First rejection- Morning Star
Second Rejection- Double top
When market rejects a level with a powerful candle and has the highest OI,
Chances are very low that it will break that level again.
Fin nifty chart
OI Data at 1pm
OI data at 12pm
OI Data at 11pm
What can you decipher from above image about 18100 CE and 18050 CE expiring worthless?
comment below to know the strategy in details?
Learning for today
The gap and go strategy.
Whenever there is a gap up of more than .5% and market gives a follow-through in the first 10 minutes.
AND
OI data is in our favour.
We can expect market to move in the direction of the gap.
See the today’s OI chart and Candlesticks chart for your reference.
Have your questions here.
Many people were expecting a breakout of PDL at 13:50, but OI stayed firm in BankNifty.
Lesson- Never go against OI.
How to trade the markets.
Bullish Market- Buy the support like PDL, Range Low, Swing Low etc.
Bearish Market- Short the resistance- PDH, Range High, Swing High
Sideways- Fade support and Resistance.
Example Today- Overall market is bullish, BNF came to support at PDL formed multiple rejection candle and broke out of range.Entry Bullish candle as shown
Never go against the trend
What to do when nifty and banknifty are trading in different direction?
Trade only when both converges and starts moving in same direction
Example- Nifty bullish and banknifty bearish- wait for banknifty to come to support and start reversing
Example ON 5th April.
Banknifty was bearish and Nifty was bullish, BNF came to support and start reversing.
Ideal time to enter
