Full Gap Up Openings - A Visual Study

Full Gap Up Openings - A Visual Study

This is a visual study on full gap up openings. During the period November 2010 to April 2011, there were 17 occasions where we had full gap up openings. I wanted to look at the respective days intraday chart and get some idea on what exactly happens during the rest of the day. I prepared 17 charts in Excel. All are based on 5 minute data of Nifty Futures. The first three candles are the last 15 minutes action of the previous day. These charts are numbered Chart 1 through Chart 17. Just to give you an idea of the kind of market phase during this period, first I will post an EOD chart. All these 17 days are marked on this chart so that you get a clear idea on where the gap up happened. After that we will move on to those 17. So, here we go.

I'm still working on the past data and will post some quantitative results but looking at the above charts it is clear that we can't make any rules on how to trade these gaps. For example, if you make a rule like - " If the market opens full gap up then buy at the open with a 20 point stop" This rule "worked" on chart examples 1,3,5,7,10 and 14 but has failed on other days. So the bottom line seems to be that every day has to be treated on its own merit. You may study these charts and then come up with your own conclusions and please do post them in the comments section.

A similar study on full gap downs during the above period is underway but I'm too tired now and I will post that study later.

Curtesy  : http://www.timamo.blogspot.in

What does a Negative Working Capital Cycle mean to the Company's Shareholders?

What does a Negative Working Capital Cycle mean to the Company's Shareholders?

Working capital is a financial metric which represents Operating liquidity available to a business and is a critical component in the functioning of any business. It is a measure of the company's efficiency in managing its operational costs. Working Capital Analysis is a crucial before taking an Investment decision in any Company.

What can be interpreted from Working Capital Cycle?


Every Industry has its own dynamics in terms of its Working Capital requirements. Working Capital comparison between Peer companies will help to deduce the efficiency of the Business and also understand the Capital Allocation capability of its Management.

1) Most of the Fast growing companies continue to stretch their Working Capital which poses huge Balance Sheet risk. This kind of WC fueled growth is not sustainable.

      - Problems of Companies like Subiksha, Jain Irrigation etc come from elongated Working Capital cycle and increasing Inventory days (or) Increased Creditor days. Both increase the leverage of the Business.

2) Quality of Growth can be understood from analysis of the Company's Working Capital Cycle.

     - Most companies try to push growth by giving higher Credit (or) Varying Creditor days. All these happen during the boom periods and don't continue for long.

Positives Of Negative Working Capital Cycle


A Negative Working Capital cycle basically means that the company is having higher Current Liabilities when compared with its Current Assets. Negative Working Capital essentially means that the company is able to pre-sell its products and gets a decent Credit from its Suppliers which help it to grow its Business without any Capital requirements.

     A Negative Working Capital cycle where the company is able to pre-sell its products (or) get advances from its customers is a huge positive for the Company's shareholders. This indicates the Huge Customer demand for its products or a very Strong Brand. Only a few companies have this favorable situation and all these Shares have been Huge Multibagger in the past. (Eg: Colgate, VST Industries, HUL etc)

Interpretation of M***F***'s Balance Sheet


Our new Multibagger pick is one of the rare companies which exhibit strong Working Capital Management with a negative Working Capital Cycle. Let us have a closer look into the Balance sheet details of this stock.

It can be easily seen from the above picture that the Company gets a Significant amount as "Advance from Customers" which shows the Demand pull for its products. Only if the product flies off the shelf will the company able to Pre-sell it to Distributors. This clearly shows the Brand Pull of its product.

Even without knowing the Business, it's easy to understand the financial characteristics through Proper Analysis of Balance Sheet, P&L Statement and Cash Flow accounts. This Business has low CAPEX debt, High Asset Turnover, Healthy Margins and Negative Working Capital cycle - All of which indicates the Quality of the Business and Huge Share Holder Returns.

Our Multibagger Stock Pick: Interesting Viewpoints

·      Company had two Business divisions. One was a legacy Business which was a drag on its other Great Business. The legacy business was hived off a few years back.

·      This Family Business now has a new Wharton educated younger generation Scion who is driving change in the Business with a Strong focus on building the business to the next level.

·      Company has a Strong brand and a Niche Focus in a Huge Business segment.

·      A Consumer product whose Price point is a low and affordable 5 Rs/-.

·      Business which has grown its Revenues over 3X and Profits over 12X in the past 5 Years which clearly shows the nil impact of the general economic slowdown.

·      A smaller company in the similar sector had a Private Equity deal which valued the company at several times the current Valuations of M***F***.

·      Company has a ROE of around 40% and Return on Capital of > 32%. It also has an Asset turnover of over 3X its investments.

As per our discussion with the Company's Senior Management and our Primary Research, we expect the company to clock a very high 35% CAGR in revenues in the coming 2 years. Management is also confident of maintaining its margins which will lead to huge profitability without any Equity dilution. This revenue growth is basically coming from the Huge Capacity expansion which the company has completed in the last Quarter. 


All of this along with other Research information makes us confident in the Future of this Businesswhich is not tracked by any of the Big boys in the Market, but has the potential for Institutional Investment over the next few years. This Stock perfectly suits the tagline of our Multibagger Package. "Invest in Small Cap companies which will become Large Cap".

Courtesy : hbjcapital.com

June is coming to an end and it has been good month as far as FII flows are concerned…

FII flows in cash market

The inflows of Rs. 1966 crores in cash market looks impressive but what is disturbing is recent outflows. Yesterday, FIIs sold quite aggressively. So, on an overall basis for the month – the data looks impressive but the near term trend still seems indecisive.

FII flows in Index Futures

FIIs aggressively net bought index futures this month.

Courtesy : stateofthemarket.net/

P/E Ratio : P/E ratio is a reflection of the market’s opinion of the earnings capacity and future business prospects of a company. Companies which enjoy the confidence of investors and have a higher market standing usually command high P/E ratios. This ratio indicates the extent to which earnings of a share are covered by its price. If P/E is 5, it means that the price of a share is 5 times its earnings. In other words, the company’s EPS remaining constant, it will take you approximately five years through dividends plus capital appreciation to recover the cost of buying the share. The lower the P/E, lesser the time it will take for you to recover your investment. Its one of the most imortant Ratios you can look at. 

BUY Signal : Once PE goes below 14.
When NIFTY PE goes below level of 14, start accumulating the stocks and invest your money in 4-5 installment over some months. Make sure that markets are going up and down and moving in a range. If PE goes below 11, its a must BUY!!

SELL Signal : Once PE crosses above 22.
Part book the profit once NIFTY PE crosses above 22, PE crossing above 22 does not mean markets has to fall, its only an indication that markets may be overbought and now smart people will start selling there shares to mad public. If PE crosses above 25, its a must SELL!!

What Does Price-To-Book Ratio - P/B Ratio Mean?
A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.

What Does Dividend Yield Mean?
A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.


courtesy : marketpulse-snp.blogspot

Reality of the Market

Reality of the Market

Majority of the traders fail because they do not understand the reality of the market.
Most of us are not even playing the right game.
Materials available over the net and the books written by failed traders teach technical analysis patterns
and indicator based signals and we assume this is the reality.

The indicator based TA signals and price patterns are illusions.
These are only effects. Cause is something else. Then what is the cause ? Price .Indicators
and  patterns are derivatives of price. Then price is the cause and TA patterns the effect.
So we need to focus on price.

Do not reach a conclusion so fast. Price is another effect
and there is something that makes prices move in markets.
What it is ? It is the order flow. Orders make the market move.
 If the net order flow is on the buy side market will go up .
 If net order flow is on the sell side market will drift down.

Then order flow is the real thing  that moves the market. Oh No .
Dig a little more deeper. Yeah. got it . It is the people who act in the market by feeding their orders.
When people start bidding higher,price will move up
when they start lowering their offers price will start moving down.

A little more deeper. When people are going to bid or offer aggressively ?.
 It is when they feel the urgency and desperation to transact. This is when they become emotional..
So it all comes down to the emotion of  the market participants.
Fear and greed are the most powerful emotions that can force people to act.

If you are able to identify the price levels where a large enough group of traders succumb to these emotions 
and  able to act there without hesitation , you will win in this game. 
Trading is nothing but engaging the other party. Encashing  their fear and greed.

Suppose you are in a shopping mall. People will  be moving  around in a random manner.
 Then you hear an announcement that the first ten purchasers of  a particular item will get another free.
 You can see  so many people rushing to that counter .That is greed in action.
Then you go and press the fire alarm button.Everybody except you will rush to the exit. Fear in action.
Now you know it. Fear is much more powerful emotion than greed.

Courtesy :  NIFTYNIRVANA.BLOGSPOT.IN

Nifty is between 5200-5050.Today it broke 5150,
but in overbought zone.can see some -ve by tmrw.
Until 5200 stands on closing basis mkt will not be BULL.
They will make all shorts to be covered & will let mkt Down

RANGE BOUND

nifty will be in the range of 5050-5190
intermediate sup @ 5100-5070-5050
& Res @ 5150-5190

Bearish Pattern

BEARISH EVENING STAR Type: Reversal Relevance: Bearish Prior Trend: Bullish Reliability: High Confirmation: Suggested No. of Sticks: 3

BULLISH MORNING DOJI STAR Type: Reversal Relevance: Bullish Prior Trend: Bearish Reliability: High Confirmation: Suggested No. of Sticks: 3

Have courage to take loss.........

Have courage to take loss.........

Links to this post

Friends,
I have been writing time and again that take loss.One need to be ready to take loss.It is not all profit in market. It is not said casualy that if one makes 20% return in market then you are a good investor.
Remember one thing.There is no exit in stock market.Once you are in, you never come out.That is why I keep on saying, don't keep on putting all your money in market.It is not a good idea to put all your money, rather saving , in stock market.Keep some money in fixed deposit that one will need in bad times.Never borrow money and invest that is a very bad idea.Hope of making the loss is very bad thing to do.It never helps.If atall one wants to make up the loss, invest in bluechips which have been beaten down or pick good Cos with good management and good future.Investing in smallcaps never helps or  averaging will never help.Once the stock is down it is very hard to go up in next bull run.
Either you keep on infusing money to recover the loss or you keep on putting money to invest more.
Every new bull run has new favourite stock to give multibaggers returns.
Once a stock becomes a multibagger and starts showing loss, it is gone.Some other stocks takes its place.
If one has bought a stock at high price because of whatever earnings or great future it had and then in bear market it goes down, and it starts showing bad results , then most probably it is out of favour stock.
Why players will let investor make up the loss?Once small investors are in at high price , why they would let small investors make their money back?Had they gone mad that they would let small investor come out of it and they buy it and take a loss?...NO...that is never possible. Ye bahut hi simple bat hai .....ek bar small investor ko phasa diya hai , penny stock mian jo bahut upper gaya hai , koi story ki vajah se, usko phir se upper kyon le jayenge?Pagal kutte ne kata hai un operators ko, ki wahi stock wapas upper le jake , small investors ko nikal ne ka mauka dega?Vo tumko kyon nikale ga jis main tum high price pe leke phas chuke ho?Unless, they have interest in certain stocks, they will never take interest in it again.
Understand the market.How players play it.Our makret and even world market is played at the whims of players.Have you seen what happened on Wednesday last week?In 1 hr market showed a volatilty of 400 points and that is 125 points in nifty! It still says that our market is in hand of players and it will remain forever like that.
Always be ready to take a loss.Sell stock as soon as it goes down by 15-20% unless you are convinced about the future of the stock.
I have been saying time and again, it is not easy to make money in stock market and it is a dangerous game.Even when a master like Nemish Shah says that 2 or 3 stocks can give huge return out of 10 , then what to say of ourselves?We have seen that Nemish Shah of Enam Sec, hold Rico Auto since many years, he holds Super Spinning since many years, he holds Kar Mobiles since many years, he is holding Investment and Precision Casting since many years and still they haven't run at all, and he is the master in terms of even Rakesh Jhunjhunwala then just imagine our fate in stock market!Even Peter Lynch has said the same thing.Not all stock gives multibagger return.
Try to understand the risk in investing in Midcap and Smallcaps.......
Only 2 or 3 stocks become successful call out of 10 and that happens with the Masters who are  there in the market everyday and know the pulse of the market and what is happening in our market and internatioanl market then just imgane our fate!
One need to be ready to take the loss and sell the stock and should be able to buy something else which can give better returns.Get ready to take the loss of 50% OR  even 60% and switch over and make sure you buy a good Co.If you buy again a penny stock you will see the same fate.
Friends, I am no GOD. I also make mistakes and hence don't take my word as a final word.Pathar ki lakir nahi hai jo main likhta hun.
Loads of stocks has not performed on my given call.It is all how Co does and what market thinks.