Investment strategy

Generally it is said that there should be KISS (KEEP IT SIMPLE STUPID) strategy to be successful. The same works for investments also, anybody with little knowledge of the market has all the chances of making excellent profits if he develops a system and adheres to it irrespective of the market. With little technical analysis the person can be successful and multiply his money with little rise. But in any case the stop loss should be strightly adhered to as the primary motive is to protect you capital. If anybody is not in favor of stop loss then stock market is not for him.

This method which I am indicating is very very simple and can be adhered to by investors so that they keep on multiplying their money over period of times. You might be wondering what the system is which can give consistent gains. The method is 200 day EMA (Exponential Moving Average). We would discuss the method in details below.

Generally it is said that bulls rule above 200 day EMA and bears rule below it. So the method says that when the stock price moves above 200 day EMA then we have to buy and when it moves below it from above then we simply have to sell the stock and shift to other stocks which are above 200 day EMA. Generally the rule is if the stock price is above 200 day EMA the stock continues to move up over a period of time and after a sustained move it might again move below it. if the stock price is below 200 day EMA it continues to move down till the time arrives when it move above it. When an individual buys a stock expecting it to move up so if the bulls are active then the chances are that it has all the chances of moving up, as above 200 day EMA bulls rule odds are in your favor and it makes sense to make an investments. I have seen over a period of years that irrespective of state of the market this systems works. I bull market its give spectacular results if an individual gents into a good stock.

So the question now comes whether all the stocks which move above 200 day EMA are worth a buy? The answer is no. Here fundamentals come into play. You should buy into the stocks which are fundamentally good and or fundamentals are improving.

Now comes the question as how to judge the fundamentals. The company should be in profits for last two years at-least, if they are in increasing trend then in would be better. Its latest quarterly results should show profits, it would be better there is positive increase in quarterly results. The higher the increase the better. If the above conditions are met and the stock moves above 200 day EMA then we can be sure that we might be in the stock which is fundamentally improving and bulls have taken charge and we can expect the price to move further. If the stocks goes on to make a 52 week high post it moves above 200 day EMA then we can be sure that we are into a good stock and we can expect further upsides.

After move above 200 day EMA, the stock moves above and moves above 200 week EMA then it re-affirms the decision buy us and actually we should add to our existing position on movement of weekly MA.

If the stock move above 200 day EMA and you missed the stock to buy the same and after some time it comes down and takes support there and then starts to move up then it is also a good opportunity to get into the stock and also add into the existing position. The support at 200 day EMA is an ample proof that bulls are ruling and confirms our stand.

In all the case the stop loss should be on movement or close below 200 day EMA.

May all be happy and peacefull

M.Mahiidar

Enjoying Life

Trend is Friend.

Examples of investments at all time highs giving good returns:

The above chart is of TCS which has out performed when the market were not moving any where from 2010 to 2013 end. In march 2010 TCS has formed an all time high which has all chances of prompting to buy with stoploss. The Buy would be around 750 levels and you see over the period of last four years the stock has trebled. If you see the financials its a debt free company, from 2005 to 2010 its EPS has increased from 10 to around 35 indicating that the financials were improving fully and there after also the EPS was increasing year on year and now FY-14 it has an EPS:106. You can see that if a fundamentally strong company when makes a new high its a buy and chances of giving good returns are really high. All the black arrows are the buy points.

the above chart is of NATCO pharma it made an all time high at 167 in 2010 and it is nearly a 9 timer in last four years when the market did not move any where except for last six months. During the three years prior to new high its turn over has trebled and EPS has more than doubles and with consistent increase during all these years signalling that the fundamentals are improving and has a potential out-performer in making and look what has happened.over last four years also its margins were improving and also EPS was consistently increasing.

 The above chat is of Page industries. it made all time high in 2009 at around 500 levels and not its a 16 timer during most of the period the market did not move any where. If you see the financials three years prior to new high the EPS was increasing at the rate of 30-40% along with increase in turnover and improve in margins. These all point towards improving financials necessitating a buy and if you see from then onwards till now it EPS has increased at an CAGR of 38%. EPS has increased from 28 to 147 and you see the price. 

I can give you innumerable examples which has give spectacular returns after they make a new all time high. So all time high is not a point to sell but atleast we should try to buy if the last three financials of last three years(at-least two years) are improving and latest quarters are also promising then its a buy but with Stop loss either technically or as per individuals risk apatite. 

M.Mahiidar

Enjoying Life

Trend is Friend.

All of us who are investing into stock market are looking for strategies for investing into stocks at correct price and getting out at top. Generally it is said that buy low and sell at high price easy said done. Difficult to identify the low and also high price. Generally people perceive that buy low means that it should be bought at low price compared to its all time high price, the lower the better and wish to sell at the high price probably at 52 week high all time high. So generally to identify the low price novice investors look into 52 week low stocks and try to buy at 52 week lows planning to sell when it moves up. But the market is market, generally 52 week low stocks further go down denting the confidence of the investors and they finally blame the market or the so called analysts. They dont have strategy to buy and also no strategy to sell so they suffer.But they generally do not make an slight effort to understand the market, i generally donot call understand the market but i call it as following the market.

To day i wish to bring into one strategy which has all possible chances of giving good returns over period of time.

The strategy name is

All time high:

Generally people are reluctant, to buy at all time high, as they thing that if the stock is at all time high then it should be sold and not bought so they refuse to look at the stock which is at all time high. But actually its the point to buy. Here the all time high is made after some consolidation the longer the period the better.You should buy at all time high made after consolidation, with stop loss at the nearest pivot low or the 200 day EMA or 100 Day EMA. Stop loss is a must for either trading or investments.
Now comes the question why any body should be encouraged to buy at all time high. Technically all time high signifies that the buyers have out done all the sellers till that point of the time. Meaning that buyers are more that sellers and this becomes the case for buy. And also the investors might be betting on the improved financials in the stocks which they intend to buy.
 
Now the question comes whether one should look to buy stocks which make all time high, it cam be done, but to protect our selves one should stick to stocks which are fundamentally good. The fundamentals should be improving over last three years at-least last two years. Higher the growth year on year the better. Look in the recent quaters if the quarterly results are also improving QOQ then its also is a good news. Higher the growth rate the better, all these point out that the company is fundamentally good and is fundamenatals are improving justifying the price( all time high). Usually i look into % increase in EPS YOY and QOQ to decide on buy decision. The higher the % increase the better.
I always try to buy the price at all time high and the fundamentals are improving. i have seen so many stocks which have made all time high and after that they have risen substantially from those levels.
I would give one or two examples today and would give those stocks which have give spectacular returns to the investors who have bought at all time high.

 The above chart is of Aarti Drugs, it made an all time high in october 2012 and it corrected to the neck line and then from there it reversed and went on to make all time high again in february 2014 after nearly 1 and half year consolidation. if you see the fundamentals at that point of time its have it has CAGR increase in EPS for last three year at 39% and latest quarters also the increase in EPS was around 40% QOQ for last three to four quarters  which clearly point towards the improving fundamentals and investors are prepared to pay high price for the stock and look what happened the stock has been nearly 4 timer in short period of time. the two red arrows are the probable points of buy.
Another stock:

The above chart is of Granules india it made an all time high in 2012 came down and took the support of the trend line, moved below it and made a spring line reversal and made again all time high at around 200 in January 2014. If you see the fundamental at that point of time the EPS has increased at a CAGR of 52% for last three quarters and the latest 3 quartes the % increase in EPS was more than 100% all these were pointing towards improved fundamentals and justifying the price at all time high and it has turned 4 timer from those levels in very short period of time.

Fundamentally strong stocks when they make all time high after long time they become a screaming buy with high margin of safety. but in any case we should have stop loss to the extent of which you are prepared to take.

I would give other examples which have been 20 to 30 timers in last five years when the market was not so good.

Any clarifications are welcome and glad to confirm the same

M.Mahiidar
Enjoying Life
Trend is Friend.