Friday, August 22, 2014

Thursday, August 21, 2014

Breadth


Breadth continues to improve and now the % of stocks above the 10 day average is at 67%.

Nifty Daily Range


Here's a look at the daily high low range of spot Nifty. The traded instrument Nifty Futures does not much deviate from these figures so we can use the spot data as a proxy for the futures instrument. In 2012 we had 18 trading days below 30 points and the total trading days were 248 so this works out to be 7.3%. Similar calculations are done for all the years. I would have liked to do a more detailed study like doing this study say for the last 10 years of data but I guess the result would not be very different. 

Below is a plot of the 10 day average of the daily range. This is a good proxy for volatility and is different than the ATR which takes into consideration the morning gaps into its calculation. Intraday traders would be more interested in knowing the basic high low range. It helps to understand where we are presently on the volatility curve - if the range is like in the lower 40 region then you may trade lightly as there are more chances of a chop but if the range expands to say over 65+ then your trades can be good ones.


Wednesday, August 20, 2014

A and B Screens


Above are the top 25 stocks on my A screen. Below is top 25 on the B screen:


The underlying concept behind top down approach is that leading stocks will continue to lead until they don't. Today again the breadth has improved further:



Recent SPMM Picks


I had these picks for SPMM on 3rd August (Sunday). Bal Pharma went up on the next day, gaped up on Tuesday and then did a sharp pull back exactly as I described in this post! 



Tuesday, August 19, 2014

Breadth


The breadth has further improved today. Now the % of stocks above 10 day average (yellow) is at 57% while the 20 day average (green) figure is at 49%. Number of stocks above the 50 day average (blue) is 50 %  and the long term breadth defined by the 200 day average (red) is at 87 %. Improvement in breadth at new market highs is a healthy sign  - it shows that stocks are being bought at higher prices.

Nifty Makes a New High


Nifty has now broken out and the breadth is increasing too:




Sunday, August 17, 2014

June SPMM Picks

On June 15 I selected Cipla and Sun Pharma. Cipla is now at 448 (+8.2%) and Sun Pharma is at 815 (+29.3%). If you want to do some delivery based trading then SPMM top down approach will help you a lot.

How to Use the 50 DMA for Entries

Taking entries in strongly trending stocks can be a bit tricky. If you randomly enter a stock without checking how far the price is say from its 50 day average then it may land you in some trouble coz if the price is too far away from the 50 then it might go sideways for many days or it might do a sudden pullback towards the 50 trapping you at the higher end. Just to give you one example let us look at the Whirlpool chart below:


Now here the price is at 415 and the average is at 333. In terms of % price is almost +25% up from the average. So if you buy now at 415 then there is a possibility (not a certainty) that the stock may spend some time going sideways or doing a sudden sharp pullback. So the best thing to do is to let it go and wait for some days and then see if you can buy it somewhere near the average. 

I have a scan for knowing the price to average ratio. If the price and average are equal the I get a reading of 100. If the price is 2% up from the average then the reading is 102 and so on. Below is a scan which just shows this:


The ratio is in the last column. All these stocks are in a very strong trend and they are up 14% to 32% from their 50 dma. Let's look at some stocks where the ratio is smaller:


Let's look at Motherson Sumi which is a Screen A stock in my data. It is just 3%  up from the 50 and offers excellent opportunity to re enter the stock:


There is no need to rush things and jump at the stock first thing on Monday morning but one can wait for a few days and see if it really settles over the 50 and then buy putting a stop say at 330 or so. Let's look at one more stock - Polaris:


I'm not suggesting that you must buy all these stocks but I'm just showing you one approach you can try out.