Category: Learning Articles

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The Strength of a Flat Base, A Super Growth Stock Pattern

In the earlier weekly special articles, we have seen various types of chart patterns that can appear on data graphs. In this week we will focus on a particular chart pattern that is a simple consolidation to understand, yet has a hidden strength in it.

In a cup-with-handle or double bottom, the success of the breakout depends on the way a stock rises and falls within the base. A third pattern shows that a stock can choose to take neither path before its big move north. Rather than approaching an uptrend or downtrend, the stock moves sideways for weeks or months. This action is known as the flat base.

Continue reading “The Strength of a Flat Base, A Super Growth Stock Pattern”

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Chart Patterns

In the weekly learning article published on July 29, 2017, we discussed “Swing Trading.” We received a lot of positive comments for that article and many readers were interested to learn more about it.  Today, we move on to a new topic “Chart Patterns.”

This article has to be treated as a continuation of the Swing Trading article. In this series, we will discuss certain key technical parameters that need to be watched for effective Swing Trading. One such parameter is Chart Patterns. Millions of traders transact through stock markets each day and it is difficult to interpret everyone’s motivations. Chart patterns look at the big picture and help you identify trading signals. In today’s article, we will focus on Triangle Patterns.

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Know How To Preserve Your Hard Earned Capital

MarketAmith India_Know How to Preserve Your Hard Earned Capital

“If you want to learn anything about fish, sit in front of a fishbowl and look at the fish. If you want to learn about the market, you must observe and study the major indexes carefully.” – William J. O’Neil, MarketSmith Founder

Is it necessary to understand the market direction before you invest? Some investors ignore the market direction, which is a crucial tool that can be used to time the market. The market direction can be thought of as a tide. “A rising tide lifts all boats” – so does the market. Our methodology, based on market research, has shown us that three out of four stocks follow the market direction.

So if you invest when the market is rising, at the least, you are ensuring that the probability works in your favour, with little chance that the stock you are investing in, is one out of four stocks that defy the market condition.

The market direction can be assessed for strength or weakness based on a few technical concepts such as a distribution day count, current index with respect to 50-day and 200-day moving averages, a follow-through day, overhead supply of the index, among others.

The distribution day mechanism is a key concept that identifies weak days (down days, supported by institutional selling) in the market. The distribution day count helps determine the status of the market, whether it is in an uptrend or a downtrend. A follow-through day helps determine a strong up day in the market, which could potentially signal the beginning of a Rally.

So how to read the Indian markets now?

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Market at New Highs, but More Losers than Gainers-Are Your Stocks Topping Out?

MarketSmith India - Market at new hights

“The best way to sell a stock is on the way up, while it’s still advancing and looking strong to everyone else… You’ll never sell at the exact top so don’t kick yourself if a stock still goes higher after you sell.” – William J. O’Neil, MarketSmith Founder

We hope that you have been enjoying a good ride as the market has made new highs. However, if you have been reading our Daily Big Picture, you would have observed that the market breadth has been tilted toward the losers, even as the indices have climbed higher.

Continue reading “Market at New Highs, but More Losers than Gainers-Are Your Stocks Topping Out?”

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Swing Trading

In the weekly learning article published on July 15, 2017, we discussed “A Stock Drops Below your Entry Price; When Should You Get Back In.” We hope that the article was useful. Today, we move on to a new topic, where we are going to discuss “Swing Trading.”

What is swing trading?

Swing Trading is a strategy focused on achieving small profits and cutting losses in short term trends. Compared to long-term investment periods, the gains you make from swing trading might be small, but if done consistently over time they can compound into excellent annual returns. Swing Trading positions are usually held a few days to a couple of weeks or can be held for a longer period. Continue reading “Swing Trading”