Reading the Market is Crucial for Investment Success

 

After a prolonged uptrend throughout 2017, the Indian market turned extremely choppy since late January 2018. Amid a variety of factors ranging from a global trade war to the current liquidity crunch in the Indian debt market, the Indian stock market has been extremely volatile this year. After a heavy sell-off in the broader market during February-March, the Indian market recorded a follow-through day on April 5, allowing us to put the market back in a Confirmed Uptrend. While the earlier plunge in the Indian equities would have kept many investors away from the market, we relied on our time-tested market direction model to spot trend reversal. We made good use of this period to make some decent returns on high-quality names such as Bata India (+24.7%), VIP Industries (+16%), Reliance (+20.4%), Page Industries (+23.3%), Britannia Industries (+24.2%), Bandhan Bank (+21.4%), Bajaj Finance (+21.9%). Nestle India (+17.6%), Astral Poly Technik (+14.9%), and Kotak Mahindra Bank (+12%). Of course, it was not all hunky-dory as we made losses during this period but managed to limit them at 8% thanks to our risk management method of following a strict stop-loss.

While the market kept hitting new highs, we remained cautious in our approach, enabling us to book regular profits in the above names. Also, the method of keeping a count of heavy-volume down days also known as distribution days helped in spotting weakness building in the market. This allowed us to keep emotions aside while moving the market to Uptrend Under Pressure on September 4. Now, we could have easily avoided doing that by considering that the Nifty and the Sensex were just 2% away from their all-time highs. That said, we took the build-up in distribution days seriously and with the distribution count reaching five on the Sensex and four on the Nifty, we alerted our subscribers to get more vigilant with their dealings. Over the next six sessions, we brought down the number of stocks in our portfolio to just four from the earlier 14.

Now, we had to take some hits along the way by booking losses in some names. However, our method has served us well on the downside also, looking at the levels at which some of our removed stocks are trading today.

The popular life quote of No Pain, No Gain applies in the stock market as well. You need to be willing to take small hits to make it big in the market. Capital preservation holds key in the current market scenario. This will allow you to stay in a position such that you would be able to capitalize on a strong market uptrend as and when it begins. As always, we will be keeping a close eye on the daily market action and will alert users if we see buying interest coming back in the Indian market.

Warm Regards,

Anupam Singhi
CEO, William O’Neil India

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