@P-Shekhar wrote:
Allow me to give a small intro… Initially about 10 years back i tried to use pure Technical’s for all trades along with back-testing results. Though success was good, there were also a lot of failure bring down profit strike rate. I used to employ dozens of indicators, etc leading to a very cluttered chart. Over the years as any analyst does, i developed my own system of un-cluttering my desk and tossing out most of what i learnt out the window and keeping it as basic as possible. I shifted from lower frames like daily to larger frames like weekly and finally settled on monthly. For things to work on a monthly frame, trade holding period can be hugely extended to say, even 10 months to over a year. But since my approach was to target around 4-6% compounded per month, final sell profit dictated how much i made. It worked very well. Then came trying to better the system by not just choosing any stock just technically and trying to find “safer” stocks. There came in the need for fundamental analysis to help choose the stock. Since FA (fundamental analysis) works on the tenet of finding stocks way below intrinsic value; it also meant the stock would have to be at monthly/yearly lows technically or at least 40-50% below prior peak price. There are other similar threads on VP that seem to think on similar train of thought. I would like it to widen the scope a bit more.
The idea of this thread is to welcome Investors with fundamental thoughts, using P/L, BS, Cash Flows, etc to be able to time their entry for longer term holding as perfectly as possible. Note that only technicals can provide this entry. A stock which has corrected say, 60% from peaks may seem very cheap in value fundamentally, but the TA (technical analyst) may see chances of further 20-30% correction , hence it’s all about the timing.
My hope is that more TA’s will join me on this thread to help Fundamental investors make better entries into stocks and try to find the most appropriate time to exit also on stocks of “their” choice i.e. give us the stock name you are tracking and I/we will help you analyse best time for entry and exits. Coming to exits; though entry into stocks is usually the easy part irrespective of price, it’s the exit which can prove dicey. This is where the game of stretched valuations/technical peak Vs greed comes into play. If my objective for a stock X bought at say, 100 is to make 70% per annum over a 1-1.5 year period, then when the stock actually does do 170 in a year or about 200 in 1.5 years time, sometimes strong momentum may seem to hint further upside of another 50-60%. Here is where our personal trading/investing rules have to be applied as to “How much is enough”. That would be a personal issue. I tend to take my profits off above 70-100% P/A when i get. Logic is sectors move in cycles and when my stock X from a given sector is at peak, there is usually some other sector which has not been in flavour and is at yearly lows at that time, hence i rotate cash.
Would also like to mention a word about “multibaggers” here. Most consider a multibagger to be an unknown small cap bought at very cheap levels which may go on to multiply many times over the years as intrinsic value approaches. Using the technical method i follow, one can “make” any stock a multibagger provided the company itself is fundamentally sound. I would rather put my money into known companies like small-medium mid-caps bought at yearly lows and allow them to do 6-7 X in 4-5 years rather than try my luck at companies with lesser data and less experience no matter how attractive the business model is. Eg., i would rather buy into say, Escorts at 460 and hold for 3-4 years for 1750-2100, rather than buy say, ChamanLal Sethia exports at 80 and wait for 240 in years to come. Not that Chaman cannot do it. Just that i would have more conviction in a company like Escorts…
looking forward to a favourable response from all interested in making this thread a success and more importantly, sharing different schools of thought applied together to create better wealth !!!
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