Saturday, 10 November 2012

NIfty P/E

P/E ratio is known as price to earning ratio. How to calculate PE? In simple terms lets say if stock is trading at 100 Rs. and its earning per share is 10, then thats share PE ratio is 10 (100/10). Fundamental analysts find this as a very useful tool. If PE ratio is low compared to others then it is considered undervalued.

Now i present a PE chart of nifty and try to analyze when to enter and exit.





















 Lets analyse the above graph for more insight. All time low of Nifty P/E is 10.68 in 2008 during recession. Belows the Nifty P/E lows or support levels in the last 10 years. These are excellent levels to buy. Nifty P/E below 13 is a big BUY any-day.


Date Nifty P/E
1 27-Oct-08 10.68
2 12-May-03 10.84
3 1-Jan-99 11.62
4 24-Jun-04 11.82
5 13-Jan-09 12.16
6 21-Sep-01 12.3
7 29-Apr-05 13.27
8 25-Oct-02 13.83
9 14-Jun-06 14.92
10 18-Oct-00 17.18
11 5-Mar-07 17.2
12 25-May-10 20.06


All time high of Nifty P/E is 28.47 in 2000. Below is the Nifty P/E peaks or resistance levels in the last 10 years. These are best levels to SELL. Nifty P/E above 24 is a big SELL any-day.
Date Nifty P/E
1 11-Feb-00 28.47
2 8-Jan-08 28.29
3 12-Dec-07 27.69
4 13-Oct-10 25.91
5 23-Dec-99 24.22
6 31-Dec-09 23.17
7 9-Feb-01 22.78
8 8-Mar-04 22.01
9 16-Oct-06 21.65
10 31-Dec-03 20.73
11 26-Feb-02 19.14
12 19-Dec-05 17.2                                                                        
 (the above data is taken from http://bse2nse.com)

So any PE level of 13/14 or below it is a "must buy" level.  These are very rare opportunities to by the index at low levels. Levels above 24/25 are usually a period of roaring bull market.  It is a phase where everybody wants to buy shares at any price because they feel left out as prices are continuously going up. Do you remember year 2007?  The housing loan scam just was a reason for markets to correct. Above all, it was Nifty P/E at all time high which posed huge resistance. The housing loan scam was a misbehavior of few individuals and fundamentally nothing changes with respect to the companies in scrutiny. When everybody wants to buy, you need to know that now the time has come for me to exit, and PE ratios reflect that.

Now you would want to know the current PE ratio.....here it is taken from NSE website.

It is 18.43
Here is a link 
http://www.nseindia.com/products/content/equities/indices/historical_pepb.htm
 
Do you know in the month of June 2012 it traded around 16/17 PE when nifty fell below 5000. In fact this whole year PE has been between 16 and 19.
 
Hope this article will help you some way.


















                    

Friday, 9 November 2012

Will Aban Offshore take a support??






As you would notice, it is right at the channel support.  Now question is would it take support or go down more?  Well, i am not here to predict.  Technical analysis does not believe in predicting.  It believes in probability.

There is a high probability that it would take support here.  It has twice taken a support on this channel line in the past.  So it is likely to repeat the history the third time.  Secondly, look at the volume.  It is falling on less volume compared to when it was going up. Third, RSI is at extremely oversold level.  So all things put together, there is a high likelihood of taking the support.

Now the question is what if it does not???  Answer is we should never bother.  If there is a trade setup, we should take it.  Fine if it goes in favor.  Else SL will hit.

Tuesday, 6 November 2012

Ambuja Cement


The chart speaks itself.  As suggested on earlier post to keep an eye on the support, it exactly took support on the channel and bounced off.  Now it is likely to reclaim new high if all goes well.

This is the power of technical analysis and buying at supports.

SBBJ

State Bank of Bikaner and Jaipur

What a breakout!

As you see it traded quite long around 200 DMA, got supported and now has strongly broken out.  Isn't it wonderful??  Sorry for posting it late, but it is still not late.


Delta Corp Ltd

As you can see on the chart, the stock has taken support on a cluster of moving averages 50,100,200 DMA.  65 seems to be a good base.  A close below it would warrant an exit.  Till then enjoy the ride upto 88.
CMP 69.8.


Monday, 22 October 2012

Break out on Emami


As you can see on weekly chart, the stock appears to have broken out a range it formed in last one year. It broke out last week and today on Monday there has been a followup buying.

When stocks break out from such a long consolidation/range, they perform well.

Buy on dips. 

DLF @200 DMA

DLF has been in the range for past many months, a range of 175 of 250.  Now it is on 200 DMA at 207.  The question is would it take support here or again around 175.

I feel it would find support here, look at the RSI.  Whenever stocks are in range, momentum oscillators like RSI give good signals.  Keep a SL below 190 on a closing basis if your view is very short term.  Target would the range extreme, 250.

Let me know your views.

Review

Today i would like to review the posts written so far.

L&T after breaking out on weekly chart gave very few chances to enter on dips; a sign of strong stock. So if someone had bought it on dips around 1550 or below, would be in gain today.  It is still buy on dips and hold.

I was looking to go long on Hexaware but the opportunity never came.

Apollo, Bata and HDFC are almost at the same level. LIC and VIP have been down a bit. TCS has gone up, but has not performed as desired.


Thursday, 11 October 2012

Stocks at supoort

Here are some stocks which are in bull run of their own.  They are now on or near significant support levels.  Use this opportunity to grab them. Please refer the charts.
Bata India, HDFC, Hexaware, LIC Housing, TCS, and VIP.







Friday, 28 September 2012

Hexaware Tech

 

Hexaware Tech is one stock which is right now on my radar.  The buy signal is going to come soon as per the trading strategy discussed on Ambuja Cement.

I will post a chart and a brief on the strategy whenever the signal comes.

Thanks.

Wednesday, 26 September 2012

How would you benefit from it?

Above is a daily chart of Ambuja Cement.  As you can see prices are constantly moving upward.  At the end of May 2012 it touched a low of 136 and in Sep 2012 it touched a high of 199. So a whooping gain of Rs. 63 in just 4 months. In percentage terms it is a gain of almost 50%.  Wow.....But question is how one would earn a portion of it...say 20% at least, if not 50%.  Probably you would say "hey i would buy right here." See below.

Ha ha ha......what a joke??? If i knew that, i would have been the richest man in the world...Ok..jokes apart let me try to explain how technical analysis helps us to identify a possible low risk entry. Here in this chart once we do our basic analysis that stock is in uptrend, making higher highs and higher lows, we can devise a strategy where we buy on dips.  Now here i present the same chart with some indicators attached to help us get a good entry.
Here to identify a trend i have used 200 day simple moving average (200DMA).  Once the prices are above this red line(200DMA) we can say that this stock is in uptrend and if prices are below it, it is in downtrend.  So once the prices are above 200DMA (means in uptrend), we wait for the prices to come down a bit and Stochastics to give us a buy signal. Here i have tried to point it out by drawing a blue circle and writing a B (buy) signal.  The stochastics indicator gave us total 3 Buy signals till now. So after determining an uptrend and waiting for a buy signal to come, we could have bought the same at (i) 170, (ii) 174 and (iii) at 180.  After buying at 170 and 174 it made a high of 198, a gain of about 15%, and after buying at 180 it made a high of 199, a gain of about 10%. Even if we decided to book profits at 10% gain each time, in total 3 trades it would have fetched us 30%.  So by trading the stock and waiting for the right opportunity, we could have earned at least 30% if not 50%.

Please keep visiting this blog to know when the next buy signal comes.  I will post it right here. Till then you can always post your questions or comments if any.



Monday, 24 September 2012

L&T Breaks Out

This is my first post.  Hope you all would benefit from it.  As you can see in the weekly chart of L&T it appears to have successfully broken out from the strong resistance @ 1485.  Certainly a very good time ahead for the stock unless it proves out to be a breakout failure. A correct strategy is to buy on every dip for the first target of 1720 to 1740, then 1850+. CMP  is 1585. Keep a SL of 1305.