Wednesday, November 14, 2012
Different Strategy for stock picking
This diwali we met our good Analyst friends. Our discussion centered around fundamental/technical and strategy of stock selection for next 1 year. Fundamentally, we discussed companies, management and Q2 FY13 results. Technically, We discussed how we are improving on our Technical Indicator which does NOT show divergence but strictly follows trend. We discussed other things like how some past 60-70 years old multi-years chart patterns are similar to current pattern in sensex and possible applicability/failure of these patterns after 60-70 years etc.
Most interestingly, A friend of us who we consider brilliant technical analyst suggested following strategy for his own stock selection with a trade/investment view up to next diwali - 1 year ( We hate analysts/fund managers/gurus who give us gyan of buy and hold with 5-10 years view etc. ).
Strategy: Buy any stock which meet all following criterias:
1. Stock should have made new all time high in Oct/Nov 2010,
2. Stock shouldn't have crossed this high by more than 10% after Oct/Nov 2010, So say stock made high of 200 in Oct/Nov 2010 but again made new high of 250 in June 2012 this stock should be ignored.
3. Currently (Nov 14, 2012) stock is below this Oct/Nov 2010 high.
4. Promoters are reputed. This is the only fundamental factor of selection to make sure we don't buy junk.
One can buy stock selected from above and hold with a 1 year view. 10% stop loss from buy price should be followed to cut losses. We noted down these points and applied the logic to our set of 40 stocks and came out with companies in following sectors - Agri Input/Tea, Crude, Starch Derivatives, Cotton Yarn. Lets watch :-).
Note: Do NOT follow any one in stock market. We suggest investors/readers to do their own research before buying any stock. Author is NOT responsible for loss incurred using above strategy.