Traders
I Wish You A Happy & Prosperous New Year 2011. Make 2011 your best trading year!
Manoj
Note: I could not update the blog due to some circumstances that I have to work on. But If you had followed the blog, I am sure what I shared with you will help make your own interpretation of the market now.
Hope to see you again soon!
Monday, December 27, 2010
Sunday, December 5, 2010
Market Technical Analysis-Weekend Report-Dec 4th 2010
Trader,
Lets see where we are now and a couple of most likely scenarios. Positive market sentiment is an important factor for a country, specially for Sr Lanka. Sri Lanka is working on attracting foreign investors by making country investment friendly. Its said that country's stock market is a good indicator of economy performance.
Last Monday's market reaction (-124 points down) and bringing ASI down to 6200 level was not a good market message.
My guess is Tue & Wed reaction was a push by CSE (government Institutional intervention). I think it was a well planned action by CSE to put the market back above the support level. Statement made by CSE chairman about extending credit clean up period cannot extend the market like that.However it was a much needed boost.
CSE's decision to curtail traders trading capacity by restricting credits had a mixed result. I strongly believe that market manipulators and inside traders should be heavily punished. But credit restriction actually penalized traders who were rightfully doing the trading business. One should not be penalized but appreciative of , if somebody uses his or her creativity to make profits in the market.
For the week ASI was up by massive 4.6% . If you look at the ASI graph above, you see that we are back above the support level. If traders and investors could keep the momentum for another 200 points up, that would break resistance barrier in 6700 level.
Also I noticed that in 2009, we had a similar market behavior (but not that weak). In Oct & Nov 2009 market was in side ways and once it broke up, market had a nice uptrend in Dec 2009 and Jan 2010. (see the graph below)
Out of all the technical indicators, I pay special attention to Advance-Decline line. If you look at the latest A-D line, its still not showing a good recovery.
(I sent a special report and my worksheet on A-D line to traders who submitted broker survey, if you were one of them but has not received the report yet, please email me)
As a trader, try your best to understand what is behind the price action. To trade profitably, you got to eliminate risk as much as possible by analyzing technicals and timing the "entry/exist points". No one can do the exact market timing, but if you develop a simple but effective set of trading rules, you can make huge profits in the long run.
To your success
Manoj Balasooriya
Note: Appreciate if you can share your comments below or email your comments at <learn.manoj@gmail.com>
Lets see where we are now and a couple of most likely scenarios. Positive market sentiment is an important factor for a country, specially for Sr Lanka. Sri Lanka is working on attracting foreign investors by making country investment friendly. Its said that country's stock market is a good indicator of economy performance.
Last Monday's market reaction (-124 points down) and bringing ASI down to 6200 level was not a good market message.
My guess is Tue & Wed reaction was a push by CSE (government Institutional intervention). I think it was a well planned action by CSE to put the market back above the support level. Statement made by CSE chairman about extending credit clean up period cannot extend the market like that.However it was a much needed boost.
CSE's decision to curtail traders trading capacity by restricting credits had a mixed result. I strongly believe that market manipulators and inside traders should be heavily punished. But credit restriction actually penalized traders who were rightfully doing the trading business. One should not be penalized but appreciative of , if somebody uses his or her creativity to make profits in the market.
Also I noticed that in 2009, we had a similar market behavior (but not that weak). In Oct & Nov 2009 market was in side ways and once it broke up, market had a nice uptrend in Dec 2009 and Jan 2010. (see the graph below)
As a trader, try your best to understand what is behind the price action. To trade profitably, you got to eliminate risk as much as possible by analyzing technicals and timing the "entry/exist points". No one can do the exact market timing, but if you develop a simple but effective set of trading rules, you can make huge profits in the long run.
To your success
Manoj Balasooriya
Note: Appreciate if you can share your comments below or email your comments at <learn.manoj@gmail.com>
Sunday, November 28, 2010
Weekend Report-Nov 27th 2010- Market Technical Analysis
Traders,
Even though market technicals have been weak, I really expected much waited budget proposal would lift the market or at least it would create a short term momentum. But it did not happen. This was an honest surprise to me.
Most of you may wonder why the market is behaving like this?
Lets see some possible reasons;
1.Some institutions and some big investors continue unload their stake slowly but steadily on the market
2.There are no significant new traders/investors coming into the market
3.Significant amount of retail investors and traders unwillingly cash their stakes for liquidity reasons
All these or combinations of these are creating more supply than the stock demanded by institutes, investors and traders.
Now, lets look at our favorite weekly ASI graphs;
We have been watching the 6500 support line for sometime now and market clearly broke it creating another leg down. How low will it go? I do not know. But I would definitely wait till the market confirms a 'change of direction'. Market has to show at least 200+ point recovery with decent volumes in order for me to test the water.
When stocks look cheap compared to previous high, people buy them guessing market has reach the bottom. Guessing the bottom is an expensive game. One alternative approach that I have been writing about is "scale up strategy". This is an intelligent way to keep your losses very low. I learnt this approach from Jesse Livermore. More I trade more I understand the value of this simple but powerful strategy. (read my previous articles on Livermore for his key trading rules)
Lets briefly look at foreign buy and sell. I am taking this graph from JBS securities site;
Take a few minutes to understand this informative graph. There is lots of not so good trends here. But one positive indication you may notice is last three days net foreign buys, specially the last bar of the graph.
Lets look at Financial sector for a moment. Is it holding its place or giving up the gains? Let's see;
Financial sector has relatively been holding to most of its gains but it also broke the support line with heavy volumes.
With all things considered, market is under Red light. We got to be patient here till we see a silverline.
To your success,
Manoj Balasooriya
Even though market technicals have been weak, I really expected much waited budget proposal would lift the market or at least it would create a short term momentum. But it did not happen. This was an honest surprise to me.
Most of you may wonder why the market is behaving like this?
Lets see some possible reasons;
1.Some institutions and some big investors continue unload their stake slowly but steadily on the market
2.There are no significant new traders/investors coming into the market
3.Significant amount of retail investors and traders unwillingly cash their stakes for liquidity reasons
All these or combinations of these are creating more supply than the stock demanded by institutes, investors and traders.
Now, lets look at our favorite weekly ASI graphs;
When stocks look cheap compared to previous high, people buy them guessing market has reach the bottom. Guessing the bottom is an expensive game. One alternative approach that I have been writing about is "scale up strategy". This is an intelligent way to keep your losses very low. I learnt this approach from Jesse Livermore. More I trade more I understand the value of this simple but powerful strategy. (read my previous articles on Livermore for his key trading rules)
Lets briefly look at foreign buy and sell. I am taking this graph from JBS securities site;
Lets look at Financial sector for a moment. Is it holding its place or giving up the gains? Let's see;
Financial sector has relatively been holding to most of its gains but it also broke the support line with heavy volumes.
With all things considered, market is under Red light. We got to be patient here till we see a silverline.
To your success,
Manoj Balasooriya
Saturday, November 20, 2010
Weekend Report-Nov 20th 2010- Market Technical Analysis
Traders,
Though last week was a short trading week, it brought both frustration and hope. At one point, ASI dropped to 6451.55 which was below the support line we were watching. But very next day it climbed 93 points to 6565 giving some relief to the traders.
If you look at the last two trading days on the ASI daily graph, you will notice that it was under clear accumulation. There was heavy selling on Wed, but prices held on tight. And on Thu some traders/institutes clearly bought stocks on the bet that budget will uplift the market.
Let's look at three market graphs.
If you been following this blog, you should now be familiar with reading it.Market is back in the safety zone and reasonably good volume supported the uplift.
Thursdays market action is counted the first day of accumulation (after failing one such attempt in 3 weeks ago).If ASI can confirm can the positive trend at least two more days without heavy selling off days, one can buy shares on "Scale Up" basis.
Lets dig a little bit further;
Notice the Stochastic oscillator above trying to go up from the oversold territory. Also Money Flow Index (MFI) hit a substantial lower point on Wed and now trying to head up.
Finally, let see how stock accumulation happened on Thursday; Traders bet on budget!
This brings us a good point. Should you buy stocks on speculative news? Most of the traders do not have capacity to influence the market, specially the market leading stocks. But there are traders and institutes who can make the price if they wish to, because of their enormous trading capacity. This is common to any stock market. In a scenario like this, our best bet is to monitor the market and follow the line of least resistance, meaning if the market is clearly heading up Buy and if market shows weakness Sell. In other words, market should confirm the trend for us to get in.
That does not mean you can make money by betting on news. You can. But is it a good enough reason to bet your capital?. I don't think. Preserving your capital is the key to stay in the market. And losing a few points in waiting and evaluating market is a good insurance premium. It puts you in a better position and make you a prudent trader.
With this technical insight in mind, watch the market on coming days, and getting in on Scale up basis if everything is in your favor. If market shows sideways again, You know what to do...
To your success,
Manoj Balasooriya
Note: Please forward this article to your friends and trading buddies. And take a minute to leave your comments. They inspire me to take the time to continue writing. Thank you.
Though last week was a short trading week, it brought both frustration and hope. At one point, ASI dropped to 6451.55 which was below the support line we were watching. But very next day it climbed 93 points to 6565 giving some relief to the traders.
If you look at the last two trading days on the ASI daily graph, you will notice that it was under clear accumulation. There was heavy selling on Wed, but prices held on tight. And on Thu some traders/institutes clearly bought stocks on the bet that budget will uplift the market.
Let's look at three market graphs.
If you been following this blog, you should now be familiar with reading it.Market is back in the safety zone and reasonably good volume supported the uplift.
Thursdays market action is counted the first day of accumulation (after failing one such attempt in 3 weeks ago).If ASI can confirm can the positive trend at least two more days without heavy selling off days, one can buy shares on "Scale Up" basis.
Finally, let see how stock accumulation happened on Thursday; Traders bet on budget!
This brings us a good point. Should you buy stocks on speculative news? Most of the traders do not have capacity to influence the market, specially the market leading stocks. But there are traders and institutes who can make the price if they wish to, because of their enormous trading capacity. This is common to any stock market. In a scenario like this, our best bet is to monitor the market and follow the line of least resistance, meaning if the market is clearly heading up Buy and if market shows weakness Sell. In other words, market should confirm the trend for us to get in.
That does not mean you can make money by betting on news. You can. But is it a good enough reason to bet your capital?. I don't think. Preserving your capital is the key to stay in the market. And losing a few points in waiting and evaluating market is a good insurance premium. It puts you in a better position and make you a prudent trader.
With this technical insight in mind, watch the market on coming days, and getting in on Scale up basis if everything is in your favor. If market shows sideways again, You know what to do...
To your success,
Manoj Balasooriya
Note: Please forward this article to your friends and trading buddies. And take a minute to leave your comments. They inspire me to take the time to continue writing. Thank you.
Sunday, November 14, 2010
Weekend Report-Nov 14th 2010- Market Technical Analysis and 10 Priceless Trading Rules from a legendary Trader
Traders,
After a week of trading, its a good time look back and see how the market behaved and see what we can anticipate in the coming week.We'll start with the latest ASI screenshot;
Those who think technical analysis does not work, just need to look at the above graph. I have not come across a so clear support line than above in recent history. During last 45 days, ASI touched support line three times and was able to bounce back without breaking it.
Volume shrank to a very low amount. If you look at the last volume bar, you'll notice that its the lowest in the recent past.
Funds stuck in two IPOs, government annual budget, and heavy disturbing weather are three key things that affected the market.
Based on above the ASI behaviour, there are two scenarios that can happen in the next week;
1. Market will bounce further above the 6500 level. If this happens, its worth paying attention to leading stocks that are showing upward momentum. Reason is, budget is one week away and market can indicate some clues of what you can expect.
Financial sector is an obvious benefiter, because its where Sri Lanka's key advantage lies. Government has already indicated that its planning to reduce certain tax relating to banking profits. Also if you look at BFI index (Banking, financial & Insurance), you can notice that, it has been resilient to the recent market correction.
2.Market will break the support line. If this happens, I could say that it should be temporarily. Sometimes, a sudden breakdown and immediate bounce back could further shake away weak traders out of the market. And after, subsequent recovery could be stronger as a result.
My recommended strategy is to scale up on an uptrending market. But market has not shown clearly that its uptrending yet.
Observing the market till right time comes is also a strategy. Its natural to feel that you should trade everyday and thats a recipe for disaster. My favorite all time trader hero is Jesse Livermore. I could survive some bad times because of the wisdom that he passed on to others.
For your Trading Wisdom
Once he said "There are times when money can be made investing and speculating in stocks, but money cannot consistently be made trading every day or every week during the year. Only the foolhardy will try it. It just is not in the cards and cannot be done." http://www.jesse-livermore.com/
You can read the full article at http://www.jesse-livermore.com/trading-rules.html
Read these rules over and over and over... you will benefit from them years to come.
To your success
Manoj Balasooriya
Tell me how you think about the blog and the articles and share your thoughts ideas. As always I really apprecite your comments.
-
After a week of trading, its a good time look back and see how the market behaved and see what we can anticipate in the coming week.We'll start with the latest ASI screenshot;
Volume shrank to a very low amount. If you look at the last volume bar, you'll notice that its the lowest in the recent past.
Funds stuck in two IPOs, government annual budget, and heavy disturbing weather are three key things that affected the market.
Based on above the ASI behaviour, there are two scenarios that can happen in the next week;
1. Market will bounce further above the 6500 level. If this happens, its worth paying attention to leading stocks that are showing upward momentum. Reason is, budget is one week away and market can indicate some clues of what you can expect.
Financial sector is an obvious benefiter, because its where Sri Lanka's key advantage lies. Government has already indicated that its planning to reduce certain tax relating to banking profits. Also if you look at BFI index (Banking, financial & Insurance), you can notice that, it has been resilient to the recent market correction.
2.Market will break the support line. If this happens, I could say that it should be temporarily. Sometimes, a sudden breakdown and immediate bounce back could further shake away weak traders out of the market. And after, subsequent recovery could be stronger as a result.
My recommended strategy is to scale up on an uptrending market. But market has not shown clearly that its uptrending yet.
Observing the market till right time comes is also a strategy. Its natural to feel that you should trade everyday and thats a recipe for disaster. My favorite all time trader hero is Jesse Livermore. I could survive some bad times because of the wisdom that he passed on to others.
For your Trading Wisdom
Once he said "There are times when money can be made investing and speculating in stocks, but money cannot consistently be made trading every day or every week during the year. Only the foolhardy will try it. It just is not in the cards and cannot be done." http://www.jesse-livermore.com/
His Trading Rules...
- Buy rising stocks and sell falling stocks.
- Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it's rising you should be long, if it's falling you should be short.
- Co-ordinate your trading activity with pivot points.
- Only enter a trade after the action of the market confirms your opinion and then enter promptly.
- Continue with trades that show you a profit, end trades that show a loss.
- End trades when it is clear that the trend you are profiting from is over.
- In any sector, trade the leading stock - the one showing the strongest trend.
- Never average losses by, for example, buying more of a stock that has fallen.
- Never meet a margin call - get out of the trade.
- Go long when stocks reach a new high.
You can read the full article at http://www.jesse-livermore.com/trading-rules.html
Read these rules over and over and over... you will benefit from them years to come.
To your success
Manoj Balasooriya
Tell me how you think about the blog and the articles and share your thoughts ideas. As always I really apprecite your comments.
-
Monday, November 8, 2010
Eight steps for success; Eight goals for every trader.
Traders,
I found below article in http://blog.traderslibrary.com. Even though blog focuses on US market, there is plenty of good articles there.
As I mentioned in my blogs, be a student of the market;make reading a priority
Manoj
------------
WARRIOR TRADING WITH CLIFFORD BENNETT
Clifford Bennett has written an excellent book on conditioning the mind for successful trading. Bennett, a currency trader, outlines the stock trader's "eights steps of battle" in his book Warrior Trading: Inside the Mind of an Elite Currency Trader. These eight steps are intended as a guide to the new trader and a reminder to the experienced.
1. Find Your Strength. It is important that the trader determine what type of market, trending or consolidating, best suits their own personality and strength. The best traders stay focused on one or the other and master it.
2. Know Your Market. You should know your market when trading. In other words, know the levels of support/resistance; know how the instrument you trade moves with the general market; know who is likely to be on the other side and what they are thinking; and "the terrain of any market includes the "long-term charts" (140).
3. Prepare Your Order. Know when to get into a trade and why and know when to get out of a trade and why. Just like a secret agent who will "never enter a room without knowing how to get out of it in a hurry" (142).
4. Placing Your Order. Once you have adequately prepared for a trade, it is then necessary to be ready to place the trade when the time is right. Here "patience is the key...you must be able to wait for the market to tell you when the moment is right. Wait for the market to generate the action; don't force it" (143).
5. Sticking With Your Plan. This is probably the hardest part about trading. Once you enter the battlefield (enter a trade), the emotions of fear, ecstasy, greed, and sheer excitement can then take over and cause you to forget your well prepared plans for entry and exit. You must enter a "Zen-like mental state" where you remain in control of your emotions. Not doing so could spell disaster.
6. Identify When You Are Wrong. "It is crucial to your survival to identify in advance whether your view might be wrong and to determine what price level, when broken, would be in support of the consensus view; therefore, you are building up your ability to defend the occasional probes against you" (145).
7. Holding On To Your Winning Positions. Set a trailing stop when your trade is moving in your direction thereby locking in profits while allowing the trade to work toward its maximum potential. "A trailing stop loss keeps you in the war, keeps you in tune with the war, and, most important, leaves you in full readiness to instantly strike again" (152).
8. Focus On Your Next Trade. This is the most important step and is saved for last. This step simply says to start anew with each new trade. No matter if you won, lost, or broke even on the last trade, the next trade is a new one. "You do indeed need to be starting every single trade fresh and alert without any baggage from the previous encounter" (153).
Eight steps for success; eight goals for every trader.
---------------------------------------
Saturday, November 6, 2010
Weekend Report-Nov 06th 2010- Market Technical Analysis & a Strategy
Last week has been a news full of week. As traders if you had followed some of the news, you could see the positive expectations lots of companies and fund managers have towards 2011 specially in the finance sector. Since Sri Lanka finance sector has been resilient to many economic challenges, its expected to outgrow ASI return during the economic boom. So its well worth to allocate significant part of your portfolio to this sector. More on this later.. Lets now focus on the technical side of the market.
Market lost three days out of four it was open. Wed market action really caught my eyes. Trading volume was very high compared with recent 2-3 weeks but price did not drop significantly. This tells us that market is absorbing the selling pressure. Even though the volume was low rest of the week, market was able to put the break on downside.
Key points
1. Market is still above the support line (158 points above)
2. Price declining is gradually slowing down
3. Based on the trendline (thin blue line) its possible that market may hold on above the trendline next week.
Now, lets look at Yahoo graph week ending Nov 5th.
If you look at the 20 day 50 day MA (moving average), market has not significantly violated the MAs. So the reaction started in Oct still come under a 'short term'correction. Stoch (which shows over-bought or over-sold condition) and MFI (money flow index) is a bit disappointing, but still above the last week of Oct lows.
WHAT TO LOOK FOR WHEN A MARKET IS IN A TRADING RANGE LIKE THIS
When a market is trading in a range like this, it gives us the chance to evaluate which stocks/ industries are stronger than the market. And when price starts o climb up, stocks that held their prices tight will go up much higher than the market.
For example, let's look at recent HNB stock graph;
(Bloomberg.com)
When the overall market is trading in a range (and unable to break the upward movement), HNB is refusing to be in the group and showing a upward momentum. There are many stocks like that. So rather than waiting till prices to start going up, research these type of stocks and add to your potential list (watch list).
You may have noticed that I always mention the data source where I get this data from. This is to enable you to go to the same source and start your research work.
Get informed and get smart!, Have a great Trading week.
To your success,
Manoj Balasooriya
Note: Thank you for visiting the site and joining me here. Appreciate if you can take a minute and share your comments and thoughts;
Thank you.
Market lost three days out of four it was open. Wed market action really caught my eyes. Trading volume was very high compared with recent 2-3 weeks but price did not drop significantly. This tells us that market is absorbing the selling pressure. Even though the volume was low rest of the week, market was able to put the break on downside.
1. Market is still above the support line (158 points above)
2. Price declining is gradually slowing down
3. Based on the trendline (thin blue line) its possible that market may hold on above the trendline next week.
Now, lets look at Yahoo graph week ending Nov 5th.
If you look at the 20 day 50 day MA (moving average), market has not significantly violated the MAs. So the reaction started in Oct still come under a 'short term'correction. Stoch (which shows over-bought or over-sold condition) and MFI (money flow index) is a bit disappointing, but still above the last week of Oct lows.
WHAT TO LOOK FOR WHEN A MARKET IS IN A TRADING RANGE LIKE THIS
When a market is trading in a range like this, it gives us the chance to evaluate which stocks/ industries are stronger than the market. And when price starts o climb up, stocks that held their prices tight will go up much higher than the market.
For example, let's look at recent HNB stock graph;
(Bloomberg.com)
When the overall market is trading in a range (and unable to break the upward movement), HNB is refusing to be in the group and showing a upward momentum. There are many stocks like that. So rather than waiting till prices to start going up, research these type of stocks and add to your potential list (watch list).
You may have noticed that I always mention the data source where I get this data from. This is to enable you to go to the same source and start your research work.
Get informed and get smart!, Have a great Trading week.
To your success,
Manoj Balasooriya
Note: Thank you for visiting the site and joining me here. Appreciate if you can take a minute and share your comments and thoughts;
Thank you.
Friday, November 5, 2010
Await for ...Weekend Report-Nov 6th 2010- Market Technical Analysis..............
Member,
Await for ...Detailed weekend Report-Nov 6th 2010- Market Technical Analysis.......soon to be posted.
Manoj
Await for ...Detailed weekend Report-Nov 6th 2010- Market Technical Analysis.......soon to be posted.
Manoj
Wednesday, November 3, 2010
Nov 4th 2010 - Member Questions & Answers
shehan wickramarachchi
Hello Manoj,
"Central Bank of Sri Lanka (CBSL) is in a policy decision to allow Sri Lankans to open bank accounts abroad and buy shares and debt of foreign companies as part of a loosening of foreign exchange controls, Central Bank Governor Ajith Nivard Cabraal revealed."
with this move taken by CBSL will there be an opportunity for retail investors to enter foreign stock markets?
Can you explain how a local can trade in a foreign stock market?(brokers,currency conversion,taxes etc)
btw your blog is so informative.keep up the good work.
thank you
"Central Bank of Sri Lanka (CBSL) is in a policy decision to allow Sri Lankans to open bank accounts abroad and buy shares and debt of foreign companies as part of a loosening of foreign exchange controls, Central Bank Governor Ajith Nivard Cabraal revealed."
with this move taken by CBSL will there be an opportunity for retail investors to enter foreign stock markets?
Can you explain how a local can trade in a foreign stock market?(brokers,currency conversion,taxes etc)
btw your blog is so informative.keep up the good work.
thank you
Answer
Hi Shehan
If Sri Lankans are allowed to open currency accounts, yes definitely you can buy & sell shares. I do not know the system government is going to use to monitor the account activities.
Setting up your account would be the easy part, but understanding foreign markets and foreign companies is going to take some time.
Go to www.wsj.com and www.stockcharts.com regularly and be familiar with markets/stocks. You can register free with them and you can also create a watch list.
Most brokers here are 100% internet based. www.scottrade.com www.etrade.com are quite popular.
Currency conversation is based on daily buying & selling rates. Daily papers publish rates every day.
Basic remains the same. So trade Sri Lanka stocks first and as a diversification you can invest some of it in overseas.
Dr. V. W. Jagath Vasanthathilaka
Dear Manoj
You have made a good analysis of market trends. Why do you think that CSE is slow to recover? Is it due to continuous process of debt collection by the broker firms? We thought this process is over. How can we create positive attitudes towards investment at the CSE? Currently I am in USA; however I am a Sri Lankan resident. How can we minimize the dissemination of negative attitudes towards CSE? Positive financial reports and excellent cooperate earnings should drive the market. How can we make the CSE an attractive place for investment? I think you are doing a great service by encouraging investors.
Thanking you
Answer
Hi Dr Vasanthathilaka
Thank you for your kind words. There can be lots of reasons why market is acting slowly, but if you look at an yearly chart of the market (ASI) you will see Aug to Oct -2010 market went up drastically. After CSE got anxious about it, they curtailed trading capacity of traders. That initiated the reaction. During a normal reaction, a market goes down up to about 5%. But so far Sri Lanka market has gone down about 9%-10%. So its going to take some extra time to get to new high.
Also, government made some recent announcements saying it was going to change tax structure, relax foreign currency restrictions, introduce new business proposal to attract foreign investments. I think these have led to some waiting games. As soon as budget proposals are revealed, stock market should react to the new business conditions.
Good earning reports do not necessarily lead to upside market behavior. Sometimes, experienced traders & investors use good news to sell their big positions. That’s why its important to evaluate the technical side of the market.
I believe Sri Lanka market is a better place invest. If you look at the broad business conditions like employment levels, interest rates, inflation rates, they all show improved levels.
stardust
Manoj, I'm happy to see a blog on technicals its always an advantage to see which way the market is heading. Have been intrested for years in charts.
I have a question though, how are you able to call this a bull market, and what qualifies as bull market? Personaly would have called this unsettled, or volitile at present, moving sideways even, but not bull, just wanted to know if I'm missing something, or are you calling this a bull run within a time frame?
Best always with good intentions
I have a question though, how are you able to call this a bull market, and what qualifies as bull market? Personaly would have called this unsettled, or volitile at present, moving sideways even, but not bull, just wanted to know if I'm missing something, or are you calling this a bull run within a time frame?
Best always with good intentions
Answer
Hi,
There are different criteria one can use to identify market conditions. One arbitrary rule is, if a market goes down more than 20%, its said to be in a bear market condition.
Other criteria is “economic cycle”. Country’s economy goes through different stages of growth levels. Basically from a boom to recession. When a country goes through a recession, one can see all the so called negative news; job losses, shrinking aggregate demand for products & services, decrease level of credit facilities etc. Obviously we don’t see that in Sri Lanka. On the contrary, economy is in a steady growth phase.
Its very important to understand the different market reaction levels. What we witness now is a short term market reaction. One can use moving averages to get an idea about this. Yahoo graph is an excellent source. Try 20 day or 50 day MA (moving averages). It has not been seriously violated. To see long term changes, use 150 day 200 day MA.
Because of these facts, I call Sri Lanka market is in a bull market condition.
ASI graph with 20, 50, & 200 day moving averages
I have received lots of questions. I’ll try my best to find time to answer them soon.
See you again
Manoj Balasooiya
Tuesday, November 2, 2010
Tue, Nov 02nd 2010 - Market Technical Analysis
Yesterday market behavior was not a good sign. It shows there are sellers waiting to get out when prices recover at certain previous highs. When a market is in a recovery process, signs like that indicate buyers hesitancy to bid higher and also lack of buying enthusiasm. Yesterday sellers dominated the market.
(yesterday ASI intra-day graph)
Also longer a market stays around support areas, it loses its strength. ASI is about 200 points above the major support line.If it can hold on to this safety area, it would show market ability to absorb sellers pressure.
Watch first 1-2 hours of trading, and it will set the tone for rest of the day.Trade with very caution.
To your success
Manoj Balasooriya
Also longer a market stays around support areas, it loses its strength. ASI is about 200 points above the major support line.If it can hold on to this safety area, it would show market ability to absorb sellers pressure.
Watch first 1-2 hours of trading, and it will set the tone for rest of the day.Trade with very caution.
To your success
Manoj Balasooriya
Monday, November 1, 2010
Mon, Nov 01st 2010 - Market Technical Analysis
Mondays are usually not a very upbeat day for the market. Despite that it was the first day of the month and pricewise market did a fairly good job. Three things that were not-so-good were;
1. Volume was very low (So today's action is not counted as a key accumulation day)
2. Most of the market leaders did not perform very well
3. Milanka index showed a downward trend (Monday intra-day chart)
Good news is, market crawled UP for the fourth (4) continuous day. And companies continue report good earnings;
Below graph shows, everything above in nut-shell.
As I mentioned in my weekend report, patience is key. Use Scale up strategy. This will keep your losses to a minimum in case if prices reverse.(Cut your losses quick and let your profit run)
Q&A
One of the readers had a good question. This trader had bought a very cheap financial stock with loaned money and price kept on going down. You can imagine how he feels. I sent him a personal email but I am sure most of you have experienced something close to that.
I want you all to burn this point to your brain. "Leave cheap stock alone". As a rule I do not buy anything below Rs.10.00 (I violated this rule only once and made a loss on that trade too). Even in the US market, I did not buy anything below $10.00.
Some company stocks are cheap because company is cheap. Its not like you are going to a mall and see something at a bargain price. We tend to think, if something is cheap its less risky. But when it comes to stocks, its quite the opposite. Cheap stocks are risky.
For example, say you bought PCH for 9.50. If it goes down by 0.75, you lose 8% of your capital. Some might say 'how about it goes up?' Well, it may go up BUT POSSIBILITY of happening that is low compared with fairly high price stocks.
Instead, say you bought SAMP at 280 and price went down by Rs.4.00. How much you lost ? only 1.4% .
Point is,its less risky and high rewarding to buy high price leading stocks, than beaten down bargain stocks.
To your success
Manoj
1. Volume was very low (So today's action is not counted as a key accumulation day)
2. Most of the market leaders did not perform very well
3. Milanka index showed a downward trend (Monday intra-day chart)
Good news is, market crawled UP for the fourth (4) continuous day. And companies continue report good earnings;
Below graph shows, everything above in nut-shell.
As I mentioned in my weekend report, patience is key. Use Scale up strategy. This will keep your losses to a minimum in case if prices reverse.(Cut your losses quick and let your profit run)
Q&A
One of the readers had a good question. This trader had bought a very cheap financial stock with loaned money and price kept on going down. You can imagine how he feels. I sent him a personal email but I am sure most of you have experienced something close to that.
I want you all to burn this point to your brain. "Leave cheap stock alone". As a rule I do not buy anything below Rs.10.00 (I violated this rule only once and made a loss on that trade too). Even in the US market, I did not buy anything below $10.00.
Some company stocks are cheap because company is cheap. Its not like you are going to a mall and see something at a bargain price. We tend to think, if something is cheap its less risky. But when it comes to stocks, its quite the opposite. Cheap stocks are risky.
For example, say you bought PCH for 9.50. If it goes down by 0.75, you lose 8% of your capital. Some might say 'how about it goes up?' Well, it may go up BUT POSSIBILITY of happening that is low compared with fairly high price stocks.
Instead, say you bought SAMP at 280 and price went down by Rs.4.00. How much you lost ? only 1.4% .
Point is,its less risky and high rewarding to buy high price leading stocks, than beaten down bargain stocks.
To your success
Manoj
Friday, October 29, 2010
Weekend Report-Oct 30th 2010- Market Technical Analysis
First, Thank you for joining me here. You are one of a few traders who find time to enhance your trading knowledge. Lets get started;
How to read the "Market Pulse"?
You will notice just above this article there is a market comment under "market pulse" How do you read it?
It summarizes what exactly happened on a particular day and shows where market is generally heading toward. Read "Advance decline ratio" with index changes. For example, yesterday ASI went up by 102 points (1.55%) and advance decline ratio was 153 to 52, meaning share prices of 153 companies went up and only 52 companies prices went down, suggesting it was a good recovery day. If we can see minimum three days like this with high volume, that would confirm upward market direction.
Back to Technical Analysis..
We'll first look at Yahoo graph; All the technical indicators are showing that marketing is in recovery mood. Money Flow Index is trending up (meaning cash inflow is greater than outflow), Stochastic shows market is heading up from oversold territory.
Question is what has to happen, to confirm the market is trending up, so that you can go long (buy)?Once technical indicators show marketing is uptrending from a bottom (or from a supporting line), look for at least 2-3 high volume market up days. Reason is that market has to break previous resistance areas in its way up. Let's look at below graph;
First, huddle ASI has to face is 6800-6900 area. Traders who previously bought at these price levels want to get out even. So some traders will sell at this area. If buying power is stronger ASI may go all the way up to 7100-7200 area. Again same process will happen. Traders who bought at the top want to get out (sell) even here. If again buying power is higher than selling pressure, ASI will reach new high going beyond 7200 area. Sri Lanka market is becoming business friendly, plus 2011 budget proposals are said to be business oriented. These macro economic factors should propel the market to new high sooner or later.
Based on these technical indicators, what would be an intelligent way to add stocks to your positions? Scale UP. Purpose here is to minimize your risk and protect your capital. Buy 25 % at the first confirmation. Watch the intra-day ASI graph on Monday and if market is trading up, allocate 25% . If market is strong and pierce through 1st resistance area (ASI 6800-6900) you may add further 25%...... you get the point. This is one of the strategies. Depending on your risk level, you can decide the percentages.
(I know some traders buy 100% at the first positive sign, with a tight stop loss. But since Sri Lanka market is not liquid enough, so its not advisable. Also there are traders who wait till market reaches new high).
Technical indicators help you go with the trend. Also it forces you to think objectively. So learn them. It takes time but its worth the effort.
My intention here in this blog is to share what I have learned hardway. I hope this article helps you someway. I'll discuss how to decide which stocks to buy in my next weekend report.
To your success,
Manoj Balasooriya
Note: Appreciate your comments & suggestions, so please take a minute to share your ideas. Thanks!
How to read the "Market Pulse"?
You will notice just above this article there is a market comment under "market pulse" How do you read it?
It summarizes what exactly happened on a particular day and shows where market is generally heading toward. Read "Advance decline ratio" with index changes. For example, yesterday ASI went up by 102 points (1.55%) and advance decline ratio was 153 to 52, meaning share prices of 153 companies went up and only 52 companies prices went down, suggesting it was a good recovery day. If we can see minimum three days like this with high volume, that would confirm upward market direction.
Back to Technical Analysis..
We'll first look at Yahoo graph; All the technical indicators are showing that marketing is in recovery mood. Money Flow Index is trending up (meaning cash inflow is greater than outflow), Stochastic shows market is heading up from oversold territory.
Question is what has to happen, to confirm the market is trending up, so that you can go long (buy)?Once technical indicators show marketing is uptrending from a bottom (or from a supporting line), look for at least 2-3 high volume market up days. Reason is that market has to break previous resistance areas in its way up. Let's look at below graph;
Based on these technical indicators, what would be an intelligent way to add stocks to your positions? Scale UP. Purpose here is to minimize your risk and protect your capital. Buy 25 % at the first confirmation. Watch the intra-day ASI graph on Monday and if market is trading up, allocate 25% . If market is strong and pierce through 1st resistance area (ASI 6800-6900) you may add further 25%...... you get the point. This is one of the strategies. Depending on your risk level, you can decide the percentages.
(I know some traders buy 100% at the first positive sign, with a tight stop loss. But since Sri Lanka market is not liquid enough, so its not advisable. Also there are traders who wait till market reaches new high).
Technical indicators help you go with the trend. Also it forces you to think objectively. So learn them. It takes time but its worth the effort.
My intention here in this blog is to share what I have learned hardway. I hope this article helps you someway. I'll discuss how to decide which stocks to buy in my next weekend report.
To your success,
Manoj Balasooriya
Note: Appreciate your comments & suggestions, so please take a minute to share your ideas. Thanks!
Thursday, October 28, 2010
Weekend Report-Oct 30th 2010- Market Technical Analysis..............
I'll post a detailed report on Oct 30th. Mainly I'll discuss immediate three resistance areas that you need to be watchful and what has to happen to ensure a solid recovery...
See you on 30th...
Manoj Balasooriya
See you on 30th...
Manoj Balasooriya
Wednesday, October 27, 2010
Thu 28th Oct 2010 - Market Technical Analysis
Market closed at 6557, up by +10.84 on 27/10/2010. Market almost touched 6500 level and bounced back from there (which was a good sign).
What I wrote yesterday remain valid for today too. Please take a minute to read yesterday note.
This is a good time to Start building your "watch list" . Market never remains the same. What goes down should go up. But don't let "hope" come & take over you.
I'll leave the today's note with little secret.
Make it a habit to look at "intra-day"ASI or Milanka graph. You can learn a lot about the immediate direction of the market. For example, yesterday ASI went up by 10 points, but it does not give you any idea about how it happned. Now lets look at the graph;
Look at the 3 lines I have drawn. During the first 2 hours, market headed south (line 1). Then it shot up almost 60 points indicating some positive buying at the support level (end of line 2).
These kind of analysis reveals valuable information. So its worth adding to your daily to-do-list.
To your Success
Manoj Balasooriya
Tuesday, October 26, 2010
Wed 27th Oct 2010- Market Technical Analysis
Market closed at 6546 on 26/10/2010. We are fast approaching a very decisive point in ASI. If market goes below 6500 (46 more points), possibility of another leg down is highly likely. So far market has gone down 9% during last 15 days. This is quite a considerable downward correction.
carefully look at the graph below; Its shows the importance of decisive support level.
Up to day, market has been receiving pretty good earning reports. And Fitch continues to upgrade financial sector banks. Despite these, market continues be under selling pressure.
Also Money flow index (MFI) continues to show a clear cash outflow, confirming the selling pressure.
As far as buying stocks are concerned , I would stay sideline,untill the market shows a clear change in direction and confirmed upward momentum.
Its is a very timely thing to build your stock watch list now. Select stocks that are resisting the downward momentum and add them to your watch list. Also carefully look into their fundamentals. When market is ready to go up, those stock would climb disproportionatly high.
To your success,
Manoj Balasooriya
carefully look at the graph below; Its shows the importance of decisive support level.
Up to day, market has been receiving pretty good earning reports. And Fitch continues to upgrade financial sector banks. Despite these, market continues be under selling pressure.
Also Money flow index (MFI) continues to show a clear cash outflow, confirming the selling pressure.
As far as buying stocks are concerned , I would stay sideline,untill the market shows a clear change in direction and confirmed upward momentum.
Its is a very timely thing to build your stock watch list now. Select stocks that are resisting the downward momentum and add them to your watch list. Also carefully look into their fundamentals. When market is ready to go up, those stock would climb disproportionatly high.
To your success,
Manoj Balasooriya
Monday, October 25, 2010
Tue 26th Oct 2010- Market Technical Analysis
Market closed at 6633 on 25/10/2010. Psychologically important point is 6500. If market goes below this number (more than 2%), there would be an another leg down.
So far market has received pretty good earning reports. And Fitch continues to upgrade financial sector banks. Despite these, market continues be under selling pressure.
Keep your eyes on the supporting line (graph1) Also if you look at the Money flow index in the 2nd chart, it continues to show a cash outflow from the market confirming the selling pressure.
As far as buying stocks are concerned , I would stay sideline till the market shows a clear change in direction.
(Graph by Patternz)
Graph by Yahoo
Trade with red lights on!!!
Manoj Balasooriya
So far market has received pretty good earning reports. And Fitch continues to upgrade financial sector banks. Despite these, market continues be under selling pressure.
Keep your eyes on the supporting line (graph1) Also if you look at the Money flow index in the 2nd chart, it continues to show a cash outflow from the market confirming the selling pressure.
As far as buying stocks are concerned , I would stay sideline till the market shows a clear change in direction.
Trade with red lights on!!!
Manoj Balasooriya
News Read- Oct 25th
Sri Lanka Fitch confirms HNB 'AA-(lka)' rating
Oct 25, 2010
Fitch Ratings Lanka has confirmed the national long-term rating of Sri Lanka
Sri Lanka PABC upgraded by Fitch
Oct 26, 2010
Sri Lanka's Pan Asia Banking Corporation (PABC) has been upgraded 'BBB(lka)' from 'BBB-(lka)' with a 'stable' outlook on improving asset quality and capitalization, Fitch Ratings Lanka said.-- Lanka Business Online
Sunday, October 24, 2010
Mon 25th Oct 2010 - Market Technical Analysis
Market is still under short term correction. Thursday slight market up was a positive sign. If ASI remains above 6550, the possibility of recovering from the short term correction would be higher. If you look at the 20 day moving average, you can clearly see, market is trying its best to stay above that line. Also market volume was relatively high during the last 3 days compared with last week. As far as the money flowing into the market is concerned, its still an outflow which is a sign of weak.
It seems, traders are waiting till the full budget proposal are presented. Also future IPOs are taking some money out of the market which weighs on the market uptrend.
If you are a risk taker, one may add to current position, stocks that have been holding the price(s) during last couple of days.
If you are safe trader, let the market shows a clear trend, then you may buy technically strong value stocks.
(Graph by Yahoo.com)
To your Success
Manoj Balasooriya
Is Trading a Business? Three Key Ingredients for a Successful Stock Trader
Everybody who trades, want to make lots of money, at least thats what they hope to do. But how many traders actually make money in the stock market consistently? 10% yes, balance 90% are losers. This is very true in the US market and its true in the Sri Lanka market. Even in a bull market average traders consistently lose money. Why is that?
It says there are 10,000 plus reasons for that. But hardest mistakes are not market related but they are within YOU. Look at this common scenario. You make money in your 1st trade, 2nd trade, 3rd trade and you think wow, this is so easy, you become overconfidence and buy next one with a big stake. Well soon you start to see your profits evaporates in front your eyes, you become like a deer in the headlight! With desperately you sell it, and in no time it starts to go up again and you wonder why you? Well you are not alone.
I experienced these emotional dramas not only once but also so many times. And sometimes I still do when I fail to follow my trading rules. Trading is 80% psychological and 20% technical. You may buy for example JKH and make a profit and somebody else may buy the same stock at the same time and lose money.
How can you turnaround yourself and become a successful trader?
First and foremost, trading should be treated like a real business. You must allocate fixed amount of hours everyday to do your homework. You can't trade all the stocks in the market. Limit your stock universe into 5-15 prominent stocks. This will allow you to be in charge and you can study their behavior without much stress. Next step is to study their fundamentals. What businesses are they in? Are they in good industry groups? Are they liquid enough to get in and get out? (Recently I bought Ceylinco Insurance and when it hit my loss point, I wanted to sell it, guess what, I could not find a single buyer for that price!) Have you read their recent quarterly Profit & loss account? Also look around and see how they are actually doing? Are they opening new branches? What does CEO say on Lanka Business report?...
These should be part of your daily battle plan. If you approach your business like this and when you make profit, there is immense fulfillment in that because you earned it. Its not a Broker tip or so called Guru's tip. If you lose money, learn from it and see where you make the mistake. Correct it go back to trading.
Second part of your plan is to "improve YOU". Emotional Buying Kills traders. You open your computer and wait till 9.30am hits the clock and boom you see gainers and losers and you don't want to miss the boat , you rush to buy and click order book and hit the buy button. Well after you buy it, it looks going nowhere and you see somebody says buy this and you jump into that and day goes and you wonder what you did wrong? well everything!.
This is Hope, Fear & Greed Trading. I have done it more than I should and still do when greed finds a weaker spot in me. Recently I bought VFIN because I did not want to lose the opportunity . Well I got on boat and made a big loss. Good tuition fee for an obvious mistake.
3rd part of the plan is to realize that there is no need to trade all the time. There is a proper time to buy and sell if you had done your homework. On any given day, if you are not at your best, think twice before hit the magic button. When you are tired, or had made some losses, and emotional not fit, just walk away or just observe the market. Market has been there 100 years ago and it will be there when you come back. Its your hard earned money, don't rush to donate it the market. Even though you can't see it, on the other side, traders are waiting to dump their stock on you.
In summary, stock market offers you financial freedom, an opportunity to do live your dreams, but only if you are prepared to and done the hard work. Treat it like a real business. Study the market and read everything that you can. Study about yourself. I learned a lot about my mistakes when I read some of the biographies of best traders.
Probably you can understand why only 10% become successful in trading. But the good news is YOU can be in that 10% if you decide to.Its NOT superior brain power , talent, age, superior analysis or your formal education background that makes the difference. Study the trading, become a student of it, do your homework and treat it like a real business. And your success can be guaranteed.
Manoj Balasooriya
USA
Note: I first wrote this article to investnow.lk.
I appreciate your feedback. Leave a comment. I am focusing on Sri Lanka Stock Market. I am a lifetime student of the market and I love the never ending challenge.
Saturday, October 23, 2010
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