Saturday, December 19, 2015

Retracement Or Reversal: Know The Difference

Courtesy : Investopedia

Most of us have wondered, at some point, whether a decline in the price of a stock we're holding is long term or a mere market hiccup. Some of us have sold our stock in such a situation, only to see it rise to new highs just days later. This is a frustrating and all too common scenario, but it can be avoided if you know how to identify and trade retracements properly.
What Are Retracements?Retracements are temporary price reversals that take place within a larger trend. The key here is that these price reversals are temporary, and do not indicate a change in the larger trend.





The Importance of Recognizing RetracementsIt is important to know how to distinguish a retracement from a reversal. There are several key differences between the two that you should take into account when classifying a price movement:
Factor Retracement Reversal
Volume Profit taking by retail traders (small block trades) Institutional selling (large block trades)
Money Flow Buying interest during decline Very little buying interest
Chart Patterns Few, if any, reversal patterns - usually limited to candles Several reversal patterns - usually chart patterns (double top, etc.)
Short Interest* No change in short interest Increasing short interest
Time Frame Short-term reversal, lasting no longer than one to two weeks Long-term reversal, lasting longer than a couple of weeks
Fundamentals No change in fundamentals Change or speculation of change in fundamentals
Recent Activity Usually occurs right after large gains Can happen at any time, even during otherwise regular trading




93 comments :

  1. very specific crucial detail..thanks for sharing

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  2. Hello VP sir...
    Thanks for the post ....
    Advance happy happy marry marry Christmas
    May Jesus Christ blessings in all the time....

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    Replies
    1. Thanks for your wishes and same to all

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  3. A thank you to you and special advance wishes for Christmas! Learning a lot.

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  4. Dear VP ji pls share your thoughts about premco global. Thanks in advance

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  5. Dear sir please your view on Majesco ltd

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  6. Thanks VP ji for this eyes opening article. I think comparison table is unable to view fully.

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  7. Hello VP sir,
    A very relevant post for newbie investors. Will help to avoid panic sell off when seeing dips on stock prices. Thanks for sharing your deep insights about the stock market.

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  8. Dear vpji,
    As per the news, sunil hitech has been involved in tax evasion by hiding incomr of 104 crores.I am aware that in india many companies follow such practice but would like to know your views regarding same.will it affect its qip planning as it will be difficult to get valuation it planned.

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    Replies
    1. Replied about this subject below previous posting .Whatever be the business potential , I will not support any unethical promoter.

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  9. Hello sir, I find flex foods quite attractive at cmp....
    What are your views about the same?
    Regards.

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    Replies
    1. Not tracking any company from Flex Group

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  10. Thanks for sharing and teaching us to be able to distinguish between reversal and retracement.wishing you merry Christmas in advance sir.

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  11. Hi Sir,

    Your inputs on PMC Fincorp.

    Thanks

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  12. Merry Christmas to you VP sir and to all friends here. Hope the new year brings all that you wish for.

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  13. Hello Sir, I am in very novice stages in learning to find stocks which has the capability to turn into a multibagger and from whatever studies I could do reading your blogs and few other articles googling around i could narrow down a couple of them. Your views will greatly help. Thanks!!
    1. Shree Hari Chemical Exports
    2. OM Metals Infra

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  14. Hi VP Sir, Now-a-days I am seeing a new trend in Stock market. Few mmb platinum boarders, especially one person who himself call him king are giving buy and sell calls without any fundamentals and innocent investors who r following him are blinding buying his recommendations. I am thinking what happens if those stocks fall huge as those don't have any good fundamentals and those investors who bought at peak price get locked at the peak. Recently when the CEO of Jet Airways resigned, one of his followers asked the impact of it on the stock. Then the so called King answer was very silly, he is saying that no impact and we all are new CEOs of Jet Airways. I was thinking how carelessly he is recommending stocks to buy and sell and the mmb moderator is not even looking into those messages

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    Replies
    1. Not interested to comment anything specifically to any particular person . In general, in a market where retail investors are active in small and mid caps , anything is possible. But we should remember the fact that only quality will sustain in a bear market . Nothing wrong in hearing different opinion but the decision should be taken by the investor itself after studying the stock idea personally and generate enough conviction. Nobody will answer for loss if it happens when market mood turns.

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  15. Sir, I am looking to enter saurashtra cements,nodal chemicals,Gujarat borosil,dhampur sugars,Gayathri bio,spice jet,ashok leyland. Suppose you are tracking any of these Please share your views green signal or red signal

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    Replies
    1. Tracking only Gujarat Borosil which suggested about 1 year back @ Rs.8 . Currently this stock trading around Rs.70 . Neutral at CMP.

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  16. hi VP. no stock ideas frm u for a long time. eagerly awaiting d same.

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    Replies
    1. I prefer to adhere SEBI rules which came to effect from June 1

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  17. Sir can u please guide on prospects of SRS ltd.

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  18. your view on choksi imaging, tainwala chemical and aunde india

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  19. Sir please share your views on sms pharma in context of its current value and future buisness

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    Replies
    1. This stock already multiplied by 5 times ( Adjusted to stock split) in 1.5 years post recommendation. Neutral at CMP.

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  20. I found your post during diwali ti!me about categorization of stocks in which you specifically mentioned what to expect from each category and their risk profiles.
    It would be much helpful if you give some guidance about the conditions in which one should add on further positions to already owned stocks.
    I face dilemma in adding already profitable stocks as at those prices share looks little costlier. Many books which I read suggest adding on to profitable one rather than loosing ones. But in terms of value picking it is other way round ( considering that our study suggests that in both cases business is good).
    Please guide on this based on your rich experience.

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    Replies
    1. Value investing never means investing in low priced stocks. It should be decided based on the worth of the business .

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  21. Thanks for sharing good information. continue your noble work of educating investors. God bless you and your family..merry Christmas in advance...

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  22. Heartening to see you vp growing from strength to strength revitalising each one as you do so with ethical values ofcourse as bottomline.Merry Christmas & HAPPY NEW YEAR SIR

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  23. Hi VP Sir, Please share your views on Kothari Petro and JK Agri.

    Regards,
    Venu.

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    Replies
    1. JK Agri suggested around half of the current price and even before de-merger . Neutral at CMP .

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  24. Thanks for the wonderful article sir.. Happy Christmas and New year..

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  25. KDDL Ltd. any views on this stock Sir...I manufactures dials for Swiss watch companies

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  26. Sir, Long time back you had recommended Themis Medicare. It is at all time high of 550. What is your view?

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    Replies
    1. It already multiplied by more than 5 times from suggested level . Prefer to HOLD.

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  27. Thanks to all my readers for your Christmas Wishes and same to you and your family.

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  28. Sir, what's ur opinion on MARSONS LTD ..Thanks in advance.and advance marry Christmas wishes to u and ur family.

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  29. Dear VP Sir,

    Sir pls share your views on Aban Offshore of possible...cruide prices are going down which is negative for offshore companies. can we add at CMP for long time horizon...kindly provide your valuable views....

    Thanks and regards


    Abhijeet

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    Replies
    1. A Contra buy for risk takers with enough patience.

      Delete
  30. Dear Sir,
    So far I invested in mutual funds because I didn't have proper knowledge about equities. I would like to start investing in equities and I'm not sure where to start. I know I can be wrong even after I do proper analysis, and I'm willing to start with minimal risk. It would be great if you can guide me.
    1. How do I pick a company (or two) so that I can start looking into it in more detail?
    2. How can I know if the promoters of a company are genuine/ethical?
    Thanks in advance.

    ReplyDelete
    Replies
    1. It is not a subject easy to teach in few sentences. First you decide 'What kind of investor you are' and then try to read some good books suitable for your investment style .A good investor not born in a single day , stay invested and continue the learning process.

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  31. Wish u a very merry Christmas sir!!!

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  32. Sir, is adlabs good buy at current price?

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    Replies
    1. Expecting company may able to post positive bottom line in another two years.

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  33. Sir yours views on ashok leyland? Happy Christmas sir!!!

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    Replies
    1. Not strictly tracking .

      Thanks for wishes and same to you .

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  34. Thanks VP, but please continue giving abstract hints about stocks once in a while, retail investors like me benefit from your advice the whole time. Ofcourse adhere to the SEBI guidelines but please carry on your work in some subtle way. Just like you mentioned DIC you can post some other stocks as well. All this aside wish you and your loved ones a merry christmas :)

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  35. Sir,
    Any view on Astec Life Sciences, if you have discussed this before kindly provide the link.
    Thanks,
    Regards,

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    Replies
    1. Stock suggested around Rs.55 .Use search option available at top left corner to find out old postings.

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  36. Wish you a happy Christmas and a happy new Year Value Pick Sir, Because of you my year (2015) was filled with happiness and knowledgeable, I am trying to learn lot in terms of value investing :) Thank you very much for your excellent Knowledge sharing, I will try to follow your valuable advice :) Keep Rocks :)

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  37. Dear VP sir,

    your recommended stock Eon Electronics hits 52 week high. What is your view on this..?

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  38. Happy Christmas to you Sir. Please give your valuable suggestion for SIP method buy in Kaveri seeds? I want to buy this stock in SIP due to negative environment for this sector, if you give positive comment on this.

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    Replies
    1. Due to changed business environment, at present not actively tracking seed companies.

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  39. Sir, Happy Christmas and happy new year. Please let me know your on MIC and Vimta Labs.

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    Replies
    1. Thanks for wishes.
      Opinion on MIC already shared and not strictly tracking Vimta Lab.

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  40. Sir,

    Your views on Andrew Yule & Company?. Is it a multibagger in future? .

    Thanks
    VS

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  41. Dear VP Sir, I have been a follower of your blog for the last one year.Majority of stocks in my portfolio are the stocks suggested by you. For the first time in my investing career spanning over last 10 years my portfolio is in green. I am indebted to you.I salute you for the selfless service you have been extending to small investors. From the bottom of my heart, full of gratitude, I wish you and your family a Merry Christmas and a very Happy new year.

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  42. Dear VP, Merry Christmas and Happy New Year....

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  43. A Merry Christmas & Prosperous New Year to all .
    May the guiding light here make us all better investors in the New year.

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  44. happy christmas and happy new year dear sir

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  45. Respected VP Sir.
    Should I buy Vimal oil at this price ?

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  46. Dear vip sir
    Please share the view on PDS multinational for long term

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  47. HI SIR,WISH YOU HAPPY CHRISTMAS.
    I would like to know your view about Gujarat auto gears.

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  48. Dear VP ji , happy merry Christmas to you and your family. All your great wishes should come true.

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    Replies
    1. Thanks to all for wishes and wishing same to you .

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  49. VP Sir, what is your views on V2 Retail which has today announced e-commerce portal.

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    Replies
    1. Prefer to hold for now and wait and see how the new business going on.

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  50. Wish u Happy Merry Christmas Sir...!!!

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  51. Dear VP sir, wish you a happy x-mas.

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  52. Hi Sir..... Can you please share your views on Saksoft currently. you had previously suggested it long back...

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    Replies
    1. Saksoft suggested @ Rs.82 which is currently trading around Rs.280. Suggesting to book profit . Mindteck is the only IT company I am strictly tracking now.

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  53. Wishing u a Merry Christmas and Happy New Year!!

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  54. Dear Sir
    Merry Christmas To you and your Family
    May Lord Fulfill all your Wishes and fill your life with prosperity

    Regards
    Mallikarjun Bally

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  55. sir... your view on Gayatri Project Ltd

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  56. Dear VP sir
    Need your views on websol. I was not able to see your opinion in MMB as it was removed. Apparently around 70% of solar panels used in 2015 was imported from China and similar figures in the previous year too.. Isn't this disturbing and can impact the domestic manufacturers such as websol negatively? Moreover Govt. Is not imposing any duty on these imports. This issue is concerning me a lot. Kindly let us know your views on this matter.

    Thanks in advance
    Srinivas Murthy G

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  57. Sir what's ur view on cmifpe .is it a good long term buy.what's ur take on the management does it have the capability to swim through these turbulent times.


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