Technical Terms in Share Market

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic is that, when the price declines, there will be more demand for the particular share. By the time the price reaches a particular level, it is believed that demand will overcome supply and prevent the price from falling below support.
Resistance is just the opposite of ‘support’. A Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic behind the theory is that , as the price advances , sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches a particular level it is believed that supply will overcome demand and prevent the price from rising above resistance.

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Bonus Shares

Bonus shares are additional shares given to the shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares. The basic principle behind bonus shares is that the total number of shares increases with a constant ratio of number of shares held to the number of shares outstanding. For instance, if Investor A holds 200 shares of a company and a company declares 4:1 bonus, that is for every one share, he gets 4 shares for free. That is total 800 shares for free and his total holding will increase to 1000 shares.

Companies issue bonus shares to encourage retail participation and increase their equity base. When price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share. But the overall capital remains the same even if bonus shares are declared.

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Chart Analysis in Stock Market

• Chart analysis is the technique of using patterns formed on a chart to get an idea about the price movement of a share.
• There are two types of chart patterns: reversal and continuation.
• A continuation pattern suggests that the prior trend will continue upon completion of the pattern.
• A reversal pattern suggests that the prior trend will reverse upon completion of the pattern.

L&T Ltd - Safe Stock to Invest

The company is well poised to capitalise on the upcoming business opportunities, particularly in the infrastructure, power and defence sectors, which are likely to benefit from the government's thrust.

The management expects about Rs 150000 crore of orders in the next couple of quarters to come for bidding. These include orders from airports, metros, dedicated freight corridors, urban infrastructure, power generation, including nuclear power plants, T&D, etc. 

Larsen & Tourbo

BSE: 500510 | NSE: LT | ISIN: INE018A01030 | SECTOR: INFRASTRUCTURE - GENERAL

Target Price: 2123

52 Week High/Low

Prices of commodities, securities and stocks fluctuate frequently, recording highest and lowest figures at different points of time in the market. A figure recorded as the highest/lowest price of the security, bond or stock over the period of past 52 weeks is generally referred to as its 52-week high/ low.

It is an important parameter for investors (as they compare the current trading price of the stocks and bonds to the highest/lowest prices they have reached in the past 52 weeks) in making investment decisions. It also plays an important role in determination of the predicted future prices of the stock.

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What is PEG Ratio

Popularized by the legendary Peter Lynch, It’s a  ratio that will help you look at future earnings growth  You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

• PEG = (P/E) / (projected growth in earnings)

For example, a stock with a P/E of 20 and projected earning growth next year of 10% would have a PEG of 20 / 10 = 2.

If you have a stock with a low P/E. Since the stock is has a low P/E, you start to wonder why the stock has a low P/E. Is it that the stock market does not like the stock? Or is it that the stock market has overlooked a stock that is actually fundamentally very strong and of good value?
To find that answer, PEG ratio will help. If the PEG ratio is big (or close to the P/E ratio), you can understand that this is probably because the “projected growth earnings” are low. This is the kind of stock that the stock market thinks is of not much value.
On the other hand, if the PEG ratio is small (or very small as compared to the P/E ratio, then you know that it is a valuable stock) you know that the projected earnings must be high. You know that this is the kind of fundamentally strong stock that the market has overlooked for some reason.

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IPO

The initial sale of stock by a private company to the public which turns it into a public company. IPOs are typically offered by smaller, younger companies who are seeking to expand through the infusion of capital from the IPO. It can also be done by large privately owned companies looking to become publicly traded.

Most IPOs use the services of an underwriting firm, which helps it determine the type of security to issue. The underwriting firm also helps select the price and timing for the IPO.

The initial day of trading as well as the near term can see huge swings in price.  For small private investors, this makes IPOs tough to predict and highly risky for small investors. Most companies with an IPOs are going through a transitory growth period, which adds to the  uncertainty regarding their future values.

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Share Market Ka Funda: Types of Price GAPs

 

Common gaps: Common gaps are ‘common’ and ‘uneventful’. If a Gap is formed when the markets are moving in a narrow range, it is called a Common Gap.

Breakaway Gaps: A “breakaway” gap ends a consolidation pattern and happens as prices break out. Often, they would be accompanied by huge volumes. Break-out Gaps are generally not filled for a long time, i.e. in the case of an uptrend, the price does not fall back to wipe off the gains. They may be filled as and when the prices retrace after a substantial up move. If the breakout happens to be a downtrend, the prices may not rise soon to wipe off the loss.

Runaway Gaps:Runaway gaps are best described as gaps that are caused by increased interest in the stock. For runaway gaps to the upside, it usually represents traders who did not get in during the initial move of the up trend and while waiting for a retracement in price, decided it was not going to happen. Increased buying interest happens all of a sudden, and the price gaps above the previous day’s close. This type of runaway gap represents an almost panic state in traders. Also, a good uptrend can have runaway gaps caused by significant news events that cause new interest in the stock. Runaway gaps can also happen in downtrends. This usually represents increased liquidation of that stock by traders and buyers who are standing on the sidelines. These can become very serious as those who are holding onto the stock will eventually panic and sell – but sell to whom? The price has to continue to drop and gap down to find buyers. So, in either case, runaway gaps form as a result of panic trading.

Exhaustion Gap: An “exhaustion” gap occurs at the end of a price move. If there have been two or more gaps before it, then this kind of gap should be regarded very skeptically. A genuine “exhaustion” gap is filled within a few days to a week. It is generally not easy to distinguish between the Runaway and Exhaustion Gaps. Experience in reading charts will help in due course. The best clue available is that Exhaustion Gaps are not the first Gaps in the chart, i.e. they follow the Runaway Gaps and usually occur when the runaway Gap is nearing completion. Exhaustion Gaps do not indicate whether the trend will reverse, they only call for a halt in the price movement.

   

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Technical Analysis: Price Gap

A gap is an area on a price chart in which there were no trades. It is easy to see gaps if you take candle stick charts. Let us try to understand gaps in another way. The fluctuations in stock prices are coherent in nature. That means that the price rises or falls gradually.  Thus, in rising scrip, if on one day the low was Rs 100 and the high was Rs 135, on the next day the low would be Rs 130 and the high Rs 140. Here, the low for the next day falls within the high-low range of the previous day. But suppose for the second day, the low was Rs 145 and the high Rs 150. Then, the low for the next day has fallen above the previous day High-Low range, or it was higher than the previous day’s high. So, when one draws bar charts showing High-Lows every day, there would be a discontinuity, termed as a ‘Gap’ in technical theory. An interesting feature of Price gaps is that it gets filled within a short amount of time. That is, the price would come back to fill the price gap of Rs 140 – Rs145, where there was no trade in the previous days.
In simple terms-a gap occurs when the current bar opens above the high or below the low of the previous bar. On a price chart, a space appears between the bars indicating the gap.




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Share Market Timings

Trading on the Indian equities segment takes place on all weekdays. There is No trading on Saturday, Sunday and Published Indian Stock Market Holidays declared by the Indian Stock Exchange in advance.

• The Market Opens at: 09:15 hours and Closes at: 15:30 hours
• Pre open trade session will be from 09:00 ~ 09:15 hours

Pre-open trade session is a 15 minute trade session from 9:00AM to 9:15AM on the 50 stocks of NIFTY index .
Only 50 stocks of the NIFTY index can be traded during this time on both NSE and BSE. Normal trading for all other stocks will start at 9:15AM till 3:30PM.

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Why Invest in Stock Market?

Stock markets is the only place where you can start creating wealth with a little money. All it requires is a bit of discipline, average intelligence and good temperament. Any other form of investments like real estate, gold are not strictly regulated like stocks and they may also require substantial capital investment. Although in reality people have made more money by investing in assets like real estate and the stock market still remains infamous for destroying common man’s wealth. People with bad temperament and emotional attachment generally fail in stock markets.
The reason for this is that, profitable investing in stock requires proper financial knowledge and a cool mental attitude.So choosing right Stocks is most important. There will be many choices available & it is not an easy task to select few out of them. Depending on the type and nature of investment you choose, there are varying degrees of risk associated with it. And risk is part and parcel of all type of investments and success of any investment you’ve made depends on how well you have managed the risk part of it.

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Shares Valuation

• Whether you do simple valuation process or very complicated methods, remember that value is a relative measure. What you’re trying to find is a bargain. Opportunity to buy shares at a bargain generally arises when something is out of favor.
• Always look for moderately undervalued shares rather than trying to find out grossly undervalued shares. If a share is grossly undervalued, it means that there is something terribly wrong with that company.
• You should be able to justify why you bought a share and before buying, make sure you know what would make you sell the stock.
• Never compare your decisions with others. If you are ready to buy a stock at a particular rate for a reason, there’s someone equally ready to sell that stock for some other reason. So, it’s natural; for others to think contrary to your views.

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Invest in Mutual Fund

Mutual Fund can be defined as an investment company that acquires funds from investors, and then invests the money in a diversified portfolio of investment securities. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. When you invest in a mutual fund, you are buying shares of the mutual fund and become a shareholder of the fund. Each scheme of a mutual fund can have different character and objectives. Mutual funds issue units to the investors, which represent an equitable right in the assets of the mutual fund.

If you do not want to go in for a risky venture and have security for the amount invested. You would want to maximize your returns on investment. or if you may not have the time or knowledge to actively manage your money. In this case, you would want a professionally managed firm to look after your investment needs and spend in profitable avenues. Mutual funds offer a safer way to reach your goals.They are a convenient and cost effective method of obtaining diversification and professional management. They generally buy and sell securities in volume, which allows investors to benefit from lower trading, management and research costs. Fund performance is subject to frequent reviews by various publications and rating agencies, making it possible for investors to conduct direct comparisons between funds.

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Large Cap Stocks

Stocks of the largest companies in the market such as Tata, Reliance, ICICI are classified as large-cap stocks. Being established enterprises, they have at their disposal large reserves of cash to exploit new business opportunities. The sheer volume of large-cap stocks does not let them grow as rapidly as smaller capitalized companies and the smaller stocks tend to outperform them over time. Investors, however gain the advantages of reaping relatively higher dividends compared to small- and mid-cap stocks while also ensuring the long-term preservation of their capital.

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Mid-Cap Stocks

Mid-cap stocks are typically stocks of medium-sized companies. These are stocks of well-known companies, recognized as seasoned players in the market. They offer you the double advantages of acquiring stocks with good growth potential as well as the stability of a larger company. Generally companies that have a market Capitalization in the range of 250-4000 crores are mid cap stocks

Mid-cap stocks also include companies that show steady growth backed by a good track record. They are like blue-chip stocks (which are large-cap stocks) but lack the size of those companies. These stocks tend to grow well over the long term.

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Direction of Trend in Market

The fastest way to make money in the market and that too in most risk free way is to identify a change of trend in the market as early as possible. Take your position, ride the trend and close your position shortly after the trend reverses.

Any market professional will tell you that it is impossible to buy at the lows and sell at the highs or sell at the highs and buy at the lows consistently. But that's the fun part, you always need to be alert and aware.

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Primary and Secondary Market

Primary Market: Primary Market is the means by which companies float shares to the general public in an Initial Public Offering to raise capital. An Issuer/Company enters the Primary markets to raise capital. They issues new securities in Exchange for cash from an investor. If the Issuer is selling securities for the first time, these are referred to as Initial Public Offers (IPO's).

Secondary Markets: Once new securities have been sold in the Primary Market, an efficient mechanism must exist for their resale, if investors are to view securities as attractive opportunities. Secondary Market transactions are referred to those transactions where one investor buys shares from another investor at the prevailing market price or at whatever price both the buyer and seller agree upon. The Secondary Market or the Stock Exchanges are regulated by the regulatory authority. In India, the Secondary and Primary Markets are governed by the Security and Exchange Board of India (SEBI).

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Advantages of Swing Trading

1. Swing Trading combines the best of two worlds -- the slower pace of investing and the increased potential gains of day trading.
    
2. Swing Trading works well for part-time traders — especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesn't require that type of focus and dedication.
    
3. While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride "swings" in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.
    
4. With day trading, the only person getting rich is the broker. "Swing traders go for the meat of the move while a day trader just gets scraps." Furthermore, to swing trade, you don't need sophisticated computer hook-ups or lightning quick execution services and you don't have to play extremely volatile stocks.

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Swing Trading

• The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
   
• Strongly trending stocks often make a quick move after completing its correction which one can profit from.
   
• One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
   
• In brief a Swing Trader's goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques. 

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What is Swing Trading..??

To be honest, I was baffled too when I first heard the term. Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend. Swing trading combines the best of two worlds - the slower pace of investing and the increased potential gains of day trading. Swing traders hold stocks for days or weeks playing the general upward or downward trends.

Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves. By rolling your money over rapidly through short term gains you can quickly build up your equity.

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