ASI - Upwards heading, but very slow.......

Market witnessed higher closes for the last 8 strait Days. Registering an increase of 104 points, with an average of  13 points per day. This is not at all aggressive. One sigh of relief is that many heavy weights have started moving up, but follows relatively the same pace as of the Market. However it is encouraging to note the uptrend. If the market is going to move up further, then it has to test the downward sloping trend line drawn from the highs in 2016, which suggests that the ASI must pass 6560 points to break out of the downward slope and give some bullish hopes. The next barrier of course will be the previous high of 6600 points and thereafter the high of 6700 which occurred after the fall in 2016. At 59 points the RSI is also in the medium range breaking above the half way mark of 50 points, and has a breathing space of rising to test 70 points. The uptrend had also help the MACD to move above the signal line, thus confluencing many indicators which augurs well for the Short term upside of the market.

VONE - Trade Opportunity

Buy - 21.00 - 21.50
Sell - 23.00 and above
Stop - 20.00

Please Trade with the Stop Loss. Else do not trade.

date : 29.09.2016

AAIC - Trade Opportunity

Buy @ 22.10
Sell @ 24.00 and above
Stop @ 21.00

Support and Resitance......Brothers of Demand and Supply

If you are in the Stock market you'd know that you need to always keep learning. One of the important aspects to understand when learning is that the OLD BASICS will always be the BASICS in the present or the future..

One such basic theories are called the DEMAND AND SUPPLY. As we know when the Demand is there the Prices go up, and when the Supply is there the Prices come down. In other wards DEMAND is where the Buyers desire to Buy, Whilst the SUPPLY is where the Sellers are willing to Sell.

It is the same with Stocks as well. But by just looking at the market it is not very easy to understand how this theory would benefit the Investor. The most often habit is to check with others, whether the selling or buying is over. Unfortunately that may not be reliable.

Thanks to TECHNICAL ANALYSIS you can now know where the Demand or the Supply is available. This is why Technicians should master the SUPPORT and RESISTANCE LEVELS.
In simple language Support  is where there is more Buying, Whilst Resistance is where there is more Selling.
As such when a stock falls to the Support area the DEMAND builds and the Prices move up only to find Resistance to bring SUPPLIERS in to rapid selling. Therefore a trader who wants to follow Technicals must bare in mind that  support and resistance areas are where you find the DEMAND and SUPPLY.
Understanding these areas are not easy but NOT HARD. You need to practice and develop the confidence levels in the journey of identifying these areas.

 

During the latter part of 2015 GRAN.N.0000 had tried to test the range of 94.50 to 100.00 but had failed. This can be seen as the Present Supply force as many Sellers will be willing to sell at this area, whilst the Demand is visible between 87.50 and 92.50, where the buyers appear to be desiring to Buy within this Range. As and when the Buyers succeed to withstand the FORCE OF SUPPLY within 94.50-100.00 then this range will be the desiring range of the Buyers, and the PRICE will move up further testing the SUPPLY Range above.  

Figuring the Demand and Supply Ranges are critical for every one who intend to Invest OR Trade in the Stock Market.

Is this the end of the Pull back on the ASI

21.09.2016 -

After many days of lower closes, ASI closed somewhat positively today. Increase of 21.67 points with considerable volumes augurs well for the overall Market. Many of the major Counters vis a vis JKH, COMB,NDB and the likes paved the way for the ASI to close this way. Does it mean that the losing streak is over? Are we stepping into a TREND EXTENSION? May be it is too early to say so, But ONE CATALYST  to change the GAME will certainly be the resumption of the PORT CITY PROJECT for which the blessings of the GOSL was given to resume in OCTOBER. OCTOBER is next month. Next Month will start in 2 weeks from now. Amidst the higher closes today, we saw the main counter to benefit from the aforesaid closing higher amongst them. That is AEL. Any smell of the Port City can spell well for them.

As for the ASI the 6420 area is a crucial support point, and the close at 6451 today is positive. A strong momentum can take it up to test 6480 - 6500 area in the short term. The most important factor at present is that the market is holding on to the uptrend at the moment. Stocks such as AEL, TKYO, and KAPI will take the lead in the Construction Sector, whilst the Banks, Poultry and Manufacturing stocks too will be gathering pace in this trend extension.

MACD and RSI together - How to profit from them

14th of September 2016 -

As I touched on the RSI and MACD in my earlier posts, I thought it may be useful for me to give you a few examples of  how to make use of them in order to Buy and Sell a Stock.
Before going to the examples please read the following GUIDELINES and RULES:

GUIDELINES -
*** MACD works only if there is a TREND, if the Stock is moving sideways (Consolidation) this will not    be useful.

*** RSI may be useful when a Stock is consolidating, and can help the MACD during a TREND.

*** There are no HOLY GRAIL 100% ACCURATE INDICATORS in the entire world, as such YOU NEED TO KNOW WHERE TO STOP YOUR LOSS. This is a must.

RULES -
*** You Buy when the RSI CROSSES OVER 50 and POINTING UP + MACD LINE CROSSES ABOVE THE SIGNAL LINE.

*** You Sell when the RSI  moves over 70 points and start pointing down OR the MACD line crosses below the Signal line, which ever happens first.

**** You Stop by selling at the previous support level.

*** YOU MUST NEVER EVER BREAK THESE RULES. ***

Now let's take a look at CFVF.N.0000 Daily Chart

As you can see the there had been 3 complete trades in CFVF from March 2016 to date. In the 1st trade it was the MACD that crossed over on the 10th March, then on  the 16th the RSI crossed over 50 points, at which point it was bought at 17.20. Then the RSI edged over 70 points and retraced down on the 15th of April, thus it was sold on that date at 25.40, giving an 8.20 profit. In this trade the stop was at the previous support of 13.80. The next trade was when the MACD crossed over on the 13th June, thereafter the RSI crossed over 50 points on the 8th of July, at which the Buy was made at 20.00. The RSI edged a little over 70 and retraced on the 27th July, triggering a sell at 24.40, giving a return of 4.40, whilst the stop was at 18.50. The 3rd and final trade was executed when the RSI crossed over 50 points on the 31st of August, MACD cross over following thereafter on the same day making the Buy at 22.00 with a stop at 21.50. the Sell was made at 32.30 on the 8th of Sept as the RSI retraced after crossing over 80 points. The return was 10.30.

2 important things to note here is that historically the RSI has moved over 80 points in CFVF, therefore when you Buy to sell in the rally there is a big chance of getting a decent return. The next thing is that when you Buy with the RSI crossing over 50 points, you are avoiding the risk of buying at sideway movements, and Buy within a trend on many occasions. 
                               

       

MACD......Another Popular Indicator in the Colombo Bourse

Indicators and Oscillators have an important relationship with Technicians World over. One of the most talked about and always used Indicators by millions of Traders is called the MACD indicator. If you break down the make up of this indicator you will notice that it is helping you to BUY and SELL an instrument, based on Exponential Moving Averages.
When Gerald Appel invented this indicator, he used the 26 day EMA, 12 day EMA and the 9 day EMA. What he did was that the 26 EMA was subtracted from the 12 EMA and the result was called the MACD line. The 9 EMA was positioned to be the signal line. Hence in this indicator you have the MACD line and the Signal line.
For Technicians and who ever interested in the MACD, only need to understand the movements of these 2 lines. The time to Buy will be when the MACD line rises above the Signal line, whilst you sell when the MACD falls below the Signal line. If you understand this that's all you need.

Apart from the Lines, we also monitor the movements of the lines through the MACD histogram in the same Chart. Histograms are little vertical or Straight Bars that rises or decline above or below a horizontal zero line.

When the MACD line rises above the Signal line the histogram bars move over zero until the MACD line falls below the Signal line, at which point the histogram bars fall below the Zero line. As the MACD line move and expand above or below the Signal Line, Histogram Bars will grow larger. When the MACD line move closer to the Signal line then the Histogram Bars become smaller. This is given in the chart below.

 Another advantage in the histogram is the expansion or the narrowing happens during the interim period. This is useful to find the higher lows and lower highs within the trend both up or down. The Chart below shows how the histogram start rising before the MACD line rises above the Zero line, helping the trader to understand the reversal with higher low closes or lower high closes.

Ceylon and Foreign Trades Plc - 17.4% target ..... .5.90 must hold

CFT.N.0000 is trending up since the lowest low of 4.70 on the 9th of March 2016. Since April it had been trading side ways along the 200 EMA within a low of 5.40 and a high of 6.60, finally breaking out and moving upto find resistance at 7.00. It is once again going through a consolidation with a low at 5.90 and a high at 7.00. There is a trading opportunity available on this counter at the present close of 6.50, with a target of 7.80. A return of 17.8%. However it is important to note that a Stop loss at 5.90 is very important, to follow this trade.

What is Consolidation - Is it GOOD or BAD

Stock markets will move ONLY  in 3 directions,UP,DOWN,and SIDE WAYS. In technicals we describe them as Trending, Reversal and Consolidation. Hence a consolidation is a side way movement. The beauty of Technical Analysis is that you can feel and expect consolidations to take place at any stage of the movement.
Therefore we know that consolidations are essential to the overall trend or reversal.
When a stock is moving up which is called Trending, we know that the buyers are willing to pay increased prices expecting to sell at a profit. But as we know the buyers can't just keep on paying higher, as such the capacity of paying higher by them tend to reduce, at that point the sellers will have to come down in price to sell. Just because the sellers are coming down to sell doesn't mean that the stock is now going to reverse and complete the up trend it is presently enjoying. In an uptrend the message that's given by the buyers is that they are not willing to just pay up, instead they are now wanting to absorb the selling at a range. This range is the consolidation phase of an up trend.
As an example let's take the present trend of Tokyo Cement Plc, in the chart given below:

On the 31st of  May 2016, TKYO.N.0000 opened at 38.80 and closed at 39.80. There onwards it went upto 44.50, and moved sideways between 44.50 and 39.50. Thereafter it continued it's ascent gradually to hit a high of 58.50 on the 26th of August 2016. The Trend paused there and is moving sideways between 58.50 and 55.50. Based on the present trend I believe that it will break above 58.50 and continue it's trending phase. If we see it closing above 57.40, then there is a very good chance of it breaking above the 58.50 high as well.

The Good side of a consolidation is that in the side way  movement the buyers are prepared to absorb the selling until such time the selling drys down. At which point the trend will resume.

But the Bad side of it is that it is very difficult to trade in the side way movement unless you are confident and experienced. Which can only be improved with patient and intelligent trial and errors. In order to master it you need to understand the support and resistant areas and closely follow the oscillator indicators such as RSI and Stochastics.

Present behaviour of several stocks suggest that they have the potential of   continuing their uptrend, and they are given below:

AEL - will consolidate between 26.50 and 25.50.
GRAN - will consolidate between 95 and 91.
CFT - will consolidate between 6.60 and 6.40.
BLUE - will consolidate between 2.20 and 1.90
PCHH - will consolidate between 1.50 and 2.00
COMB - will consolidate between 130 and 140
JKH - will consolidate between 145 and 150.

AEL - Can hit 27.50 to 28.00. Support between 25.50 and 26.50

Access Engineering Plc is the biggest Engineering/Construction Company quoted in the market. The resistance of the previous rally was around 26.90 and 27.00, which was tested in the last few days. During this trend the RSI hit a high of 83 points when the price hit 26.50, thereafter a high was established at 27.10, but the RSI did not move higher, which is technically a movement in the opposite directions, which is known as a negative divergence. This bearish signal could pave the way for an opportunity to those who intend getting into the counter. But The ideal range will be between 25.50 and 26.50, ideally close to 25.50 area. Given the positive signals we see in the Construction Sector, the idea of getting on board would not be a bad idea at all. A strategy of Averaging Down at 26.50 and covering down to 25.50 can be one approach, as the Sri Lankan Market doesn't allow short selling like Other markets. Another approach could be by allowing the RSI to retrace and getting in on the higher low, after allowing the RSI to close higher.