The Hindu Business Line : Strategy

In many cases, the share price of the company starts falling after I buy the stock and vice versa when I sell. Is it a phenomenon that is peculiar to me or is it a more common occurrence? E. Raju

You can rest assured that you are not the only person experiencing such a problem. Every other investor in the stock market would have definitely experienced this kind of a situation. This problem may arise either due to incorrect timing of buying stocks or an error in judging the trend of a stock. Not all stocks move in a similar fashion. At any point in time, there would be a set of stocks that would be moving up and another that underperforms.

If you get both the choice of stocks and the timing of purchase right, you may not get to see this kind of a phenomenon too often.

Though it is easier said than done, identifying stocks that are in a trending mode and getting the timing of the entry right is not an easy task.

There would always be occasions for any investor where either the timing of entry or the identification of the trend would go awry.

If the error pertains to incorrect timing in the right kind of stocks, investors would always get to see their investment delivering returns sooner than later.

On the other hand, if the error pertains to wrong selection of stocks, investors would find themselves being saddled with underperforming stocks for a relatively longer time stretch. To tide over such situations, it would always be advisable to have a cut-off point in terms of time and a stop loss for any investment.

It would better to exit from the stock if it fails to deliver within the cut-off period or if the stop loss is breached. If you are convinced about the fundamentals of a company, it would be advisable to remain invested as long as the stop loss is not triggered.

There will always be a fair chance that the stock could start delivering returns at a later date.

I bought Hyderabad Industries at Rs 495 and Gateway Distriparks at Rs 261. My assessment is that both the stocks are tracing out an "ascending triangle" pattern.

I did not have any charting facility and these observations are made by just watching the price movement. Syamalam Madhusudan

We would urge investors who are serious about pursuing technical analysis to purchase a computer and a good charting software.

These are basic requirements that would make things much simpler and also foster the understanding of the concepts of technical analysis.

As far as Hyderabad Industries is considered, it appears that the stock is tracing out a symmetrical triangle pattern.

This view would be invalidated on a close above Rs 515. A close below Rs 440 would confirm this pattern and would result in a drop to Rs 405-410.

In the case of Gateway Distriparks, there appears to be a case for an "ascending triangle" pattern taking shape. This pattern would get confirmed on a close below Rs 240. In such an event, the stock could slide further to Rs 215-220.

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