The Hindu Business Line : Strategy

Last week you advised investors who are serious about pursuing technical analysis to buy a computer as well as good charting software. As an investor I am really interested to understand the concepts as well as to gain some knowledge about technical analysis. Please also tell me about software that will identify the right stock at the right time to enter or exit. C.S.Sanju, Rajat, S.Palanichamy, Shridhar, G. Sathyakumar. P.R.Ramesh

There are a few points that we would like to highlight about our suggestion to buy software.

The software we recommend to buy would be one that would help you in drawing technical charts and help hasten the process of learning technical analysis concepts. We do not recommend investors/readers to buy software that throws up "buy" or "sell" signals.

Those who are serious about learning technical analysis may buy the software called "Metastock" developed by Equis International.

Details of the product and local selling agents are available on their Web site: www.equis.com. Though there is software other than "Metastock", we feel this one would cater to the requirements of a beginner as well as a more experienced person in the stock market.

For those interested in Elliott Wave, software such as Advanced Get, Dynamic Traders or Winwaves would be helpful.

Though most of the software, including "Metastock", would have quite a few in-built trading systems that would throw up "buy" and `sell" signals based on a set of parameters, we urge investors to stay clear of those systems unless they have back-tested it and are comfortable using it.

As always, never ever take any "buy" or "sell" signal without a stop loss in place. The idea behind suggesting to buy software is to make investors learn the tools and concepts of technical analysis and enable them to take trading decisions on their own.

We would like to make it clear that we are not advocating investors/readers to buy or use any software that would come up with a "buy" or "sell" signals based on any trading system.

Kindly let me have your views on Ind Swift Labs bought at Rs 140. Subash, S. Haja Najeemudeen, Sundar, Ajay Malhotra, A.Jairath, Kurapati Harihara

Ind Swift Labs (Rs 115): The outlook for the stock was featured recently (edition dated Feburary 12) under the "Query Corner" section. The share price has breached the stop-loss of Rs 130 mentioned earlier. As is normally the case, the downtrend gained momentum on the breach of the stop-loss. We would like to caution readers that a few of our recommendations are bound to go wrong and it is unavoidable.

It is in such instances that the concept of stop-loss would assume importance.

Despite having emphasized the importance of stop loss on numerous occasions, we find investors not quite realising its value. We believed that the stock would find support at Rs 130-135 and there could be a subsequent bounce back. The breach of the stop-loss of Rs 130 has effectively negated that view.

It would be advisable to look for opportunities to exit the stock and wait for fresh "buy" signal to re-enter.

The stock is in a major downtrend and it would be safer to wait for confirmation of the trend reversal before committing fresh funds.

A weekly close above Rs 135 would be an early sign of emergence of positive trend. Till such time, we would urge investors to reduce exposures or at least have a stop-loss at Rs 97. Use a trailing stop-loss in the event of a further upward move in the ensuing weeks.

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