Friday, September 10, 2010

What it means: Increase in volume in the way above 30d Ma graph, VRX vs JKS

This is a important point one has to make a note. After a stock has double and it the stock is continuing the trend there are many volume changes that can happen. One should not hastily take an decision not to hold the equity if the graph is above the 30 d MA or may be with in 5 % below it. There are normal corrections and one should not sell the stock in this situation.

As did happen to me on the purchase of VRX at 42, the stock was still above the 30d MA. But it jump to 45 in a couple of day with large volume. It also slided back to the 41-42 range bordering the 30 d MA. Hastily I sold it off with the fear that the trend has come to an end. But large volume and sell off above or resulting in bordering 30 d MA should be taken as a normal correction on the path. Though large volume
is sometimes an indicator that people are selling and booking profits, one has to be cautious. Actually at these dip points and bordering the 30 d MA are the best stock accumulate the stock.

Then VRX moved to 59 dollars. I got into it again at 59 and now it is at 65. I lost 50 % move because of my mistake.

Now a similar situation has arisen for JKS. There is high volume sell off and book profit situation. The stock is well over its 30d MA. The stock is at 24 after the sell off. Declined 20 percent from 29.
The 30d MA is at 22. I need to give room for this stock to wobble a little bit. At least 21 something.
After the sell off is over the stock can either rise or decline further. Usually good stocks with good rates go higher after the sell off.
The trick is to accumulate such stock during panic and sell off. But one has to learn to beat the gut reactions to sell off and book profits too soon. Of course selling to cut losses is the first thing to do if the stock heads below the 30 d MA. But if the stock is bordering then it means it will definitely rise or forming another base for another rise even with bleak volume.

It is interesting to observe the mass behavior in uptrend stocks. Lets see what happens in this case JKS.
The fundamentals seem to strong for JKS.

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