For long term equity investments more than 6 months which timeframe is best to take a look at the chart.?
This is the 10 year chart of Escorts ltd.
There have been several opportunities here to make money in equity delivery. After the up-run in 2009-2010, it took 5 years for Escorts to see that 2010 high again. So, on what day would you put your money into Escorts?
You will get definitive answers if you follow accumulation-distribution patterns as well as breakout patterns.
Look for the accumulation of a stock near a strong support level ( you can arrive at this level by looking at the stock's behaviour at this level during the previous years.)
One often buys the lows in this accumulation range whenever the opportunity arises. We can see that after an initial breakout in the 2nd half of 2013, it took 3 years for Escorts to make another breakout.
But the clarity in these 3 years is that a new accumulation range was formed.
If the holding capacity allows you, then you see that a massive breakout has occurred in 2016, what one would call a multibagger breakout.
Where you decide to take profits depends on your target, but the general principle is you buy high and sell higher during a breakout. It would be safe to say that you can still continue partially holding your positionuntil you see a definite reversal pattern.
(Continuous gap up openings with each day ending at a low lower that the previous close is such an indication of a reversal.)
What we arrive from these general observations is that one cannot define an ideal time period of a chart for observation to take a delivery position. Although a periodic study of the chart, say every 3 months, will give you more information
on how you can make an informed investment.
The most popular chart period for reference purposes is the 52 week chart or the 1 year chart. Here, you will definitely find accumulation/distribution and breakout patterns which will surely add value to your investment strategy.
This is the 10 year chart of TVS motors ltd.
One can easily observe that although Escorts and TVS have moved up, the majority of movement in both these stocks have happened at different times.
In TVS, we see an upward reversal and breakout pattern in 2014 and the entire movement happened in the same year. But the same principle applied here as well.
So it would be ideal to follow the general investment principle rather than a fixed timeline of observation.
Please note that Escorts and TVS motors are undervalued high quality stocks which have resulted in the stock movement. Quality is the key here.
So the right stock is decisive for the way your investment pans out. (Following a watchlist of high quality stocks and studying the chart patterns periodically would be effective before an investment is made.)