Sudden increase in volume with a long bullish candlestick means?

Technical Analysis
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Please check the attached image. I want to know in such a situation what should I do? Should I go long or are such stocks operator driven?

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Which stock is this?

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I will never get the fascination with trading in junk stocks like Walchandnagar, when there are so many other quality mid caps that are giving great trading opportunity.

Just because technically this one is looking like a price-volume breakout doesn’t mean that you should trade this. Personally, I never go long on companies that are loss making and/or have huge promoters pledges - this one happens to be 98% pledged…BIG red flag for me.

I advise checking such stocks out on screener for fundamentals and staying away from those that look fishy
https://www.screener.in/company/WALCHANNAG/

Hope this helps…

Cheers!
~Neha

From in.screener.com:

Cons:

  • Stock is trading at 35.63 times its book value
  • Company has low interest coverage ratio.
  • The company has delivered a poor growth of -16.11% over past five years.
  • Company has a low return on equity of -35.03% for last 3 years.
  • Contingent liabilities of Rs.291.10 Cr.
  • Promoters have pledged 98.15% of their holding
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@Neha_Raghuraman, pretty cool :ok_hand:

Wait, but this still doesn’t mean the stock won’t go up, does it?

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Thanks for the great explanation

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never consider this an opportunity , but it is a good stock to analyse
because after a good run rally or profit booking both can come.
trade only after full analysis

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Madam Neha, can u guide me how did u get to know the stock’s name? Its not mentioned on the chart?

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i got lucky I guess… it has become sort of a hobby to look at different charts all day so I kinda grew familiarity with lot of them. When I saw the screenshot the price/chart look familiar to that of Walchandnagars’s, that’a all .

Cheers!
Neha

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True, it can still go up. The real question, however, is whether it’s worth going long on. I like to see all the key criteria on my checklist checked off before taking a long swing trade position (technical, fundamental, news triggers, upcoming earnings etc.). This one would have passed on the technicals but not on the other criteria therefore I would have skipped.

It’s like picking a good school for my kid. Proximity to my house is a big plus but I won’t compromise on quality of education and other factors just because of a school is close to my house.

Cheers!
Neha

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Why I specifically asked this is because I’ve made good money in a bad stock by buying at the right time and vice-versa.

For ex,

Jaypee infra

Picked up some qty at 14.60 levels and some at 16.40. Currently, trading at 23.

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It’s a junk grade stock but it made me money. I knew where my stoploss exit level was in case the trade went against me.

Should I have not taken this trade?

On the other hand, I’ve picked up some decent mid-cap stocks which are now trading below my buy price even when Nifty is going crazy.

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Hi Srinivas,

I am very glad you are way up in profits in this trade. Congrats !

Now coming to whether you should have taken the trade or not. I think a professional trader trades setups and not luck. We can get lucky every once in a while but that should not be our main strategy because that luck runs out in the long run. JP infra ran up on positive media news and I am sure you were not aware of that when you took the trade. So, just imagine for a second that the news would not have come. What do you think a penny stock stock like JP (with poor fundamentals and court battles) was headed? It certainly was not going to rally like this.

When I am going to take a trade, I like to be able to explain to people around me the reason (s) I think the trade would work (e.g. strong stock that fell on some non-fundamental reason or a chart pattern that suggests positive breakout etc.) and why the probability of that happening is at least greater than 50-50. Otherwise, my neighbour (who is a librarian, by the way) has just the same probability of making money as I do and that’s not a great reflection on my ability as a trader.:grinning:

I made some decent money on Adani Ent today but I was not very happy with it because my entry was too risky (bought it right when it broke out; didn’t wait for consolidation). On the other hand, I made much less on my short position in RCOM (because I came out too soon) but I am still more satisfied with that trade because I managed my risk very well.

So, I would rather judge my trading skills on how I disciplined I was, how I prudently I used my strategies and how well I managed risk rather than how much money I made because money clouds our ability to see/acknowledge the mistakes we made and hence we are more prone to making them in future…

Wow…that was a loooong answer.

Again, my 2 cents…I am sure you were managing the risk carefully as well with the SL . I am very happy that you were able to make money on JP! Congratulations once again…great start to 2018 :tada::tada::confetti_ball::confetti_ball:

Cheers!
~Neha

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You have a valid point to make. I agree !
Same happened with Rcom , it tripled from lower levels. If somebody had invested his lifetime’s earnings in Rcom for that 1 week, he would have made 200% magical returns on investment.

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