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Monday, October 29, 2007

Short Term Tips - Buy Shriram Transport Finance



Buy Shriram Transport Finance at CMP of Rs. 262

Target-1 of 285 and Target-2 of 294
Stoploss of 252

Duration - 7 days

The stock is currently trading above it's 5 and 10 Day EMA. The short term average is well above the long term average and the stock seems to be in a long term bullishness. Short term traders can expect a 10 to 12% return in a week's time.

Posted by Srivatsan at 7:37 PM 0 comments

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Sunday, October 28, 2007

Short Term Tips - Buy Hotel Leela


Buy Hotel Leela Venture at CMP of Rs. 47.40

Target-1 of 52 and Target-2 of 56
Stoploss-1 of 45.80 and Stoploss-2 of 44.20

Duration < 1 Month

The stock recently crossed it's 20 Day EMA of 44.40 and 50 Day EMA of 45.60 The current volume trend also looks good. The stock is trading at an average volume of 1.7 million shares in NSE as compared to it's 3 month average volume of 1.8 million shares

Posted by Srivatsan at 6:09 PM 0 comments

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Short Term Tips - Tamilnadu Newsprint

TNPL 50 Days EMA Chart
Buy Tamilnadu Newsprint (TNPL) at CMP of 99.40
Target-1 of 120 and Target-2 of 132.
Stoploss-1 of 98.05 and Stopploss-2 96.45

Duration - 2 months

Concern - Trading Volume has been neutral. But the stock has seen consolidation around 99 and a breakout here can take it to higher levels.

Analysis based on 50 and 100 Exponential MA.

Posted by Srivatsan at 6:26 AM 0 comments

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Saturday, October 27, 2007

IPO - Varun Industries - Apply for Listing gains

There has been lot of Buzz currently going on around this IPO. Brokerage firms like K R Choksey, Prabhudas Liladher, SP Tulasian and many more are giving a buy call to this IPO.

Respecting all the leading brokerages/Individual calls here is a non-biased review of this company to protect small investors interest.

Seeing all the Apply calls I had a look at the financial statements of Varun Industries. OK now Is it a good company for Investment? No. Not at all until we have a glimpse of their coming few quarters results.

So why am I wasting time writing this note?. The company Issue price seems to have a margin of discount on an expanded equity base. Even though risky there seems to be a potential of around 12-15% return on listing.

Now About the company

Varun Industries is one of the leading manufacturer and exporter of stainless steel, kitchenware, and house ware items. Currently 97.27% of it's income comes from exports. Oh exports, the current Buzz word for Indian companies.

Then why not a long term Investment?

The company operates in a pretty thin margin of 3 to 4%. The prices of raw material, Stainless Steel sheet which is the major input for varun Industries is seen shooting up in the recent past. This if goes up further can even more hamper the companies Operating margin.
The company receives it's major revenue in US Dollars and the recent appreciation of rupee can adversely effect it's Operating margin.

The companies current short term debt stands at around 33.6 crores which is more than 3 times it's current reserves of 9.6 crores. Even the Cash flow of the company does not look attractive to me.

Now on it's valuation front

At the current Issue price of Rs. 60/- the stock trades at around 6.77 times it's FY07 EPS of 8.85 after taking into consideration it's expanded equity base. Based on the first 4 months FY08 results the company saw a increase in net profit growth of around 18%. The company may end up with a EPS of 10 in FY08, expecting it performance to be the same as first 4 months. With the current valuation the company can provide a listing gain of around 12 to 15%.

My advise is to exit the stock on listing and wait for it's coming few quarters to take a Buy call on this stock.

Disclaimer: Please do your analysis before taking a call on this stock. The listing gains may vary depending on the volatility of the market and also the stock can list below it's Issue price.

Posted by Srivatsan at 4:48 PM 0 comments

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Understanding Short Term Trading

Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.

Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.

Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.

Types of Moving Averages

1) Simple Moving Average (SMA)

SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.

2) Exponential Moving Average (EMA)

EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.

The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.

A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.

In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.

Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.

Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.