Reblog: MACD – How to use the MACD correctly


The MACD is a momentum and trend-following indicator that is based on the information of moving averages and, thus, ideal to act as an additional momentum tool and momentum filter for your trading. In this article, we will explain what the MACD does, how it helps you analyze price and how to use it in your own trading.

First, let’s take a look at the individual components of the MACD indicator:

MACD Line: The MACD line is the heart of the indicator and it’s the difference between the 12-period EMA and the 26 period EMA. This means that the MACD line is basically a complete moving average crossover system in just one line.

Signal Line: The Signal line is the 9-period EMA of MACD Line

MACD Histogram: MACD Line – Signal Line

In this article, we focus on the MACD and the signal line in particular. The histogram is derived from the other two components of the MACD and, thus, don’t add as much explanatory value to overall MACD trading.

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Sensex ends flat on Friday after hitting record high on GST rates, up 1% for the week


Benchmark indices scuttled between gains and losses to finally settle the day marginally higher as 2-day GST Council meet ends where rates for various goods and services were decided.

The government today decided that most of the services would be taxed at the rate of 18% under the GST regime. Rates for more than 1,200 items under the GST were announced with products like hair oil, soaps and toothpaste down to 18% from 22-24%.

Earlier in the day, S&P BSE Sensex rose as much as 278 points to reach a fresh high of 30,712, surpassing its previous milestone of 30,691 hit on May 17 as FMCG surged on GST boost. The index has hit a new high for the fourth time in five sessions.

The S&P BSE Sensex settled at 30,465, up 30 points, while the broader Nifty50 ended at 9,427, down 1 point.

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Reblog: 10 Things a Trader has to Beat


To be a profitable trader you must overcome these ten things:

  1. You must beat the market benchmark you are competing against or you might was well just buy and hold that index.
  2. You must beat your emotions by following a trading plan.
  3. You must beat your ego by taking losses early when you are proven wrong.
  4. You must beat your greed by managing your position sizing to limit your risk exposure.
  5. You must beat your fears by letting a winning trade run when there is no reason to exit.
  6. You must beat your desire to predict the future by reacting to what price action is actually happening.
  7. You must beat the trader on the other side of your trade.
  8. You have to make enough money to beat your commission costs.
  9. You must not let the market beat you up with too many losses and make you quit.
  10. You must beat the naysayers who think active profitable trading is impossible.

The original post is authored by Steve at newtraderu.com and is available here.

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Reblog: Mean Reversion and the Bell Curve


The pressure to outperform all the time leads stock pickers to constantly seek mean reversion trades

Over a three-year time period, stock prices tend to mean revert. This has spawned numerous investment approaches that try to squeeze capital gains out of those reversions. Classic deep value investing, as popularised by Benjamin Graham at Columbia Business School, taught that you would succeed by buying 50-cent dollars and selling them when and if they reverted to the mean. The “Dogs of the Dow” strategy of buying the 10 highest-yielding Dow stocks was born out of mean reversion.

Over long time periods, common stock performance falls on a bell curve like the one listed below. Half the stocks outperform and half underperform. Among the poorest performers, some go to 0%, and 5% of common stocks do so poorly that they can ruin a concentrated stock portfolio. (1)

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Nifty ends on Friday at 9,400 ahead of inflation data, up 1% for the week


 

Benchmark indices ended lower with the Nifty settling at 9,400 as investors turned cautious ahead of inflation data and booked profits in recent outperformers.

 

Consumer price inflation (CPI) is expected to have eased to a three-month low of 3.49% in April from 3.81% the previous month, according to Reuters poll. The government will also unveil the new series of Index of Industrial Production (IIP) as well as Wholesale Price Index (WPI), with 2011-12 as the base year, later in the day.

 

Both Sensex and Nifty hit record highs of in the previous two sessions, and were up more than 1% for the week. This is a second consecutive week of gains for the indices.

 

The S&P BSE Sensex ended at 30,188, down 62 points, while the broader Nifty50 settled at 9,401, down 21 points.

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Reblog: YES, MUTUAL FUNDS CAN STAND OUT FROM THE HERD


Forbes Magazine, Dec. 19, 1994

At the typical stock-fund office, phalanxes of computer screens glow like the control room of a nuclear reactor. The portfolio manager is an intense young MBA. He can recite earnings estimates by rote for each of the 100 stocks in his billion-dollar fund. He’s a high-pressure guy, the atmosphere is electric with excitement, and the phones are always ringing. All this costs money, but the managers have to justify themselves. What are they for if not to trade in and out of stocks?

Yet all this striving does nothing for most fund investors. Although the industry has its good years, over long periods of time the average U.S. stock fund does worse than a market index. No wonder: Typical annual expenses run to 1.3% of assets.

George Mairs, 66, does things differently. Mairs & Power, Inc., founded by Mairs’ father in 1931, has nine employees and runs a total of $300 millon out of the old First National Bank Building in St. Paul, Minn. Nearly all that money is in separate accounts. Mairs & Power Growth Fund has $41 million in assets; a balanced mutual fund, Mairs & Power Income Fund, runs $13 million.

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Reblog: On outperformance


Some excerpts from my annual review to subscribers. Hope you will find it useful

Sources of outperformance

Superior performance versus the indices can usually be broken down into three buckets

  1. Informational edge – An investor can outperform the market by having access to superior information such ground level data, ongoing inputs from management etc.
  2. Analytical edge – This edge comes from having the same information, but analyzing it in a superior fashion via multiple mental models
  3. Behavioral edge – This edge comes from being rational and long term oriented.

I personally think our edge can come mainly from the behavioral and analytical factors. The Indian markets had some level of informational edge, but this edge is slowly reducing with wider availability of information and increasing levels of transparency.

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Sensex settles 267 points lower, Nifty below 9,300 on Friday as banking stocks dip



The benchmark indices settled lower on Friday as banking stocks dipped after the government notified the Banking Regulation (Amendment) Ordinance, 2017, while a drop in crude prices dragged down oil explorers such as ONGC and Oil India.

The S&P BSE Sensex ended at 29,858, down 267 points, while the broader Nifty50 closed at 9,285, down 75 points. The Nifty50 index reversed course seconds after hitting its fresh all-time high of 9,367 in early trade.

India VIX, essentially a fear gauge, closed the day at 11.98, rising over 5% from the previous close.

In the broader market, the S&P BSE Midcap and S&P BSE Smallcap indices settled 1% and 0.8% lower, respectively.

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Reblog: HUDCO IPO review


Housing & Urban Development Corp Ltd, popularly known as “HUDCO” that recently celebrated its 47th anniversary on 25th April 2017 and enjoying “Mini Ratna” status among PSUs is breaking the ice after a gap of 5 years (since April 2012) with a maiden IPO from a PSU. This wholly owned GoI Company is engaged in urban and rural housing as well as infrastructure project financing and has a track record of profit generation and dividend distribution since inception. It enjoys AAA rating for its debt plans from rating agencies like CARE, ICRA and IND Ra to have low cost debts.. Its housing finance loan is classified as social housing, residential real estate and retail finance (branded as Hudco Niwas). Under social housing Hudco is financing economically weaker sections/ lower income groups of the society.

For urban infrastructure finance, Hudco distributes loans relating to water supply, roads and transport (including railways and ports), power, SEZs, gas pipelines, oil terminals, telecom network, market complex, shopping centres, hotels, office buildings, sewerage, drainage, solid waste management etc.

As on 31st of December 2016 it had outstanding loan portfolio of around Rs. 36386 crore out of which around 30.86 per cent was for housing sector and the rest for infrastructure. 89.93 per cent of the total loan was to state governments and their agencies. It is enjoying the NIM of 4.2 per cent plus across the sector. On the said date its Gross NPAs were around 6.8 per cent and Net NPAs were around 1.51 per cent with a provision coverage ratio of 78.98 per cent. With this maiden IPO GoI is diluting 10.19 per cent by way of offer for sale of 204058747 equity share of Rs. 10 each in a price band of Rs. 56-60 per share to mobilize Rs. 1142.73 – 1224.35 crore (on the basis of lower and upper price bands). Issue opens for subscription on 08.05.2017 and will close on 11.05.2017. Minimum application is to be made for 200 shares and in multiples thereon, thereafter. Retail investors and eligible employees will get Rs. 2 discount on the final offer price. Post issue, shares will be listed on BSE and NSE. This being an offer for sale (secondary offer) the equity capital of the company remains same at Rs. 2001.90 crore. Its entire paid up equity has been issued at par since inception till July 2004. BRLM to this offer are IDBI Capital Markets & Securities Ltd, ICICI Securities Ltd, Nomura Financial Advisory and Securities (India) Pvt Ltd and SBI Capital Markets Ltd. Alankit Assignments Ltd is the registrar to the issue.

On performance front, the company has (on a consolidated basis) posted total revenue/net profits of Rs. 2921.34 cr. / Rs. 699.69 cr. (FY13), Rs. 3002.88 cr. / Rs. 733.97 cr. (FY14), Rs. 3427.85 cr. / Rs. 768.32 cr. (FY15) and Rs. 3350.08 cr. / Rs. 809.61 cr. (FY16). For first nine months of the current fiscal ended on 31.12.16 it has earned net profit of Rs. 496.86 cr. on revenue of Rs. 2677.99 cr. and the company hopes to maintain net level and EPS at the previous year’s level. Based on this the asking price is at a P/E of around 14 plus and at a P/BV of around 1.3 plus. It has no listed peer to compare with.

Company is set to play vital role in Pradhan Mantri Awas Yojna (PMAY) under Housing for All (HFA) by 2022 and thus has bright prospects going forward. It will have synergy with National Housing Bank for doing the needful in this segment. With Pan India presence, company is set to explore growth potentials.

On BRLM’s front, the four BRLMs associated with the offer have handled 29 public offers in the past 3 years, out of which 7 offers closed below the offer price on the listing date.

Conclusion: Being PSU offer for just 10 per cent of the total paid up capital and bright prospects for the segment in coming years, investors may consider investment for medium to long term.

The original article appears on chittorgarh.com and can be found here.

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Markets settle lower on profit-booking on Friday, but gains most in six weeks



The benchmark indices on Friday settled lower as investors booked profits in index heavyweights such as ITC and HDFC ahead of a long weekend, but posted their biggest weekly gain in six weeks.

The S&P BSE Sensex ended at 29,918 down 111 points, while the broader Nifty50 closed at 9,304, down 38 points.

In the broader market, the S&P BSE Midcap and S&P BSE Smallcap indices outperformed to gain 0.2% and 0.6%, respectively.

The market breadth, indicating the overall health of the market, turned negative from positive. On BSE, 1,479 shares fell and 1,386 shares rose. A total of 136 shares were unchanged.

Nifty Realty index (down 1.7%) was the leading sectoral loser, led by losses in Prestige (down 4%) and Delta Corp (down 4%) and Indiabulls Real Estate (down 3%).

The Nifty Bank pared entire intraday losses to settle 0.1% higher.

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