Thanks to reader rajamani for asking a facility of google search in this blog. You can now search the blog using google. The widget is on the right sidebar. (scroll down a bit). Google is awesome. Just type 'Breakout' or 'Stop Loss' and see how google spews out the relevant posts.
"how to trail my stop loss. i've bought apollo tyres at 58 on a breakout. Even 30 dma is at 62 which is still 20% below cmp. Have not found any reversal signals on it. how do you exit a profitable position plz guide !!!!"
My Notes: I have a blog post which discusses stop losses, Here. Apart from suggestions in the post, you can also keep a stop below the last day's low. This is also a tight stop.
A CHART MAKING HIGHER TOPS AND HIGHER BOTTOMS IS A SIGN OF BULLISHNESS. NOW THE PROBLEM IS HOW ONE CAN MATERIALISE ON THIS BULLISHNESS OR HOW DO WE KNOW THAT IT IS FINALLY BREAKING OUT. THINKING OTHER WAY, A RISING WEDGE IS ALSO A HIGHER TOP HIGHER BOTTOM FORMATION, BUT IT IS A BEARISH SIGN .
My Notes: Good question. This is a chicken and egg story. After a breakout, the rally may fail, OR, we wait for confirmation and the rally runs up, leaving us aside. So, there is no way of getting 'confirmation'. The buying point is the price at which the higher highs, higher lows pattern is confirmed. This is always the point of highest risk. To avoid this risk, traders can buy on pullbacks, but there is no way to know for sure if this is a pullback or reversal. I recently wrote a post on breakouts and there was a lot of reader comments, so use the google search written above to check it out.
Is the higher highs pattern a rising wedge or is it the real thing? For me, a rising wedge comes in a downtrend. The downtrend should have started and be visible. The wedge should be narrowing down with both lines meeting at the apex. You must also be aware of the controlling trend.
Reader devesh dikshit says some stocks like Rel Capital and Suzlon have underperformed the Nifty. They are much lower than their 2007 bull market highs while the Nifty has rallied a lot. Will they catch up, he asks.
My Notes: Well, each bull market has its favorites, so these stocks are out of favor. Also remember that Rel Cap had rallied to bubble levels, which are unlikely to be touched soon. So, the answer is: If we see the current up move as part of a secular bull market, then these stocks will rise but probably not to their 2007 bubbles.