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Friday, December 20, 2013

Indian share market Tips; Free stock tips, cash and future tips for December 20, 2013

Updating on all trading days
Five stock market tips are given free for today's (December 20, 2013) trade on 'The Indian stock market'. This include one index future tip (BANKNIFTY future tip), one stock future tip and three intraday cash tips. Be cautious while trading.
Trading strategy
 Always keep stop loss. After achieving first target (T1) move your stop loss to just below entry level.After achieving second target (T2) move stop loss to first target (T1).

  

BANKNIFTY Future Tip 20.12.2013

BANKNIFTY Future DECEMBER 26 B-11255 T-11300,11400,11590 SL-11210
S-11045 T-10920,10775,10630 SL-11420

Stock Future Tips 20.12.2013

TECHM Future DECEMBER 26 B-1807 T-1817,1832,1867 SL-1797
S-1777 T-1767,1747,1715 SL-1784

Intraday Cash Tips 20.12.2013

CIPLA B-401.50 T-404,406.50,409.50 SL-399
S-395 T-392.50,390,386 SL-397.50
HCLTECH B-1242.50 T-1252.50,1267.50,1282.50 SL-1235
S-1227 T-1217,1203,1183 SL-1235
ADANIPORTS B-168.70 T-170.40,172.10,175.70 SL-167
S-163 T-161.30,159.60,157.50 SL-164.50
More free stock market tips posted at stockforyouindia
These stock market trading tips are prepared for intraday trading purpose.Trading in market direction is the best option.Always buy only at/above buy (entry) price.Sell only at/below sell (sell) price.Keep strict stop loss for all trades.Not initiate any intraday call after 2.30 PM.Book partial profits (at least 33 per cent) at first target.Those who are going to third target book partial profits at second target (at least 33 per cent) and then move stop loss to T1.Close all intraday positions before 3.15 PM If scrip opens above(buy)/below(sell) target levels then don't trade on that stock or try to trade only when it comes near to entry level.
NB-This post is only for education purpose.Trading on stock market is risky.Trade at your own risk.We are not responsible for any loss booked by the traders.

Saturday, October 19, 2013

Earnings per share (EPS); An important fundamental indicator used in stock market


 Earnings per share (EPS) is a fundamental indicator used in financial markets, which measures the earnings value of each outstanding share of Company's common stock. It is considered as an indicator of company's profitability. It is calculated by dividing net income (net profit) by the number of outstanding common shares. You can find the EPS of the companies in their consolidated results and income statement. By multiplying EPS with outstanding shares you will get the company's income.

Earnings per share (EPS) Formula

Basic earnings per share can be calculated by using the following formula



 For example, If the net profit of the company 'XXXX' For the financial year 2013 is 100,000,000,000 and the average number of common shares of the company is 33,000,000,000, then EPS can be calculated as
EPS= 100000000000 / 33000000000= 3.03 = 3

There is not much difference between net profit and net income. So some people use this formula as


   Earnings Per Share (Weighted) Calculation

Weighed earnings per share is more reliable than basic earnings per share. It is calculated by making some changes. It excludes the amount of dividend paid by the Company to its share holders.

Now the formula becomes,



 For example, If the net income of the company 'XXXX' For the financial year 2013 is 100,000,000,000 dollars, the average outstanding number of shares of the company is 33,000,000,000 and the dividend paid to its share holders is 11,000,000,000, Then weighed EPS can be calculated as
EPS= 100000000000-11000000000 / 33000000000= 2.69 = 2.7

Uses of Earnings Per Share (EPS)


Like other fundamental indicators, Earnings per share is also considered very important while buying securities. It must be considered with other indicators such as Price-to-Earings ratio, market capital, share prices, dividends, liquidity and the company's long term financial outlook. Among them the first priority goes to EPS, because it gives us an idea of profitability of the company. Higher EPS indicates higher profitability. But we can't say above or below a fixed range of EPS a security is a buy or sell. It depends upon market condition and sentiments. So a trader or investor must consider the EPS of other companies of the same sector before considering a buy.

Wednesday, October 16, 2013

Price-to-earnings ratio or PE; An equity evaluation tool for stock market investors

 The price-to-earnings ratio, which is commonly known to us as P/E ratio, often called P-E ratio or PE is used to calculate the value of equities through relative evaluation. In other words it is an equity valuation multiple and the valuation ratio of a company's current share price compared to its earnings per share (net profit). It is the most simplest and common method used for valuation.
It can be calculated by using the following formula




 Suppose, the shares of the company 'XXXX' is trading at 975 Rupees (per share) and the earnings over last one year was 45 Rupees then PE ratio is 21.7
 Different methods are used to calculate PE depending upon the type of earnings.
 'Trailing PE' or 'historical PE' is calculated by using the net income for the most recent one year (last four quarters or two half years) divided by the weight-age average of common shares in issue during this period. It is the most common form of PE.
 'Trailing PE from continued operations' uses operating earnings only to calculate PE. That means earnings from discontinued operations and extra ordinary items are excluded from calculation.
 Another form of PE is called 'forward PE' or 'projected PE' or 'prospective PE', in this method estimated net earnings (published by a selected group of analysts) over next one year is used to calculate PE.

Features of PE

 Higher PE ratio indicates that the company may get higher growth in earnings compared to the companies with lower PE.
 As I said above it is an equity valuation multiple. For example, If the PE ratio of a security is 25, it means that people are willing to pay 2500 RS for a company whose earnings per share is 100 Rupees.
A security with an average PE of 20-25 is considered as a good one. Above that the stock is not advisable.
 Comparing the PE ratio of the companies in the same sectors are useful. The PE ratio of its sector and the whole index may also help investors to identify whether the security is expensive.
 The companies which bear losses do not have a PE ratio.

Wednesday, October 02, 2013

William's %R; Calculation and how to use in financial markets

In previous posts we have discussed about  some important technical indicators used in stock markets such as fibonacci levels, moving averages, stochastics and bollinger Bands. In this topic let us try to learn about 'Williams %R'. Like 'Stochastic Oscillator', Williams %R is also a momentum indicator used to  measure overbought and oversold conditions in financial markets. It is the inverse of the Fast Stochastic Oscillator. This method was developed by Larry Richard Williams, an American author and commodity trader.
 'Williams %R' is also called '%R', which shows the current closing price in relation to the high and low of the past N days* (usually 14 days). It is used to know where the financial markets are trading, near the high or near the low, or somewhere in between high and low, of its recent trading range. In other words it is used to calculate the entry and exit points. The values are from '0' (zero) to '-100' (minus hundred). Above '80' it is considered as oversold and below '20' it indicates over bought.

According to the rule a security or financial instrument is considered as a good buy when the following conditions satisfy,
1. '%R' touches -100%
2.  Then wait for 5 days after -100% reached
3.  When '%R' once again rises above -95% to -85% levels it is a buy.
 A security or financial instrument is considered as a good sell if the following conditions satisfy,
1. '%R' touches 0%
2.  Wait for 5 days after 0% reached
3.  When '%R' once again falls below -5% to -15% levels it is a sell.

'Williams %R' is calculated by using the following formula.

%R = (high of look-back period- current close / high of look-back period - low of look-back period) * -100 

A chart showing William's %R levels is given below.


A spreadsheet showing 'Williams %R' levels is given below.


* Instead of days you can use weeks or months to calculate medium term to  long term over bought or over sold conditions and buy or sell signals.

Saturday, September 14, 2013

Stochastic Oscillator a momentum indicator; Fast, slow and full stochastics

'Stochastic Oscillator' is a momentum indicator developed by George C. Lane in late 1950s.It uses the support and resistance levels. Stochastic compares the security's current closing price to its price range over a specific time period. But it does not blindly follow price, volume. Instead it is purely based on the speed or  momentum of price.

 Stochastic Oscillator is used to identify the bullish bearish trend and a possible future reversal. It also indicates the over sold and over bought levels.
 The Stochastic Oscillator can be defined as
%K = 100 * (Current close price - Lowest price of the period) / (Highest price of the period - Lowest price of the period)
%D = 3-period Simple moving average of %K
There are three types of Stochastic Oscillator. Fast stochastic oscillator, Slow stochastic oscillator and the Full stochastic oscillator. Among them the fast stochastics is the original stochastic oscillator based on the above said formula of Dr. George Lane. The fast stochastics is very choppy and more sensitive (too responsive to price changes) compared to slow stochastic. This will result in the premature unwinding of positions. So some traders prefer slow stochastics than fast stochastics.
 The slow stochastics uses three-period simple moving average smoothed fast stochastic's %K instead of '%K basic calulation' of the fast stochastics.
After the first simple moving average is applied to the fast stochastic's %K, another three-period moving average is applied to get the slow stochastic's %D.
The formula is
        Slow %K = Fast %K smoothed with 3-period Moving average
        Slow %D = 3-period Moving average of slow %K
Using slow stochastics reduces the chances of false crossovers and thus prevents false unwinding of positions.
 The full stochastics is more advanced type of stochastic oscillator. It is the generalization of fast stochastic oscillator and the slow stochastic oscillator.
The formula is,
    Full %K = N1 Period simple moving average of the fast %K
    Full %D = N2  period Simple moving average of Full %K
Here N1 is the number of periods used to calculate the fast %K and N2 is the number of periods by which the full %K line is smoothed.
 Unlike the The fast stochastic oscillator and the slow stochastic oscillator, the full Stochastic oscillator has three parameters.The first one is the look back period, second one is the number of periods for slow %K and the third one is the number of periods for %D moving average. In a full stochastic oscillator with parameters 14,3,3 , (14,3) is the fast stochastic oscillator parameters and (14,3) is the slow stochastic oscillator parameters.
 There are three different ways to trade using stochastic oscillators.
1. Crossover method-
 The first one is based on the crossing of %K and %D signals. When stoch %K crosses above stoch %D 'buy' signal occurs. When %K line crosses below %D line 'sell' signal occurs.
 The second one is based on the 50 level cross over. When %K line crosses above 50 a 'buy' signal occurs and when %K line crosses below 50 a 'sell' signal occurs.
2. Divergence in Stochastics and Price method-
 In this method traders uses the divergence between price and stochastic oscillator. When lower lows in price and higher lows in stochastic oscillator is formed it is called bullish divergence and here a 'buy' signal occurs. When higher highs in price and lower highs in stochastic oscillator is formed it is called bearish divergence and here 'sell' signal occurs.
3. Over sold and Over bought levels method-
 If the stochastic oscillator is higher than or equal to 70% level it  is called over bought. To confirm the condition wait till it crosses 80% level. After crossing 80% level if it moves back to 70 level a 'sell' signal occurs. When the stochastic oscillator is lower than or equal to 30% level it  is called over sold. To confirm Wait till it crosses 20% level. After crossing 20% level if it moves above to 30% level a 'buy' signal occurs.