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Friday, 8 February 2013

Results Pattern !! Why you should avoid buying stocks on results day - Reliance Example

Readers

It is important to understand as small traders, proper timing to buy stocks. It is never advised to buy a stock on the day of results even if the results are good.

In most cases (except where there are surprises like in the case of Infosys), good results would have been factored in the prices. By the time results are announced, people who entered earlier would start exiting in tons. Stock prices falls despite good results.

Best way to trade results is to watch the company's performance through different channels several weeks before the results - like order book, good news , expansion resulting in increased profits, advance tax numbers etc. If these are good, enter the stock before results and offload on the day of results.

As an example, Reliance hit a high on the results day spike. From then on it started falling and now indicators are negative, it will take a long time for the stock to cross the results day spike. Several investors and traders would have bought that spike and sitting on losses and impatience now. Markets have turned negative and on crossing the support levels of Nifty, Reliance will be further sold and the stock will go down further to its support levels.

See the chart to see how it behaved after the results.




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