High – Low Index Trend Analysis Statistics

Markets Index are going down, when is it likely to change course? There are some indicators which give investors early signs of the prevailing trend coming to an end. A couple of such indicators like New high New Lows (NH-NL) & Index Trend direction (TD) have some very useful information.

The NH-NL index is the index of leading stocks in the direction of the market in 3 time periods. When a market is down, how many stocks are leading the downside and when it is up how many are leading on the upside. Market tops happen when upside does not match with the price move in the market. Like when the market hits a new high and the NH-NL indicator is not, it is a sign that market is getting tired.

On the down side, the NHNL indicator gives signals for a sharp reversal. The 30 day NH-NL, when it hits -1000, it is time to buy the strongest stocks in the market, the turn around will be very sharp. On the 90 day NH-NL, the indicator should hit -500 and on the 365 days or 52 week NH-NL as it is popularly called should hit -400

NH-NL of each time period can be used for different periods of buy & hold time frames. A signal on the 30 day index will be valid to hold the position for about a week or 2. 90 day signal is valid for a month long holding & the signal on 52 week will hold direction for about a quarter of an year.

NH-NL signals on the buy side are very powerful, price moves will be sharp.

One such opportunity is coming up now. 30 Day NH_NL is about to cross -1000. 90 day is already past -500 & 52 week is close to -400. What all of these are indicating is that, a turn around in the market is around the corner.

It is time to identify stocks that are stronger than the market, whole stock prices have had a significant correction after a good rally. Such stocks are the ones which will be the leaders when the market turns direction.

The Trend Direction (TD) Indicator, shows the number of stocks that are trending bullish, bearish & sideways. Ideally when there are more number of bullish trending stocks, market is euphoric. Also when there are a large number of bearish trending stocks, the reversal will be sharp.

This index is worked on the NSE 500 stocks. Weights are given for bullish, bearish and sideways directions. When the indicator hits -500 or more it is time for a reversal. Now the indicator value is at -345. In just about few days if the correction continues, we will hit the bottom.

Both NH-NL and TD are showing strong reversal signs, it is time to get prepared for identifying stocks that will have big rally.

How to be a winner in stock investing?

I had written an article on who is smart, the FII’s or the DII’s (https://bravisatempletree.com/mid-cap-stocks-are-stronger-than-their-large-cap-peers/) a couple of months back. I did not expect that so soon we will get back to square one. In one of the recent data on how the investments have been happening post China crisis, it was sad to note that again our retail investors have caught the tiger by its tail.

HerdMentality Holdings.19.10.15

The public participation had helped the DII’s to have larger exposure into the Mid Cap space which was the performing segment in the current bull rally. FII’s got their fingers burnt with their large cap exposure. Now, the retail data that comes out shows a sad story. FII’s were smart again, they learnt from their mistakes, changed fast. While our retail investors are still in the same swirl.

To be successful in stock market investment one has to be invested in companies that are big growth stories, both fundamentally and technically. The list of stocks that the FII’s have bought as per September data shows that they have placed themselves perfectly in those companies that have strong price patterns. Whereas, our retail investors have made perfectly wrong decisions by buying into stocks like Amtek Auto and Aban Offshore. These are companies that the FII’s have discarded from their portfolio.

Why people have bought into these stocks?

When we experience something good, we invariably want to experience it again. While doing so we naturally get carried away and take the experience in face value. Same thing happens in stock investing, when we see the price of a stock at a particular price and decide to buy into the stock, while it keeps rising not giving us an opportunity to buy, then one day suddenly it corrects and drops to some extent from its high. For us, it is a cheap stock and we load it into our portfolio. Little do we realize that the stock price has fallen for a reason?

For example, AMTEK AUTO is down because it has defaulted on its debt, a very big 15000 Crore debt default is staring large at them, it is also brought sleepless nights to fund managers in JP Morgan who have large exposure in this company’s debt. Similarly Aban Offshore is down because of crude price drop, will it regain its glory, is not known for now. When such impulsive investments are made, it is obvious that these investments will either stay flat or drop further. And when it drops, we tend to add more to our holding in the thought of averaging our losses without realising that, when we add investments into an already losing investment, we immediately add to our losses.

Over a period our investment will end up in a loss and what we talk about our experience to the outside world is that the stock market is GAMBLING.

Some of the exits from the retail segment like KEI and DEEP Industries too are wrong, these are stocks that have good potential for growth.

Be invested into good stocks, your investments will naturally be profitable. If the investment crosses 5 years, you’re down side risk is absolutely zero. And the profits will be the highest.