Conversations: October 27

Saket asks:

1. Stop losses for buying on dips
My Notes: The actual numbers will depend on the charts you use – end of day, intra day, time period. The broad rules could be (for long positions, reverse for short):

a. Initial catastrophe stop: Below the nearest swing Low OR Below the 3 day Low OR below the one day Low. You should choose the stop where (a) risk is acceptable AND (b) Breaking he stop means that your trade becomes invalid, uncertain

b.Breakeven stop: Once the trade moves in your favor, move your stop as close as possible to breakeven. OR If you have more than 1 contract or share, then sell part of the position Look for bigger moves for the remaining.

c. Profitable Exits: On a trailing stop, target, or a reversal  pattern which changes the underlying trend. This may be a 20 day moving average, OR (a) above OR many other methods.

Saket again:
2. well i heard u today speaking about cairn being a great investment and can be a multibagger in next few years i had looked at its charts but didnt quite understand the reason behind u r hypothesis

My Notes: 
For investing, I look at themes. CAIRN is a crude producer. Crude is a finite resource. So is Lignite. Therefore I like the idea of investing in CAIRN.
On the charts, the stock is near its life time hgihs. Above 300, it moves into unchartered area. Who knows where it may go. Big moves are possible in stocks which make life time highs. Remember, th Markets can do anything.

Saket:
3.when we are talking about investments or 2-3yrs do we look at weekly charts
My Notes: Yes, you should.
Men’s question asked last week remains relevant:
Is it right to buy on dips now or is it different this time. A 38% retracement of the recent low to high is around 4870.

My Notes: I do not know if it is ever different. Same market, same process of greed and fear. But, the retracement is relevant only when prices stop and begin to consolidate near a retracement number.
We say: Prices are consolidating, maybe ready to move up, AND it also happens to be a Fib retacement area, so there is a high probability opportunity.
We Do NOT say: price has touched 4870 so let me buy. Never.

On my Guppy MMA chart, Sunnay has this suggestion:

why so confusing set up, If price is above 50 sma, long term trend up, if adx green line is up, red down, and price above 20 sma short term trend up.
My Notes: All roads lead to the same destination – go with the flow. So it is fine to use 50 an 20 MA and +DI nd -DI. The key is consistency.

AnshulTPT asks if it is possible to set in two stops – one is automatically cancelled if the other one is triggered.
My Notes: On the trading software, I do not think this facility exists.
Saumil asks:
could you please advice me on shares to buy.just give me advice on few shares which you think is a good long term bet.
My Notes:
This is not a stock picking blog. But, I like the idea of holding CAIRN. You must wait for a correction before entering the market, even if it is for the long term.