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Learning Series # Part 2 # Picking momentum and quality stocks

10
Nov

Dear All,

Knowledge Sharing
In my last post I had discussed some of the detailed step by step process of selecting a quality stock,
Here I am presenting one more quick method of selecting a potential quality or momentum stock –

Here we go !!

For this method we should have patience and we wait for a day when market falls abnormally, the reason is irrelevant {it may be elections 🙂 , cross border war, currency war anything}

1. Step 1 – After the market is closed, lets look for stocks which have closed
– (i) in the positive
– (ii) or Stocks that have made a new life time high or 52 week high

So the Idea is to select in the stocks which have strength and stand like a Wall against any bad news and they not only stay at same price but
– (i) will also close in the green that means investors are trying to use this opportunity to grab more shares from the market at these levels
– (ii) They also make a new life time high or a 52 week high

2. Hence end of the day after market is closed I see my existing portfolio to the analyze the strength of my holdings .i.e is how many closed in the green or positive. Generally these are the stocks which will lead your portfolio

3. To include a new stock in my portfolio, I am interested in 2nd option that is – (ii) Stocks that have made a new life time high or 52 week high.

Why because these are stocks which are ready to make fresh highs and large money is trying to chase this stock even at these levels, sensing there is still a lot of value left in this stock

So once you have identified stocks which have made new life time highs or 52 week high, Do your own fundamental analysis on these stocks and if you feel there is a value at the current price just go for it, keeping your risk and reward in mind

4. So lots of theory, lets do it practically,
Go to NSE website search for 52 week high stock – so I found below list of stocks making 52 week high (excluded from the list is ETF ) –

Security New 52W/H Prev. High Prev. High Date LTP Prev. Close Chng % Chng
Accelya Kale Solutions Limited 1,575.00 1,478.00 21-Sep-16 1,465.00 1360.2 104.8 7.7
Delta Magnets Limited 40 38.55 7-Nov-16 40 38.55 1.45 3.76
Gujarat Industries Power Company Limited 105.5 103 1-Nov-16 103.75 98.9 4.85 4.9
Kotak Mahindra Bank Limited 829.4 826 30-Oct-16 822.1 811.8 10.3 1.27
Servalakshmi Paper Limited 4.6 4.4 8-Nov-16 4.2 4.4 -0.2 -4.55
Shreyans Industries Limited 103.55 92.9 3-Nov-16 103.4 86.5 16.9 19.54
SREI Infrastructure Finance Limited 91 90.2 8-Nov-16 86 87.2 -1.2 -1.38
Swan Energy Limited 130.6 128.4 8-Nov-16 128.75 113.1 15.65 13.84
VAKRANGEE LIMITED 262 261.7 8-Nov-16 260.1 260.75 -0.65 -0.25

After doing all my analysis, I zeroed into Shreyans Industries, buy around Rs 103 Rs to 105 Rs-
Where I feel risk reward will be favorable, hence I will allocate small capital to this stock with a stop loss of previous days close i.e. 86.5 Rs

Target should be some where around 130 to 150 Rs. Risk reward of 1:3