Announcing re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jul 1-21, 2015. Only a limited number of subscriptions will be offered to blog visitors, followers and subscribers – on a first-come first-served basis – to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com at the earliest for details.

The newsletter has completed 66 issues, with its share of hits and misses. The past few months were challenging and humbling. Challenging because several selected stocks failed to perform well in a market that has shunned small-cap and mid-cap stocks. Humbling because subscribers have kept faith in my stock picking abilities. Improvement in market sentiments should help some of the non-performers to get back on track.

Those who follow my blog posts already know what kind of stocks I like, and what type of stocks I avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have low debt, give steady (rather than spectacular) returns and have some growth prospects.

Non-subscribers may be interested to know how recommended stocks have fared during the past 18 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief results table with recommended prices and dates, subsequent high and low prices, closing prices and gains as on Jun 30, ‘15:

Stock	Date	Price	High	Low	Close	Gain (%)
A	Jan 28 ‘14	67.00	122.00	60.50	74.90	11.8
B	Feb 26 ‘14	154.60	159.40	77.15	81.65	- 47.2
C	Mar 28 ‘14	89.00	351.00	84.60	252.00	183.10
D	Apr 25 ‘14	277.20	579.40	266.00	558.25	101.40
E	May 27 ‘14	94.10	740.00	93.25	623.25	562.30
F	Jun 27 ‘14	62.60	88.00	59.00	69.00	10.2
G	Jul 28 ‘14	206.50	267.90	174.00	186.65	- 9.6
H	Aug 28 ‘14	115.50	229.80	113.25	135.10	16.9
I	Sep 26 ‘14	46.00	52.80	31.00	44.85	- 2.5
J	Oct 27 ‘14	250.10	322.85	248.00	275.45	10.1
K	Nov 27 ‘14	231.85	348.80	221.00	262.10	13.0
L	Dec 26 ‘14	66.60	77.00	52.50	64.35	- 3.4
M	Jan 28 ‘15	285.00	285.00	222.00	234.30	- 17.8
N	Feb 26 ‘15	82.25	94.65	74.35	93.15	13.2
O	Mar 27 ‘15	88.45	103.00	81.15	89.70	1.4
P	Apr 27 ‘15	223.70	240.10	162.10	165.60	- 26.0
Q	May 28 ‘15	89.40	91.85	84.20	87.75	- 1.8
R	Jun 26 ‘15	77.15	77.20	72.00	75.15	- 2.6

All recommended stocks are small-cap or mid-cap, picked for long-term investment of 2 to 3 years. Some of them provided strong gains (in bold) – which is a testimony to their underlying strength. Note that three stocks are showing double-digit losses (in italics) but subscribers were recommended to sell much earlier when stop-losses got hit.

17 (out of 18) stocks touched higher levels after my recommendations. In a 2-3 years time frame, I expect most of the laggards to improve their performances.

None of these stocks were ‘cheap’ – fundamentally strong stocks rarely are - and some had already run up quite a lot when they were recommended. The down trend of the past 4 months have taken a toll on stock performance – but is providing entry opportunities.

Why wait if you wish to add fundamentally strong stocks with growth potential to your portfolio? Just subscribe to my Monthly Investment newsletter. Send me an email (atmobugobu@yahoo.com) soon – subscriptions will close on Jul 21, 2015.

BSE Sensex and NSE Nifty 50 index chart patterns – Jun 26, 2015

The following comment appeared in last week’s post: “Unless FIIs turn buyers, down trends on both Sensex and Nifty charts may not get reversed any time soon.”

As per last week’s provisional figures, FIIs were net buyers of equity worth Rs 445 Crores. DIIs were also net buyers of equity worth Rs 550 Crores.

Sensex has managed to cross above its down trend line (on chart below), while Nifty is poised to do likewise. Monsoon rains have covered the entire Indian peninsula ahead of schedule – so a major market concern is out of the way.

The Lalit Modi fiasco has galvanised the opposition and put the government on the back foot. Hopefully, reform measures will not slow down as a result.

Greece’s sovereign debt problem has not been resolved yet. Only 2 more days remain for the repayment deadline set by ECB and IMF. If a last minute deal is not agreed upon, there will be repercussions in the global economy.

BSE Sensex index chart

The daily bar chart pattern of Sensex overcame resistances from the blue down trend line and the lower edge of the ‘support-resistance zone’ and crossed above its three daily EMAs into bull territory on Mon. Jun 22.

Follow up buying from bulls was missing. The index consolidated sideways within a 330 points range during the rest of the week. Which begs the question: Is the down trend over?

The answer is: Not yet. Why? Volumes (not shown on chart) during Monday’s upward break out were not significantly high. That makes a pullback to the down trend line or, even below it to the 200 day EMA, a possibility.

If the pullback halts at the down trend line or the lower edge of the ‘support-resistance zone’, the subsequent upward bounce will be a good adding opportunity.

Daily technical indicators are looking bullish and overbought. MACD is rising above its signal line in positive territory. ROC, RSI and Slow stochastic are inside their respective overbought zones, but not showing much upward momentum.

Some more consolidation or a correction is likely. Note that the entire down move from the lifetime high touched in Mar ‘15 has been a bull market correction. Analysts predicting doom and gloom and much lower index levels should be ignored.

NSE Nifty 50 index chart

The following comment was made in last week’s post on the weekly bar chart pattern of Nifty: “Unless volumes pick up, Nifty may not be able to convincingly cross above the down trend line.”

Volumes did pick up during the past week – enough to enable Nifty to cross and close above its 20 week EMA in bull territory; but not enough to cross above the blue down trend line. That may give bears an opportunity to regain control.

Weekly technical indicators are still in bearish zones, but showing signs of turning around. MACD is below its falling signal line, but moving sideways just below the ‘0’ line. ROC, RSI and Slow stochastic have bounced up from their respective oversold zones, and showing good upward momentum.

Expect another interesting fight for dominance between bulls and bears next week – with bulls having a slight advantage.

Bottomline? Bulls are on the verge of reversing the down trends on BSE Sensex and NSE Nifty charts. Bears are still in the game, and may try their best to retain control. Both indices are back in bull territories. Stay invested, and be prepared to add to existing portfolios. If you are planning to enter the market for the first time, choose a good balanced fund.

Add some stability to your portfolio with bank fixed deposits – a guest post

The younger you are, the more should be your allocation to equities. Why? Because the longer you stay invested in equities, the greater is going to be your likely returns. Also, your financial commitments are lower when you are younger. So, you can afford to take more risks.

As you grow older, start a family and care for elderly parents, you will need more stability in your investment portfolio and additional cash flow to support your primary earnings from business or profession.

In this month’s guest post, Nishit argues in favour of bank fixed deposits. The downside to bank FDs is low returns which are taxable. The upside is safety of principal amount and facility of regular cash flows through quarterly interest payments. Using some simple investment strategies, the unexciting bank FD can add stability to your portfolio.

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Interest rates are falling. That is being touted as good news for the economy and for borrowers. Lower interest rates mean higher growth and more jobs. More jobs mean more income and more purchasing power. This whole cycle of spending, consumption and growth is likely to be triggered off by the cutting of interest rates by RBI.

RBI has already reduced rates by 75 basis points (i.e. 0.75%), and is further expected to reduce rates by about 1-2% before this cycle is over.

One of the casualties of this rate-cut cycle who goes unlamented is the senior citizen, who depends on fixed deposit (FD) interest for his livelihood. Banks are very quick to cut deposit rates and those FDs which were giving interest of 9.7% have already been reduced to 9%. In fact a study across PSU and Private Banks shows that maximum interest on FD which can be obtained now is 9%.

How does one work around this? To explain the impact, if a senior citizen has Rs 10 lakhs in FD, 9.7% interest gives him Rs 97000 and 9% gives him Rs 90000 per year. How does he make up for this Rs 7000 shortfall?

One way of doing it is locking in FDs for a period of 5 years when the rates are high. 5 years is a sufficient long period for one cycle of rate cuts to play out.

Also, once the rates start being cut, the 2-3 year FDs offer the highest rate of interest. At such times, one can go for such shorter-duration FDs.

The Senior citizen scheme from the Government, which has a 1 year lock in period, still offers 9.3% rate of interest. This rate changes only in April every year. So, one can lock in up to Rs 15 lakhs in this scheme till April ’16.

Next common question is: what about liquidity? What if one needs money urgently then how does one break the Fixed Deposit? A simple option is to break the one giving the least amount of interest. Even this can be circumvented by ensuring and planning the FDs in such a way that one FD matures every 3 months.

To do this, it requires certain amount of planning and the staggering of the FDs. Also, one can plan the FDs in such a way that every month some or the other FD gives interest. Quarterly credit of interest gives the highest returns and by staggering the FDs one can ensure a monthly flow of income while enjoying the higher returns of quarterly Interest.

The protection of capital is a must and only nationalized or top private banks FDs can be considered. This can be spread across 2-3 banks so that the risk of default is minimised.

These are some simple strategies, if followed scrupulously, can give maximum bang for the buck.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan. You can reach him at nish.stockid@gmail.com)

Related post

About Asset Allocation – a guest post

WTI and Brent Crude Oil charts: an update

WTI Crude chart

The daily bar chart pattern of WTI Crude has been consolidating sideways for the past 2 months within a ‘pennant’ (narrow triangle) pattern. A ‘pennant’ (like a triangle) is usually a continuation pattern. So, the likely break out from the pattern should be upwards.

However, triangles are unreliable patterns. That means that the price break out can be downwards; or, there may not be a break out at all. Oil’s price may continue to consolidate sideways and eventually pass through the apex of the ‘pennant’.

In the latter case, the price level of the apex of the ‘pennant’ is likely to turn into a ‘support-resistance’ level.

Oil’s price is trading above its rising 20 day and 50 day EMAs but below its sliding 200 day EMA in a bear market. A convincing break out above the ‘pennant’ may propel oil’s price above its 200 day EMA into bull territory. A drop below the ‘pennant’ will restore control to bears.

Daily technical indicators are in bullish zones but not giving any clear signals – which is often the case during sideways consolidations. MACD is entangled with its signal line and sliding down in positive zone. RSI is moving sideways just above its 50% level. Slow stochastic has dropped down after facing resistance from the edge of its overbought zone.

On longer term weekly chart (not shown), oil’s price has spent 10 weeks above its rising 20 week EMA, but is trading well below its falling 50 week and 200 week EMAs in a long-term bear market. Weekly technical indicators are looking bullish. MACD is rising above its signal line in negative zone, but its upward momentum is slowing down. RSI has just crossed above its 50% level. Slow stochastic is moving sideways inside its overbought zone.

Brent Crude chart

The daily bar chart pattern of Brent Crude oil has been consolidating sideways within a ‘falling wedge’ pattern during the past 2 months. Though oil’s price is trading below its three daily EMAs in a bear market, the ‘falling wedge’ has bullish implications.

That means the likely break out from the wedge pattern is upwards. An upward break out should be accompanied by a volume spike, otherwise the break out may turn out to be a ‘false’ one. Note the strong volumes during recent down-days, but the selling appears to have been well absorbed.

Daily technical indicators are looking bearish. MACD is entangled with its signal line in negative zone. RSI and Slow stochastic have dropped below their respective 50% levels. Some more consolidation within the wedge is likely.

On longer term weekly chart (not shown), oil’s price closed below all three weekly EMAs in a long-term bear market. Weekly technical indicators are turning bearish. MACD is above its signal line in negative zone, but its upward momentum has stalled. RSI is moving sideways below its 50% level. Slow stochastic has dropped down sharply from its overbought zone, but is above its 50% level.

Stock Index Chart Patterns: S&P 500 and FTSE 100 – Jun 19, 2015

S&P 500 Index Chart

 

The daily bar chart pattern of S&P 500 took investors on another roller-coaster ride last week. The index dropped to an intra-day low of 2072 on Mon. Jun 15 – forming a small ‘double bottom’ reversal pattern.

Over the next 3 days, it rallied past its 20 day and 50 day EMAs – closing above the 2120 level in bull territory on Thu. Jun 18. On the last day of the week, the index corrected sharply – backed by the strongest volumes in 3 months.

Note that the index closed above its three daily EMAs in a long-term bull market – but at the same level that it closed more than 4 months back, and appears to be undergoing a sideways consolidation within a large bearish ‘rising wedge’ pattern.

Strong volumes on down-days may be a sign of ‘distribution’ from stronger to weaker hands.

Daily technical indicators are giving mixed signals. MACD crossed above its signal line in negative zone, but its upward momentum is weak. RSI is above its 50% level, but moving down. Slow stochastic is moving up towards its overbought zone.

Volatile index movements is often a sign of a change of trend. Stay invested, but remain watchful.

On longer term weekly chart (not shown), the index dropped below its 20 week EMA intra-week, but closed above its three weekly EMAs in a long-term bull market. Weekly technical indicators are in bullish zones, and showing slight upward momentum.

FTSE 100 Index Chart

The following comments appeared in last week’s post on the daily bar chart pattern of FTSE 100: “…the index has so far closed within the 3% ‘whipsaw’ limit below its 200 day EMA. That means the breach below the 200 day EMA has not been technically validated yet. Only a close below 6600 will do that.”

On Thu. Jun 18, the index dropped to an intra-day low of 6625 – testing the 3% ‘whipsaw’ limit below the 200 day EMA, but bounced up to close above the 6700 level. Despite the sharp correction, the breach below the 200 day EMA awaits technical confirmation.

It may be a temporary respite for bulls. The 20 day EMA is ready to drop below the 200 day EMA. The 50 day EMA is falling towards the 200 day EMA. The 200 day EMA has started sliding down. These are bearish signs.

A last-minute resolution of Greek’s sovereign debt problems may act as a positive trigger for bulls.

Daily technical indicators are in the process of correcting oversold conditions. MACD is inside its oversold zone, but has stopped falling. RSI has bounced up from the edge of its oversold zone. Slow stochastic is trying to emerge from its oversold zone.

Note that RSI and Slow stochastic are showing positive divergences by not touching lower lows with the index. The index may pull back to test resistance from its 200 day EMA.

On longer term weekly chart (not shown), the index dropped sharply below its 50 week EMA and closed below it. The 200 week EMA is still rising, and the index is trading well above it in a long-term bull market. Weekly technical indicators are looking bearish but showing signs of upward momentum.

BSE Sensex and NSE Nifty 50 index chart patterns – Jun 19, 2015

Sensex and Nifty completed 6 straight trading sessions with gains, marking their highest percentage weekly gains in nearly 5 months – thanks mainly to a rally in RIL stock. Above average monsoon rainfall also boosted investor sentiments.

FIIs remained net sellers of equity worth Rs 3200 Crores in the past week, as per provisional figures. DIIs were net buyers of equity worth Rs 4300 Crores. Unless FIIs turn buyers, down trends on both Sensex and Nifty charts may not get reversed any time soon.

Greece is again on the brink of defaulting on loan repayments to IMF and ECB. More than $100 Billion worth of Euros have been withdrawn by small savers from their bank accounts. Only an emergency fund injection can save Greek banks from going under. Russia may play the ‘white knight’ if IMF and ECB act tough.

BSE Sensex index chart

The following comments in last week’s post on the daily bar chart pattern of Sensex may be worth repeating: “…all is not gloom and doom – yet. Why? Because the index has so far closed within the 3% ‘whipsaw’ limit below the 200 day EMA. Technical nitpicking, you think? On such nitpicking are fortunes made! In other words, there is a possibility of a technical bounce from current level.”

The expected technical bounce effortlessly crossed above the 20 day and 200 day EMAs into bull territory, but faced twin resistance from the falling 50 day EMA and the lower edge of the ‘support-resistance zone’ between 27350 and 28800.

The ‘death cross’ of the 50 day EMA below the 200 day EMA – which would have technically confirmed a bear market – has been averted for the time being. Is the down trend from the lifetime high touched in Mar ‘15 coming to an end?

Hanging like the ‘Sword of Damocles’ overhead is the blue down trend line – ready to provide stronger resistance if the rally continues. Does the index have sufficient upward momentum to cross above the down trend line – after failing to do so on three previous occasions?

Daily technical indicators are giving mixed signals. MACD has formed a bullish ‘rounding bottom’ pattern and crossed above its signal line, but remains in negative zone. ROC is showing good upward momentum by crossing above its 10 day MA to enter positive zone. RSI is below its 50% level, and showing weak upward momentum. Slow stochastic has risen sharply from its oversold zone, but is yet to cross above its 50% level.

Bears can be expected to defend the down trend line, i.e. selling can start at any time. Remember that a trend line increases in ‘strength’ the more it is tested without being breached – as opposed to a support (or resistance) level, which ‘weakens’ with every test.

Technically, next week’s trading can be crucial for both bulls and bears. A convincing cross above the down trend line will mean a shift of control to bulls. Bears will try to retain control by keeping the index below the trend line and the 200 day EMA.

NSE Nifty 50 index chart

The following remarks appeared in last week’s post on the weekly bar chart pattern of Nifty: “Oversold conditions may prevail for long periods during bear markets. In bull markets – and technically Nifty is still in a bull market – oversold conditions are usually of shorter durations. Slow stochastic and ROC (not clearly visible) have both touched slightly higher bottoms than the ones they touched in May ‘15. The positive divergences may lead to a technical bounce, if not a rally.”

Nifty bounced up strongly after touching an intra-week low of 7940 in the week ending on Jun 12 ‘15. The index closed above its 50 week EMA inside the ‘support-resistance zone’ between 8180 and 8630. Is the correction coming to an end finally?

Too soon to say. The index is trading below its 20 week EMA and the blue down trend line. That means bears are still in control. Note that last week’s trading volumes were lower than the volumes in each of the previous three weeks. Unless volumes pick up, Nifty may not be able to convincingly cross above the down trend line.

Weekly technical indicators are in bearish zones, but showing some signs of turning around. MACD is negative, and moving sideways below its falling signal line. ROC (not clearly visible) is below its falling 10 week MA inside its oversold zone, but crawling up. RSI has bounced up strongly from the edge of its oversold zone, but is still below its 50% level. Slow stochastic is yet to emerge from its oversold zone.

An intermediate bottom may have formed at 7940. In case of bear selling, a stronger support is at 7840.

Bottomline? Despite 6 days of rallying, bears are still in control of BSE Sensex and NSE Nifty charts - and will remain so as long as both indices trade below their respective down trend lines. Bulls need to muster stronger buying support to cross above the down trend lines. Stay invested, but remain cautiously optimistic.

Nifty chart: a mid-week update (Jun 17 ‘15)

FIIs are still in sell mode. As per provisional figures, their net sales in equity crossed Rs 2000 Crores during the first three days of the current week. DIIs more than compensated by net buying equity worth Rs 2700 Crores.

Monsoon rains have been above average so far, despite a late start. WPI inflation was –2.36% in May ‘15. Current account deficit contracted to a 3 months low in May ‘15. But exports are down for the 6th month in a row.

The government has consented to 16 FDI proposals worth Rs 6750 Crores recently. A gradual shift towards FDI will have a longer lasting effect on trade deficit than the present dependence on volatile FII flows.

"Manufacturers in the United States and around the world are eager to invest in India, but first, we need Prime Minister Modi to enact serious policy reforms that level the playing field for all, and encourage and protect collaboration and innovation," said Jay Timmons, President and CEO, US National Association of Manufacturers at a recent meeting in Washington.

Even after 4 straight sessions of gains, the daily bar chart pattern of Nifty has spent 11 consecutive trading sessions below its 200 day EMA. The 20 day EMA has crossed below the 200 day EMA, and is providing resistance to the current rally.

The 50 day EMA is falling towards the 200 day EMA. The ‘death cross’ below the long-term moving average will technically confirm a bear market. The rally needs to gather strength to prevent the ‘death cross’.

Daily technical indicators have corrected oversold conditions, but remain bearish. MACD has moved up to touch its falling signal line in negative zone, and showing positive divergence by touching a higher bottom. ROC has crossed above its 10 day MA and is ready to enter positive zone. RSI has emerged from its oversold zone. Slow stochastic is trying to follow suit.

The blue down trend line is dominating the Nifty chart – as it has done since the beginning of Mar ‘15. Bears will remain in control as long as the index stays below the trend line. 

Volumes picked up a bit today, but much more needs to be done by bulls if the rally is to sustain longer. Without FII buying support, that seems unlikely to happen.