Volume Shockers can give investors a high Voltage Shock if they pick up the wrong stocks

One simple way to pick up good stocks is to observe which stocks are rising in volume with corresponding rise in prices and then blend this data with the underlying fundamentals of such stocks to verify if there is good value in the scrip. However one needs to exercise abundant caution whist deploying such stock picking strategy because more often than not the value of a scrip may continue rising for days or weeks when actually there is nothing much valuable in the scrip as such. As an analogy, folks may be thinking that Gold stocks may be the next big thing when neither the promoters or financers know much about how deep down the gold stuff is and whether the stuff is actually gold or coal and even if its gold in billion tones the Government babus will come out with such fascinating ordinances that will compel the gold diggers to start digging the grave of their corporate logo and what not! [ read - filing for bankruptcy ] A case in point is the ongoing Government intervention in the affairs of MFI’s. I was a bit amused to witness the “poking of nose” by State and Central Government in the affairs of MFI’s. Very recently when I was watching a TV serial in which a very prominent personality from GOI Finance Ministry said that MFI’s in India are doing a great job and they should be left alone because the BPL guys anyway borrow even at 100 per cent from money lenders but will never approach any bank because they want the money fast and that too without much pain. And did I say that MFI like SKS Microfinance, SE Investments, Arman Finance dole out loans in the range of 25-30 per cent and not 100 per cent! Well I didn’t but guess you folks got it anyway.

Friends, remember the trend is your friend but catch the trend fast before it bends – this is something akin to a bus moving forward and northwards if all goes well but at times the bus in which you are travelling may without warning start moving in the backward and southward direction making it impossible for you to reach your desired destination – yeah you can as well hop off mid way sustaining injuries and board another bus which you believe is moving northwords! But that’s different question.

While there will always be many stocks which are up consistently on a 3, 5, 7 days time frame, not all would be great buys. Indeed, ascertaining which stocks will continue the uptrend based on fundamentals is a herculean task because you will need to check the fundamentals of each of these stocks to conclude which are the best amongst the several stocks which have commenced their north word journey. Hence, I have attempted to cover just 2 stocks only : one which I believe will continue the north word journey and another one which will come crashing down sooner than later like a house of cards.

Friends, I’ll throw some light on these two stocks tomorrow since my friends have given me about more than a dozen missed calls and I need to join them for commencing celebrating the Festival of Lights.

As I sign off, I wish you and your family a Very Very Happy and Prosperous Diwali and a Great New Year.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd