Nifty - Piercing Pattern

Nifty on 17th October 2016 at 15:30 has formed a piercing pattern. Following this on 18th Nifty opened gap up, and continued upward journey.

This continued for 9 consecutive candles of positive closing. At the end we could see a partial shooting star followed by a bearish engulfing. This brought a halt in the hourly time frame. Looking at the +ve divergance in hourly 9 RSI chart, this halt many not be a very deep one. It might just be a time correction for all the averages to catch up. Also for the 9 RSI to cool off a bit before the next move.

Gann date - Yesterday happens to be the 25th day of the down move from the top. It is +/- 1 day from 26 which is half of 52, an important Gann number. This gives more weight to this turning. This might be the end of 4th wave as seen in the daily chart.

 

Fraud detection

Notes from 8iholdings.com investment division update int
on the topic fraud detection is very interesting. Need to keep an eye on these aspects while analysing the company.

Learning’s from Berkshire Hathway annual letter 1982

Warren Buffett in his 1982 letter to investors, talking about two of his managers Phil Liesche and Ben Rosner, he wrote –

Both Ben and Phil ran their businesses for Berkshire with every bit of the care and drive that they would have exhibited had they personally owned 100% of these businesses. No rules were necessary to enforce or even encourage this attitude; it was embedded in the character of these men long before we came on the scene. Their good character became our good fortune. If we can continue to attract managers with the qualities of Ben and Phil, you need not worry about Berkshire’s future.

The lesson for an investor is that in stock market, you’re not just in the business of finding good businesses. Your real job is to find people who are running good businesses. That brings good fortune.

Lupin - what the badshah of dala street, Mr. Rakesh Jhunjhunwala did in FY 2016

We all know that Indian Warren Buffett, Mr. Rakesh Jhunjhunwala has a major investment in the Lupin. So I was curious to check whether he appears in the top 10 investors list. I took the annual report of Lupin for financial year 2016 and checked the section 'Shareholding pattern of top 10 shareholders" on page 93, there his name appears at the top holder. Next thing that I did was to glance at a page long transaction list of his trades.

My curiosity lead me to see what happens when Rakesh Jhunjhunwala buy or sell (small quantity) of his holdings in the market. Will he buy exactly at bottoms and sell at the peaks? Or he is also like any of us who will buy at the top and sell at the bottom? Or it is just random.

So I took all his trades from the annual report and plotted them on the price chart. Left hand axes represent the price while the right hand represented the quantity of his trade. Stars appearing above the Red horizontal line are the buy and below the line are the sells.

Now the analysis and interpretation of this .... well I'll leave it to you.

If anyone needs the data in a excel sheet then you can let me know and I can share the same.

Nifty intraday 26-08-2016

Our earlier views on Nifty about the triangle formation became invalid. I'll write a detailed note on this one over the weekend (Impact of the per-conceived notion on the Elliott wave analysis )

The fresh look at the hourly chart shows that we are either in 'C' of the 4th wave or on the 3rd wave of the bigger fall. For now we will go ahead and perceive the 'C' wave and will look into the 3rd wave possibility only if this wave does not end near 8410 region.

Nifty hourly chart:

The Halo Effect:

An article by JASON ZWEIG

"

In both cases, what psychologists have christened the "halo effect" was at work. In this quirk of the human mind, one powerful impression spills over onto our other judgments of a situation. The effect was first documented in the U.S. Army decades ago, when soldiers who earned high scores from commanders for one quality (such as neatness) also got high marks for entirely unrelated qualities (such as loyalty and physical strength).

Halos can be cast by many aspects of a company. Consumers who know a firm is highly profitable are more likely to believe its products are high-quality and its advertising honest. That helps build loyalty among customers, making companies more resistant to competition. And if you love a company's products, it is natural to conclude that it has superior management, too. 

"

He goes on to write the following to overcome halo effect while analysing a business/stock:
"

You can adapt a procedure described by the Nobel Prize-winning psychologist Daniel Kahneman—who is widely admired for his insights into decision-making—in his forthcoming book, "Thinking, Fast and Slow." Start by identifying a handful of objective factors that you believe can predict superior returns. You might, say, include low debt as a percentage of total capital, stable earnings growth, high return on equity, low price relative to earnings and a history of raising prices without losing customers.

For any prospective investment, rate each of these financial factors on an identical scale—say, from 0 at the bottom to 5 at the top. Then add a final, subjective factor: your overall intuitive impression of each company and its management, rating them on the same scale. Finally, total all the scores and divide by the number of factors; the company with the highest average is the one you should favor.

"

Detailed article can be read here.

Infosys EOD 25-08-2016

Elliott wave analysis of Infosys we saw that a 5 wave down move was ending (earlier analysis can be found here). Further to that Infy seems to have done a small 5 wave upmove followed by 3 wave decline today.

Infosys Elliott Wave analysis on 1 min chart: