QUANT SYSTEM TRADE RECOMMENDATION -23.01.22
- Capt D. Ganesh Raja
- Jan 23, 2022
- 3 min read
From the desk of Capt.D.Ganesh Raja
Dear Friends,
I have fully recovered from Covid and getting ready to travel again. I did find time to look many factors during the week. Today’s post will be on the backdrop of sharp fall in the markets, union budget on 1st February, impending elections in many states, especially the politically pivotal state of UP, from 10th February, Federal Open Market Committee (FOMC) meeting on 26 January, Russia threatening to occupy Ukraine etc. These kinds of events can wrack a trader’s nerve and I have experienced that during the course of my journey in markets.
Since I have already said that the recommendations are for little longer timeframe, one has to live with the inherent volatility in shorter timeframe like what we saw in the last week.
You might have noticed that I had not given a buy recommendation in Nifty last week, because there was no signal in the Quant system. There were buy signals given in other stocks, which I recommended in “Trade Recommendation Sheet”.
I have been saying in my close circles that there will be a time based on long term fundamentals of the economy and also the character and temper of the happenings, we might be nearing the stage of carefully selecting the stocks and let the bull wave lift it up. Probably we are nearing that stage. But guesswork is not what we are looking at here, so let us look at few factors.
PLI (Production Linked Incentive) scheme has been a game changer and has attracted investors to the country in manufacturing capabilities. GST collections continue to be robust. Many economists predict that the Covid wave 3 will not much of a dent in the economic recovery. We need to see how this pans out. Inflation expectations continue be high and above its long-term moving average. This should be a worrying factor because generally it is met with tightening interest rates. Also, across the world economies something similar is seen and it seems that Central Banks would choose economic growth for now, rather than containing inflation. I might be wrong here but I would rather put together my understanding of the situation,
Now I will explain my methodology for making sector and stock selection. I would typically look at sector which are experiencing a sharp turnaround due to the economic pickup and they typically would have larger profit growth. Also, in this I would look at companies which are utilizing a fraction of their installed capacity, because the incremental sales can easily be met by increasing the capacity without additional investments. Companies which are operating close to their installed capacities would need fresh investments for increasing sales, which might temporarily slow down earnings and as a result appreciation in stock price. In addition, travel, tourism and hotels are sectors which have been much beaten down due to the pandemic and post that would see a strong surge in demand. These broad ideas have to also be viewed through other financial factors.
For large cap companies for most of the decision making I rely on Quant system filters, but to be honest for mid cap and small cap companies I have a good look at financials and fundamentals, in addition to Quant system filters for making investment decisions and putting out recommendation.
The stocks recommended in last week, namely Reliance Industries , Mah & Mah, Tata Motors, Indian Hotels and Action Construction, if the price slightly violates the stop loss levels DO NOT exit the position but continue to hold it. I will try to update again during the week.
For now Nifty has given a buy signal as indicated below.
Note3: A separate excel sheet is attached to view the performance of the recommendations, which also reduces the task of individually reporting the performance of each trade recommendation. Viewing the excel sheet “TRADE RECOMMENDATION LOG” will be self-explanatory. Also in this sheet Trade recommendations which are still active are marked.
When signals are triggered mid-week, that is updated in log sheet and covered in the weekend report, due to paucity of time.
NIFTY: Last close – 17617.5.75. Recommended to go long in Nifty at these levels with a stop loss at 17350.0. It has given buy signal as per weekly charts but daily charts exhibit volatility.
Target 1 – 18350.0, Target 2 – 18700. Leverage – 0.5x
GOLD: Last close – 48119.0. Long recommendation in Gold was given on 22.10.21 at 47797.0 and on 13.12.21 at 48303.0. Continue to hold remaining position in Gold.
EXISTING TRADE RECOMMENDATION OVERVIEW
REFER TO TRADE RECOMMENDATION SHEET
NEW TRADE RECOMMENDATION
NIFTY, AS DISCUSSED ABOVE.
TOTAL LEVERAGE OF ABOVE NEW TRADE RECOMMENDATIONS: 0.5
COMBINED PROFIT POTENTIAL FOR ABOVE TRADES: 17.5%
TIME WINDOW OF TRADES: 15 DAYS TO 90 DAYS.
TOTAL LEVERAGE INCLUDING UNCLOSED POSITIONS AS PER PREVIOUS RECOMMENDATION: 1.9X
RETURNS TILL DATE SINCE 04.07.20 : 53.49% (AS OF FRIDAY 14.01.22 CLOSING)
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