Babysteps said:
Amit,
I seem to have burnt my fingers in Sree Renuka Sugar. They posted Rs. 180 crore profits against an expected figure of Rs. 30 crore. I thought that would buoy the market and bought a handful at 740 and then again at 730. For some reason, the market seems not to like the scrip and it has now slid to 703. I wonder what I should do? If I take delivery, it would deplete my working capital by a big margin and if I bail out, I would lose a good bit of money! I guess you live and you learn.
Your advise would be appreciated.
Babysteps, as you said, you live and you learn.
Firstly when a stock breaks out at 525 off and hits 760 in just five sessions, that's pushing it. How far could it really go, especially when making the climb from 700 to 760 on decreasing volume. It was way overbought.
The result season can be treacherous for those relatively new in the markets.
Information is leaked a few days ahead. Those in the know buy in hard, and sell equally hard just when the media is going gaga as the results break, and the experts are projecting future earnings etc etc. The unsuspecting buyers chasing the runaway stock are left holding the baby. In most cases of pre result big moves, the expected news is factored in.
The rule the market follows is, buy in anticipation of news and sell as it breaks.
Never chase, never ever. And if trapped high, pull the stop and exit fast.
To take this to an important subjet, there has been some talk on pulling stop-loss triggers or not, trding discipline, trading methodology etc, today.
All of this amounts to assembly-line kind of trading as far as I am concerned.
What has to be understood here is that there is no unmindfulness involved here, nor even-handedness. The issue is of objectivity with the bigger picture in place.
The rule of the thumb is, exit when in loss. It's a fool-proof rule which never fails to benefit the trader.
But there are exceptions to all rules, whether position sizing or risk/reward ratios or what have you, and while I have always disliked being a rigid stickler for rules, how sensibly one defies the rules, or how blindly one follows them, sets apart the sensible from the foolish.
If I had been holding Shree Renuka from 300-350 levels, I may have sold a little, but I would still be holding most of my position in the descent from 760 to 704, knowing that I would hold for at least one more quarter and knowing I had a great entry, and also knowing which support I could safely hold till.
But if I had entered at 550-600 knowing how fast and high it was moving, I would have exited somewhere at the start of the drop even if I wanted in for another quarter. I would have tracked it, looked for an opening lower down, and re-entered.
If I had entered low sensing a big move looking at the velocity of the move and volume, I would have bought in hard in one go, and I would still have held position even if the international markets were tanking and our own running weak, and even if I was in the red, I would have held for being aware of the bigger picture: That fundamentally the main trend is bullish here and elsewhere and the weakness is temporary, and the position itself is on a sure winner with a great entry, where lesser amongst the sector are running too. I would still have held position too, for knowing that I am personally sitting on handsome profits in several running trades, and so my risk factor overall can be stretched long.
So here it would appear that I am not a hard nosed, cold-blooded disciplinarian...and I am not.
I love to play from the heart, I love to break rules, but only and only if it makes sense to do so, and only if I know what I am doing.
So...in your case, I would not have bought in, and if in, would have bailed out much higher.
However with the damage being done, it's not an easy call at this point even if it's your own call whether to book losses or hold in agony till a turnaround.
On technicals there is not enough data on Shree Renuka, being a new listing.
If you are going to hold, I can attempt to give a couple of support areas using my material and data here. It's the same stuff used for the Nifty every day.
690-695 is one. Then 680 to 675 to 667.
To the up, a close above 717-722-727 could bring it close to your price.
Do get back if you need further clarification, and please don't mind the the discussion above, as it's not directed at you in particular, but generally for those who read these postings and are looking for different perspectives on trading.
Good luck.
