Adi,
There is no secret to what I do. I rely on price structure and visualization to narrow my stocks down. If in a sector I see bunch of stocks with a positive structure, I place them on my large LCD screen and view them from a distance of atleast 10 feet. The one which looks the best is the one I select to trade.
Look at Hindalco, Tata Steel, Sail, Sterlite etc. All have descent short term price structure. But when I saw Hindalco from a distance, I just knew that was the stock to bet on. Similarly, probably all auto stocks have good price structure, but the best one's from a 10 feet distance are Bajaj Auto and Tata Motors.
About 10-12 days back, when I had written to avoid Banks, I did the same. I am not completely bearish on banks. It is just that now I see gains coming from other sectors. Even if you look at Sugar stocks, the best price structure and visualization is in Renuka sugars. Hence, I am vested in the same.
One more important factor in determining where to invest is the awareness of market fundamentals and sector valuations. If you see, the simple reason why banks did not appeal much to me were because the valuations (short term) were simply exorbitant. It had to correct and I am glad it is correcting. Eventually when banks are ready for upmove again, they will contribute immensely to the broader market. I have positions now in commodity related sectors as I feel that markets will largely rally due to this sector doing well.
In conclusion, if I have to sum it up, I combine Price structure and Visualization with Fundamentals and Economic analysis to determine what will probably happen next. Once the initial view is structured, positions are taken. In this thread I can teach price structure but I cannot teach how to build Economic insight. This is something which will come naturally after observing markets and understanding structure of our economy.
Hope you understand that there is no holy grail.
Tc
