Let me have the audacity to tell you that price is everything in the capital markets, will you believe me? I'm sure few will disagree with me. But give me few minutes to build my case.
Hello Traders !
I'm back with another blog and this time it will be about my recent trades. I hope you can learn from a real trader, from real trade execution. So, come along on this journey to become a professional trader of capital markets. So that you can manage & grow your wealth from wherever you want. However, road ahead is not that easy as it sounds so, strap in.
Recently, I traded Sula Vineyards(SULA) and Archean Chemical Industries Ltd.(ACI) and saw a very unusual behavior of price. We are going to dissect both these trades one-by-one.
Sula Vineyards(SULA)
Role your eyes on the left side of the chart(refer Fig-1)
Fig-1: SULA Candlestick Chart
Can you see a nice base forming on the left-hand side? Such low volatility bases with small candles where pullbacks are gentle with low volume form a good foundation for the further up move once price breaks out. As soon as the price tried to break out on high volume the first entry was made @ 503 then price became sticky to the resistance level and kept going up and down at the same level for next 5 days and finally broke out with very high volume moving 31% within 2 days. I made 2nd entry at 637 and 3rd entry at 645, in total having 750 shares. I'm feeling a bit lazy, you can calculate the average buy price. Is it 569? The up move was strong, backed by high volume. I assumed the price will move higher hence, I added more quantities. The price started facing the resistance. All 750 quantities were exited at 659. Adding further quantities disturbed the risk-to-reward and also, we could not harvest big gains by pyramiding as price was facing the resistance. Let's look at its fundamentals a bit.
Fig-2: SULA Quarterly Results
Quarter-on-quarter growth in sales, operating profit, Operation Profit Margin, Next Profit, Earnings Per Share has been great and yearly results are also descent(ref Fig-2 & 3).
Fig-3: SULA Yearly Results
It has a sound base, price got sticky to the resistance level, breakout with high volume, good fundamentals everything aligned so well for the start of a fresh uptrend but it is hard to believe how the price tumbled like a peck of cards in the next few days. If you believe only in fundamentals and choose to hold the stock when it goes through ~30% correction from the all time high then you may miss the opportunity to make gains by deploying your capital in other up trending stocks. Below is the tradebook log and P&L statement from broker's back office.
Fig-4: SULA tradebook and P&L
Archean Chemical Industries Ltd.(ACI)
ACI also broke out with high volume from a nice base and has been in free fall for last few days.
Fig-5: ACI Candlestick Chart
During this time market has been volatile and the bull run was getting weak hence, I went with half of the position size which I could have built given the right conditions. So, 420 quantities were bought at 679 with low of the day as stop loss which was 666. This trade worked well and gave us 1:11 risk-to-reward. Here also, the base was good, breakout happened with high volume but price took the U-turn and since then it is unable to find the support. Now, let's have a look at its fundamentals.
Fig-6: ACI Quarterly Results
Fig-7: ACI Yearly Results
Dec 2023 quarter has seen good rise in sales, operating profit, net profit and EPS. yearly results are descent too. Still you can see what happened with the price.
Below is the tradebook log and P&L statement from broker's back office.
Fig-8: ACI Tradebook and P&L
Had I held them on the basis of fundamentals I could have easily given up on the gains and to be honest I don't have the guts to hold the position if it corrects by 30%. The capital deployed in these trades may look less for now but what if we will be trading with large account tomorrow. Let's say deploying Rs. 20-30 L in single trade. I surely won't hold it in such a deep drawdown. As a professional trader, I have to be bothered about my risk more than the reward. There could be different approaches for different types of traders and investors who operate in a larger time frame we won't go into those details because that topic is out of scope for now. I can only express the things from my experience and how I see the market. So, what do you think? Which is the most important data point one has to look into when trading in the capital markets? Price, right? This brings us to the end of our today's blog. I hope you enjoyed our today's blog as much as I enjoyed writing it. Thank you for your time ! You can connect with me over LinkedIn and X(Twitter). I'm a student for life, so don't hesitate to send over your views or sources to help me enlighten myself. You can also subscribe to our weekly newsletter(to be launched soon) and know the pulse of Indian and US stock market and remain ahead in generating Return on Investment(ROI) by reading our weekly while sipping your Sunday morning coffee.
If you are a beginner and want to learn how I do what I do. The below series of blogs will help, to be read in chronological order:
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