Share Market Basics

All About Stock Market

How many times have you heard like, Stocks have been a good investment for the long term, and then thought about which stocks, what is the right time to buy the stocks and is it possible to hold some stocks forever? These blog helps you get the answers for your doubts about the share market basics. for easy understanding basic terms are used for explaining everything.

Market Timing in share market basics

Market timing is not about finding the tops and bottoms but to find the right time to buy a stock, or to sell one or to sell one short or to do nothing. Previous history itself answer the questions. the movement of the market according to the time. whether it is going up, down, or sideways. How can you tell when a significant move, up or down, may be starting to unfold?

In one way or another, the timing for purchase and sale of stocks by technical analysis has been using by successful traders and hedge fund managers. In most of the markets where we can buy most of the things, it is a necessity to reliable the security analysis. Today's financial statements and reports are so complex and a common man cannot interpret the same.

Here i will show you a simple example to buy and sell the stock of eBay shares according to the market conditions.

In case of eBay, is a relatively young company, and the stock is also been costly. However the company have the characteristics that Microsoft had and they are the market leader of auction in internet.

In November 2002, the stock of eBay started moving out of an 18 months consolidation, and it was happening at at the time when there was clear evidence of the major stock indexes were showing sign of making an important low. The stock started from $12 and with in 2 years it reached $60 without any falter.

 

A conservative investor could be looking for stocks such as Johnson and Johnson. From the chart it is revealed that the stock is in perpetual uptrend on the monthly chart which is interpreted by small setbacks. Anyways in January 1992, the stock of JNJ was $14.67 and at the market bottom in August 1993 it made a low at $8.91. Almost 40% was declined which was not really comfortable for anyone. but this decline was not out of propagation to the gains in 1980s.  In August 1999, JNJ climbed to a high of $52.94. It was about four times the price what you paid in 1992. But eBay achieved as much in 2 years as JNJ did in 10 years!

   Avoid Stocks Going Nowhere!

The kind of stock which you need to avoid is like General Motors. In the 1920s, GM stock was the equivalent of Microsoft, and it multiplied in price by more than 100 times. Since then, things have changed for the company which was once a symbol of U.S. business. After fluctuating wildly for several years at the $45 level in January 1996 there was a reasonable buy signal. At some point in May 2000 the stock rate goes to $94.63, at that point you would have doubled your money. Even so, it was hard work owning this stock during the biggest bull market of all time, compared with shares in other com­panies.

You had bought GM in the middle of 1940s, and after holding it for the six seven, you would have made a return of just 50 percent on your money. If you failed to get out at that time, you will be selling it at a rate below $30, where it had traded at the low in December 1994. Really a bad experience!

These examples emphasis that, it really tough to look for companies whose shares have strong and good patterns in there chart history. JNJ is like a tortoise compared with stocks like eBay, but with its record of consistency going back many decades, it is most unlikely or there is a little chance that the company will run into serious difficulties or will be hurtful to your stocks portfolio. Anyways, there is still place for buying stocks like eBay for a small holding according to the charts that shows.

Fundamental analysis only looks at a company's finan­cial statements and its business prospects. This will not lead you to stocks. on the basis of its fundamentals, a great-name blue-chip stock might look wonderful. but in the real world people might not buy that. So the stock goes nowhere. when there are strong technical buy signals, it will be really good to buy a stock like eBay that looks far too costly or a stock about which you don't know anything.

The point of this blog is that you can understand from technical analysis about an individual stock or company. The timing techniques which am going to describe tell you when the balance of evidence favors holding a stock, selling, selling short, buying, or doing nothing. 

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