THE RISE AND FALL OF STOCKS

The Rise and Fall of shares: - 

          Share in the market offer a high capital appreciation but the movement of the share price is always like a wave and tide motion of the sea. The waves of the sea never surrounded it will rise again and again only the magnitude will vary if the weather is run then the sea will high waves. Similarly to see the stock market will also rise high waves when the market booms, it will get depress in slum. The rise and fall of the share is linked to a number of conditions such as political climate, economic cycle, economic growth, international trends, budget, general business conditions, company profits, product demand likewise.

Why Do Stock Prices Change?

           Stock prices are changed everyday by the market. Buyers and sellers cause prices to change as they decide how valuable each stock is. Basically, share prices change because of supply and demand. If more people want to buy a stock than sell it - the price moves up. Conversely, if more people want to sell a stock, there would be more supply (sellers) than demand (buyers) - the price would start to fall.

   Stock represents ownership in a company. Therefore, the price of a stock shows what investors feel the company is worth. Stock prices can change at any rate, some have dramatic swings in one day while others stay the same for a long time.  There are hundreds of variables which drive stock prices, the most important of which is earnings.. Think of earnings as the profit of a company, the money left after all expenses have been paid, this is what share holders desire.

There is also a common misconception that a stock that has risen will always come back down, this is false. Stock prices reflect the interests of investors, not the laws of gravity. Historically over the long term stocks have appreciated by 10-12%.

Three level of shares:-

1) Undervalued or deflated zone

2) Real valued or correct valued zone

3) Over valued or inflated zone

   Generally we can say a company is in speculative zone when the 12-day rate of change of the price is more than 75% to 100 %. The ideal time for buying shares would be in deflated zone or real valued zone. Over value or inflated zone will create excess speculation and the prices fall shortly after entering inflated zone.

 MARKET TRENDS:-

 1) Primary market trends. 2) Secondary market trend.

The major trend of the stock prices was being up or down. It is also called as correction or reaction some of the physical signs when business cycle changes.

 Good time to buy shares.

1. General pessimism & fear about the business.

2. Public sentiments are at low ebb.

3. Demands for goods are low.

4. Public participation is low in share market.

5. Real Estate prices are very low.

6. Company profit margin fall.

7. Interests rates are high.

8. No response to new issues.

9. Commodity market week.

10. Bond market seems attractive.

11. Corporate profits low, dividends low even skip.

12. Employment increases factories are going.

13. Industries start partial lay off.

14. Heavy industries are dull.

15. Some leading shares say market leaders are bullish

16. Everybody things market will go lower but market fails to record new low

actually

Good time to sell shares:-

 1. High demand for consumer goods.

2. Corporate profits high.

3. Extra dividend, bonus rights being offered.

4. Investors rushing to the stock offices kept open till now time.

5. Real estate boom, Housing shortage, high rain.

6. High bank loans.

7. High industrial production.

8. Labour shortage.

9. Over expansion of credit.

10. Over subscription in new issues.

11. Commodity markets rising.

12. Fixed interest yielding, bonds debentures, fixed deposits seem out of favour.

13. Share market news appears as headlines of in all magazines.

14. Shares fail to record new high.

15. Labour strikes for more wages.

16.Business morality very low, Black market. Seller’s market.

]

          In general a fundamental analysis tells the latest developments, profititabilty, sales of the company and the industry. We can conclude with the present status of the company and the merits. At the same time we have to look what may be the future trends of the same company. The market always discounts the future. A fertilizer company with good results may go down when the news of monsoon failure even though it is not affected profits immediately. Many companies with excellent results may go down when a political instability occurs. This indicates that investors worry about the future and mostly forget the past things.

           The super timing of the market is nothing but a pure technical analysis. There are various types technical analyses. Technical analysis are art not a science and hence the accuracy varies and it is the probabilities only.

 1. Using moving averages.

2. Trend lines.

3. Patterns.

4. Business cycle theories like Elliott Wave Theory.

5. Fibonacci Studies.

6. Stock Market Indicators.

          Elliott wave theory says that the market is like a wave and tide motion of the sea. The waves of the sea never surrender. Only the degree of impulse varies. In a rough weather the sea roars with amplitude of waves and thereafter a heavy undercurrent and pull back occurs towards the sea. Similarly in a boom time the stock market rise abnormally in speculative or overbought zone and thereafter a sudden fall occurs due to (no buyers or) surging of buyers. It is always suggested to buy in normal market condition and take profits when prices move in overbought zone. An investor can be assumed as best if he could sell around 80% of the rally.

Investment is better than speculation.

We advise each and every one to be an investor than a speculator.