In The April 2 Chronicle, I speak of the number of stocks above their key moving averages and see if there is an indication that this sudden bull rally is only a short move (of the biggest stocks) or a broader, more interesting move.
I’ve been talking about breadth for the last two weeks and today, we’ll again look at an interesting statistic: Number of Index stocks above key moving averages.
A moving average is usually significant in that it tells you whether the stock is above the average (bullish) or below (bearish). The number of days in the moving average can be small (short-term) or big (long-term). Key values are the 50 day moving average (DMA) and the 200 day moving average; you can think of them as the average price of a quarter and a year respectively.
In an index that has many stocks as its constituents, the number of stocks above and below their key moving averages might indicate the breadth of the move in the index itself. The Nifty, which consists of 50 stocks and is broader than the 30-stock Sensex, is still constrained in that three stocks – ICICI Bank, Reliance and Infosys – are responsible for more than 25% of the index itself, being weighted that way. So while the index might move a lot with just those three stocks showing up-moves, the index as a barometer of the stock market is only valid if the trend is more broad – that is, a large number of stocks are moving up.
Let’s see the number of stocks above and below the 50 and 200 DMA, on a 15 month chart, with the Nifty superimposed:
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We had two great Short Takes this week.
Can you buy a share and still not get it, two days after you purchase? And if you sell it without actually having it, what happens?
Deepak Shenoy takes you through:
- The concept of short delivery
- Auctions on the NSE
- Why you get your shares four days later instead of just two
- How you might be penalized for selling what you don’t own
- Why this is important even if you are a "Buy Today, Sell Tomorrow" (BTST) trader.
In a 20 minute free form conversation, Manish from MProfit speaks with Deepak from MarketVision talk about:
- Technology and Trading in India
- How Distributors have started to become Advisors and,
- The Reliance – DE Shaw deal.
Manish and Deepak worked together briefly during Deepak’s Moneyoga days of building algo trading systems in Bombay. According to Manish’s twitter profile – he loves Cars, technology, finance, fitness and a certain fruit from Cupertino, Calif. He moved to India 5 1/2 years back to focus on technology driven businesses. His latest venture is MProfit – a desktop portfolio management software.
(As a disclosure, there is no commercial relationship between our companies)
- What does 40% dividend mean?
- Open and Closed Ended Mutual Funds.
- Conversations with Ramki: DLF, Tata Steel and BankNifty
- Equity Mutual Funds.
- Did FIIs cause the crash?
- Mutual Funds: Pricing and NAV
- Dividend Versus Growth Plans
- Introduction to Mutual Funds in India
- Recovering From a Steep Loss is Tougher
- A primer on the P/E Ratio
- What are Bond Yields?
- The Physical Gold Con Job
- Mutual Funds Are Not Just For Equity Investing
- No More Third Party Cheques for Mutual Funds
- STT and Option Prices
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Coding and Writing Furiously Before the Match,
Deepak and Shyam
The MarketVision Team