Bottom Fishing Technique | 90 % Accurate

Today I'm going to share a technique of bottom fishing which has recently earned me lot of profit in Punj Lloyd very quickly.

In this technique, if you spot that 100 EMA has not been tested in last 6 months by a scrip's price, start accumulating the scrip aiming for 100 EMA retest in next month or so. This works well especially for Nifty Futures. However, we can apply this technique on a specific stock we trade in through some trial and error.

Note: This opportunity arises only once or twice for a particular scrip in a year. And that is the time to make a killing!

On 24th May, I noticed that price of Punj Lloyd had not touched 100 EMA since 6 months. Last time it tested 100 EMA on 12th Nov, 2010. Hence I started accumulating this stock. I bought the first lot @ 55 and immediately the price started to move up. There was a 10 points spike on 31st May and it closed @ 68.15. Noticing that it is moving according to my plan to test the 100 EMA which was @ 73-74 levels at that time, I bought another lot @ 64 after some correction on 2nd June.

Yesterday I exited Punj Lloyd @ 71 as it is very close to the 100 EMA which is now @ 72.62. This single trade earned me a handsome profit. Booo @ the CNBC which was advising consistently against buying the Punj Lloyd since last month, even on 1st June. I was so confident that I shared my trades with couple of my close friends and told them that I'll not base my trades on Technical Analysis (TA) again if Punj Lloyd doesn't go over 70 within 1 month. (Though it was stupid on my part.. LOL)

This technique is based on the belief "History repeats itself", which is perhaps the TA is all about anyway.

You must be wondering why I sold everything yesterday? It could have gone further up.

My answer is because of two factors:

1. Discipline: I've completed my objective to book profit above 70.
2. The spot price doesn't like to stay near 100 EMA (which is currently @ 72.62) for too long. After testing 100 EMA, it can shoot in either way. If you're lucky, you're in for huge profit. Else watch your accumulated profit getting evaporated soon. Also, trading according to TA is not gambling.

I'm attaching the chart of Punj Lloyd for reference. I trade on many indicators. That's why you're seeing many lines and signals there. However, for this trade, we are concerned only about the price candles of Punj Lloyd and the Green Line above it which is 100 EMA. Notice the previous pattern of 100 EMA being retested between January 2010 and August 2010 (when there was a spike).

Important: The time-frame for this strategy should be 'daily' on the charts.

P.S.: You may apply this technique when you notice that the spot price is above the 100 EMA since last six months. Start selling it as the price should retest the 100 EMA soon.

Happy Backtesting!

Based on this technique, today I'm bottom fishing ADSL and UNITECH. Price should move up as both of them have not tested the 100 EMA since last six month. I'll explain with the charts after the market hours.

Invest at your own risk.

Just got to know from a friend that there are numerous cases going on against Unitech. He's telling me to avoid it. Hence, I've decided not to purchase it as Technicals won't work if the company closes down.

Hi lads,

Today I thought I'll buy ADSL around 3:20 PM. Usually I prefer to buy equities late for delivery trades so that intraday players are out of the market, and I get a genuine price. However, my broker said that ADSL reached some market cap today. Hence, it was not available to buy. Will see if I can buy it tomorrow. CMP: 50.55 (+5.1%)

That being said, ADSL tested 100 EMA last on 26-10-2010 when it closed @ 231.15. Since then it has been declining. However, 7 months have passed and it is in the eighth month without touching the 100 EMA. I guess that 100 EMA touch is imminent within one or two months. 9 months is the maximum duration for the 100 EMA test I've seen for any stocks yet. Remember Nifty futures price reverts to 100 EMA within a maximum of 28 weeks or 7 months before it goes anywhere else.

Great news is that the 100 EMA is still hovering around 90. Hence, this stock price has the potential to hit the 100 EMA above 70 levels within a month.

Even if it takes 2 months, I presume we'll be in good profit.

Good thing is that we're Bottom fishing in this trade at the CMP.


Trade at your own risk

P.S.: Please spot the low lying stocks and share about them. Now, go fishing!

Originally Posted by itsmemad

Great news is that the 100 EMA is still hovering around 90. Hence, this stock price has the potential to hit the 100 EMA above 70 levels within a month.

)

mere chote se dimag ke kaafi upar se tangent sarakta hua nikla hai boss!..

Thank you for asking.

100 EMA line is declining at the rate of ~ 20 points/per month. Assuming that the price moves up within one month which according to this strategy is quite possible. it will slow down the rapid fall of 100 EMA (Green line) which is now @ ~ 90. Hence, the price will certainly hit it above 70 levels.
If it takes two months... still it should hit the 100 EMA above the current price.

Though according to the "Bottom Fish" strategy, we should have started to accumulate this stock one month back (just after 6 months of EMA test).

However, according to a different strategy which I will discuss later, the price touching the Red line is the first confirmed buy signal. When it touches the ligh Blue line above it, it will be the second buy signal.

Please note that both these strategies are independent and we don't need each other to make the decision. However, the beauty of this particular trade is that it is screaming buy according to both the strategies. Hence, we know that we're going in the right direction and 100 EMA test is imminent.

I'm trying to bottom fish another stock today: Patel Engineering.


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I bought 'few' stocks of ADSL @ 49, Patel Engineering @ 163, and Punj Lloyd again @ 68 (It has not touched the 100 EMA which is still @ ~ 72).

The reason I bought just 'few' stocks is because RBI is coming out with some policy revision on 16th. Hence, I may get better bargain later.

I'm attaching the chart of Patel Engineering. It last tested 100 EMA on 24-11-2010. Six months have passed. Hence, I've started accumulating it.

At present 100 EMA is at ~ 182. CMP: 160.10.
Sooner the 100 EMA retest happens, better will be the profit!

P.S.: Please don't follow the trades practically unless you know what you're doing and know about your risk/reward appetite. I'm just using this thread to document my trades according to this strategy..
I'm buying Put Options of Nifty and some scrips as an insurance for my investments too.

Today I've booked more than 100% profit in my Put Options trades. Had an inside tip that the market may fall on Monday even after falling for last two sessions after the SBI increased the rates.

Nifty is still at 83 points less than its close on Friday. BSE 263 points down as I write this. Added more ADSL and Patel Engineering to my position. Now, the avg price is 46.7 for ADSL and 157 for Patel (not holding much).

The friend has told me that the market should stabilize from Tuesday. However, I will keep stop-losses intact for both. Will determine them after the EOD. As no technical or fundamental analysis will work if the market crashes.

Beautiful post. Came to know so many things in stock mkt. so many abbreviations used in your post and i feel it might be necessary for a big player too. Rather say it might be in built habit.

I do invest in stock mkt, but not like you. I deal in delivery ONLY.

Your details are very interesting and tempted me to learn the same.

EMA, TA have different meaning as i made a search on the net. What is the exact meaning in the terms of share mkt.

Important thing is from where to know about EMA or TA of a particular stock.

Shall I accumulate ADSL @ 40.60 (Closing on 29.06.2011) or Patel Eng @ 148.

Accounting is not my cup of tea, so i will definitely learn from you.

I knew very well that if loss aries that is from my decision only and you will not be blamed in any matter, but if profit earned through discussion with you I will definitely give credit to you.

PTC Finance Ser is below it's issue prise. Shall i accumulate for a time horizon of a year.

I am very much thankful to you because you are sharing lots of information and knowledge about stock mkt on this forum for free.....

Thx and regards

Hi Pnjani,

Glad that you liked this topic. TA is nothing but Technical Analysis of charts. It involves study of the scrip's price structure by using many indicators, trendlines, moving averages, etc. These jargons may sound a bit new to you, however, they are very easy to practice. EMA's definition is linked in the first post.

There are numerous books/sites on the Technical Analysis available. You can also study about them at StockCharts.com - Simply the Web's Best Financial Charts

At present, Patel's price structure is looking better than ADSL. You may buy it with a stop-loss below 130. I've both in my portfolio, and I'm going to give them couple of months. Also, this topic is about 'delivery' trades.

I use the software from chartnexus.com for basic EOD (End of Day) analysis of the stocks. It is free and it update the charts every evening.

For Futures, Options, advanced or real time analysis of stocks, I use Metastock. Amibroker is another excellent software for advanced usage.

I'll analyze the chart of PTC Finance serv. after market hours. You must research on fundamentals of the company if you've a long term horizon of 1 year or more. I suggest that you go through the threads on couple of scrips from me in this section. It will help you to know the factors which are important while looking at the fundamentals of the company.

Happy investing.

Dear itsmemad,

Mind blowing answer, and thank you very much for taking interest in my post.

As suggested in said post, i will try to learn and then will take help if required.

Thx and regards.

Pnjani

I have downloaded the software from chartnexus.com for basic EOD (End of Day) analysis of the stocks.

Selected BSE only and updataed BSE data till 30.06.2011

Is selection of NSE and it,s data are required ?

Now what to do ????????

@itsmemad

Thanks for the tip. One doubt:

"In this technique, if you spot that 100 EMA has not been tested in last 6 months by a scrip's price, start accumulating the scrip aiming for 100 EMA retest in next month or so."

When you say the scrip may test 100 EMA over the next month, which 100 EMA? as 100 EMA is also changing for a scrip each day. So, over a period of one month the 100 EMA of a declining scrip may also fall below the Buy Price. Are you considering the 100 EMA on the date you buy the scrip as Target?

As per your technique, does Rel Infra qualifies for such a move? As per my understanding of your post, it does. Plz clarify.

Do you look beyond the past 6 months of the stock you are picking using this technique? If yes, what to look for from the history?

Originally Posted by pnjani

Is selection of NSE and it,s data are required ?

Now what to do ????????

I trade on NSE. Hence, I download the NSE data. Hope you've plotted the 100 EMA line and trading according to the rules.

Originally Posted by Roshni_khetan

When you say the scrip may test 100 EMA over the next month, which 100 EMA? as 100 EMA is also changing for a scrip each day. So, over a period of one month the 100 EMA of a declining scrip may also fall below the Buy Price. Are you considering the 100 EMA on the date you buy the scrip as Target?

As per your technique, does Rel Infra qualifies for such a move? As per my understanding of your post, it does. Plz clarify.

Do you look beyond the past 6 months of the stock you are picking using this technique? If yes, what to look for from the history?

Yes, 100 EMA changes everyday; so is our target! For ex: when I bought ADSL, 100 EMA was at ~ 90 levels. Now, 100 EMA is @ 76.85. Hence, I've revised my target to ~ 76.85.

100 EMA can certainly fall below my buy price if it continues to decline for the next one and half month. In that case, we may keep the stop-loss @ the most recent (past 1 month) lowest close of the scrip. For ADSL it was 39.8 on 23rd June. However, if a person doesn't want to bear so much loss, she/he may keep the stop-loss much higher or according to her/his money-management rules.

For Patel my revised target is 173 and stop-loss is just below 130 as I mentioned earlier in this thread.

In a hypothetical scenario of the 100 EMA moving towards our buy price but CMP above our stop loss, we may exit when 100 EMA tests our buy price.

Yes, Reliance Infra qualifies for trade according to this technique.

Yes, it's better to analyze whether the scrip has followed the rules of the "Bottom Fishing" technique earlier too. For ex: Nifty Futures has always followed this rule. Hence, I've had 100% success with it so far.

Well, I like the technique. But, somehow I find almost all beaten down and well known scrips moving below 100 EMA and it is quite obvious as the market improves or due to stock specific newsflow, some of these will see sharp spikes.

Anyways, this was a good technique to learn. Will keep this on mind but I wont invest based on this technique solely.

BTW, what are views on Aurobindo Pharma, Mphasis and Lanco infra? I am currently invested in these after the recent fall of these stocks.

Originally Posted by Roshni_khetan

BTW, what are views on Aurobindo Pharma, Mphasis and Lanco infra? I am currently invested in these after the recent fall of these stocks.

Do not take falling knife !!!!!

I made a loss in this technique.

Originally Posted by pnjani

Do not take falling knife !!!!!

I made a loss in this technique.

Agree!! Mphasis is down again today

But, I consider these scrips as already fallen knife and not falling. Lets see. A bit of risk maybe :P

It U R a treader, i.e. day or short term, then, Mphasis may be good 4 u.

I am an investor and do deals in delivery mode only. Use to keep script a year and more.

Any way, still there is a room for Mphasis to go further down. This is my view and U may or may not relay upon it. No responsibility taken.

all the best......

Thx and regards.