Introduction to Short-Term Investing

Short-term investing, often referred to as trading, involves buying and selling stocks with a focus on gaining profits within a period of 2-3 months. This strategy is ideal for investors who can stomach higher risk and seeks to capitalize on market movements quickly. Two stocks recommended by Mr. Sushil Kedia on CNBC Awaz TV - Easy My Trip and Dhani Services - have been showing promising signs of a breakout, making them attractive for short-term investment.

Technical Analysis

Technical analysis is crucial in identifying signals that indicate when to enter and exit a trade. Here are key elements to consider:

1. Breakout Analysis

The stock has made a clear breakout from a consolidation pattern, evidenced by the black resistance line. The breakout above this resistance level, coupled with strong bullish candles, suggests that the stocks have further upward momentum. This breakout is a strong signal to investor Mr. Sushil Kedia and others considering these stocks.

2. Volume Profile

The volume profile on the right indicates the levels at which trading activity was most intense. The significant price action around the 342 level shows strong support, now a key level to watch. The price has moved past the high-volume nodes, suggesting that any pullback will likely find support around these levels, particularly near 367 and 342.

3. Moving Averages

The moving averages are sloping upwards, confirming the strength of the trend. Shorter-term moving averages such as the 20 and 50-day MA being above longer-term ones like the 100 and 200-day MA constitute a classic bullish signal. This trend suggests the stocks are set for further growth.

Fundamental Analysis

While technical indicators are powerful, they should be complemented by fundamental analysis to ensure a well-rounded decision-making process.

Risk vs. Reward

The company Easy My Trip and Dhani Services need to be fundamentally sound, with strong earnings and good management. Additionally, if the broader market is in a bullish phase, this can enhance the likelihood of successful breakouts. Geopolitical factors, particularly those impacting the industry, must also be considered. For instance, for an oil and gas company like HINDPETRO, energy prices can significantly affect performance. Therefore, a thorough understanding of the company's financial health and sector-specific risks is essential for short-term investors.

Example Fundamental Considerations:

Strong Earnings: Consistent and growing profits. Good Management: Experienced and competent leadership. Industry Growth: Positive trends in the sector. Market Sentiment: Overall market conditions. Geopolitical Factors: Factors such as energy prices affecting the oil and gas sector.

Risk Management Strategies

Effective risk management is vital in short-term investing to protect against unexpected market reversals.

1. Setting Stop-Loss Orders

Mr. Kedia, like other seasoned investors, suggests setting stop-loss orders slightly below the breakout level or at a key support level. This strategy helps protect against unexpected reversals, ensuring that gains are not eroded by sudden drops in stock price.

2. Scaling Into Positions

It is often wise to scale into positions, rather than going all-in at once. Mr. Kedia bought Easy My Trip shares at 39, showed a reversal, and practitioners should follow similar tactics. Scaling in allows investors to mitigate the risk of entry at a peak price and benefits from market fluctuations.

Long-Term Portfolio Considerations

Mr. Kedia used today’s investment decisions to scale into the positions he already had. For instance, he bought DreamFolks and Infobean stocks and sold them with profit. This strategy demonstrates how to manage short-term gains within a broader portfolio strategy.

Scalping Tactics: Buy at a conservative entry point. Hold for a short-term but flexible holding period (2-3 months). Exit when there is a significant move or when profits are realized.

Conclusion

Short-term investments require a combination of technical and fundamental analysis, along with robust risk management techniques. The stocks recommended by Mr. Sushil Kedia offer an excellent opportunity for investors looking to capitalize on short-term market trends. By understanding the breakout patterns, volume dynamics, and underlying fundamentals, investors can make informed decisions that maximize their gains and minimize risks.