How to Generate a 17.28% Profit in Days

Apurva Sheth

The Sensex touched 30,000 for the first time on 5 April 2017. On the same day, I wrote to you about a way to seize the opportunity markets were throwing at us.

But it's not easy to seize opportunity without proper knowledge. At Profit Hunter, we believe in empowering retail investors with the right knowledge and tools that can give them an edge against established players.

Last month, I spotted a pattern developing across many stocks and believed that it had great potential. It was the flag pattern. I shared it with you in this article and showed you how I am picking stocks for my Swing Trader subscribers based on this pattern.

I am glad to inform you the pattern has done extremely well for us over the last few days. It's done so well that most of the stocks that we are picking are based on it. And many of these stocks have generated good returns.

Here is one example of how it worked for my subscribers...

9.09% Gains in RCF

A flag is a short-term continuation pattern that marks a small consolidation before the previous up move resumes.

Simply put, price moves up quickly. The rally is almost vertical. This is followed by sideways movement for a few days. Eventually, the price moves out of this range and the uptrend resumes. You have to get in just before the price breaks out of the range.

I have plotted the flag pattern in the above chart of RCF. I recommended it to our subscribers on 4 May after spotting a breakout from the flag pattern with good volumes.

Our trade went live on 5 May 2017 at a price of 88 with a target of 96 and stoploss of 84. The stock immediately picked up momentum and achieved its target price within three trading session on 10 May 2017. We closed the trade with gains of 9.09%.

Here's another example of a stock I identified for my members - Motilal Oswal Financial Services...

11.41% Gains in Motilal Oswal

When markets are at an all-time high, one sector you can't miss is the brokerage and financial services space. Motilal Oswal jumped 50% in February 2017. It consolidated in a range of 700 and 750 in March. And broke out of this range on 3 April.

I recommended the stock at a price of 754 with a target of 820 and a stoploss of 720 on 4 April. The stock hit a high of 819.85 on 10 April. I figured the momentum was still strong and the stock could rally further, so I revised our target up to 840, which was achieved on 21 April. This trade generated a return of 11.41%.

Here's an example of PVR. It is our biggest winner so far in 2017. In an earlier newsletter, I showed you how I revised our stoploss and target to generate a return of 17.89%. It wouldn't be possible without the flag pattern.

17.89% Gains in PVR

Our trade went live on 8 March at a price of 1,330 with a target of 1,500 and stoploss of 1,250. The stock was up about 7% within three days of going live. The stock consolidated in a narrow range for a long time until 3 April.

This consolidation was in the form of a flag pattern. It looked like the stock was near the end of consolidation and ready to resume its uptrend once again. I revised the target and stoploss higher (to 1,600 and 1,400 respectively) on 3 April.

The stock shot up about 9% the next day. The flag formation suggested there was still more upside left in the stock. So we stayed with the trend. Eventually, we closed this recommendation on 3 May with gains of 17.89%.

So you can see that this pattern has a lot of potential to generate good returns in a short time. I strongly believe that an investment in knowledge pays the best interest. And I believe this could be the best time to study as markets are giving so many opportunities.

When I shared this whole idea and development with my publisher, he immediately recommended we share full details about it with you, dear reader.

So, I am recording a special video where I will talk in detail about this pattern and even show you how to set stoploss and targets based on it. And that's not all.

I will also show you stocks which are consolidating in a flag pattern right now and could breakout any moment for a quick profit opportunity.

The stocks I am looking at right now have the potential to generate returns like 17.28% and 14.13% within days to weeks (sometimes longer like in the case of PVR).

How to get access to this special video...

Here's the good news....

No registration is required. You don't need to do anything!

You see, I know Profit Hunter readers are interested in these ideas. That's why I am taking the liberty to make sure you get this video.

Here's what's going to happen next...

At 11 am this Saturday (tomorrow), I am going to send you an email.

All you will need to do is click on the link provided in the email...and watch the video.

That's it. Super easy... After all, why should it be any more challenging to access potentially profitable ideas like these.

So until 11 am tomorrow...

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Market Notes

Why High-Priced Stocks Are Safer Than Low-Priced Stocks

In our previous market note, we wrote about the biggest misconception in retail investing: high-priced stocks are expensive and low-priced stocks are cheap. We showed you why the retail public is trapped in this fallacy. And how focusing only on returns and ignoring risk lands them on the losing side.

As promised, today we will present you with data analysis of some 2,227 stocks from April 2012 to April 2017. This will forever change your perception of high-priced stocks.

Taking cues from a subscriber's complaint about stocks above Rs 100, we have divided the data into three buckets:

  1. Stocks priced below Rs 25 (921 stocks)
  2. Stocks priced between Rs 25 to 100 (743 stocks)
  3. Stocks the priced above Rs 100 (563 stocks)

The stocks in the first two buckets can be considered low-priced and the third-bucket high priced.

We have calculated the returns and risk of each of bucket. The returns are measured as median five-year CAGR return and the risk is measured by standard deviation (SD).

Risk and Return Tradeoff

The chart shows that the median returns in all the three buckets are the same - around 13%. But look at the risk of the low-priced stocks. The standard deviation of low-priced stocks is 0.31 and 0.27, which is higher than the high-priced stocks at 0.23. This shows that low-priced stocks carry higher risk for the same amount of return.

A trader always looks for a low-risk, high-return trade. The Sharpe Ratio is a statistical measure that tells a trader how favourable a trade is, taking risk and return into account.

Sharpe Ratio (SR) = (Return - Risk free Return) / Risk (SD)

A higher Sharpe Ratio is preferable to a lower one.

As you can see in the chart above, the SR of the low-priced buckets is 20% and 23%. While the SR for high-priced stocks is 30%. Thus, from a risk-return perspective, we can say that high-priced stocks are more attractive than low-priced stocks.

High-priced stocks are not only more attractive; they are also less risky.

We pointed out before that high-priced stocks are usually low beta stocks. Beta measures the sensitivity of a stock compared to the market. Low beta indicates they are less volatile than the market. And less volatile stocks are generally less risky.

Since high-priced stocks are able to generate good returns with low risk, we don't think there is any reason a retail investor or trader should avoid them. And above all, basing your investment decision on share price alone isn't sensible. At the end of the day, what matters is the percentage gains.

From The Market Wizards...

"Every winner needs to master three essential components of trading; a sound individual psychology, a logical trading system and good money management. These essentials are like three legs of a stool - remove one and the stool will fall, together with the person who sits on it." - Alexander Elder

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