How to Select Stocks for Investing
As we discussed in the last blog about investing 50% of your capital in stocks. further, divide it into 30% in Bluechip stocks and 20% in midcap stocks.
What are Bluechip Stocks
These are simply the stocks with the highest market cap and a good track record. Now the problem is how to identify them? NSE has made this job easier for you. Simply go to NSEINDIA.com or search for Nifty 50 Stocks on google. These stocks form the Nifty Index and are carefully chosen by experts. why look elsewhere when the exchange itself has done the hard work for you. so, 20% investment amount should go to these stocks. we will talk about entry later.
What are Midcap Stocks
As the name suggests these companies have lower market capitalization. Few of these stocks will eventually make their way into Nifty50 or large-cap group. Check the list here.
How to Find Trending Stocks
There are many ways to reach a destination, similarly, there are many ways to find out stocks that are trending. We don't want to be caught in a situation where the stock remains sideways after we buy and our money doesn't grow. hence we need some kind of assurance that there is buying interest of big investors in the stock before we buy.
To identify this we will simply plot 200DMA and 50DMA on the chart. If 50DMA is above 200DMA and ascending, we will assume that the stock is in an uptrend. Check the image below.
Wait till the stock gives a clear trend and breaks out of a range. in the above image, Adani Ports was in range for a long time before we can see a rise. till the time the stock is above 50DMA and 50DMA is above 200DMA, we may remain invested in the stock. You can start tracking the stock when the cross of 50DMA and 200DMA happens. Book partial Profits when the candle starts closing below 50 DMA. here we are talking about the Daily timeframe only.
To learn more about the technical study of charts you can contact me at 9830463636.
