These are the two stocks I bought after I bought and sold SADBL at a 15% profit.
I bought API (Api Power Company Limited) at Rs. 196 per share and sold it at Rs. 227 per share.
Similarly, I bought HDHPC (Himal Dolakha Hydropower Company Limited) at Rs. 127 per share and sold the shares at Rs. 150 per share.
I bought and sold API in a span of 10 days. Similarly, I bought and sold HDHPC in a span of 9 days.
Thus, I made a profit of slightly more than 15% in both the trades in about 10 days. Not boasting, guys. I could have ended on the other side of things if the trend had reversed after I bought the shares. The Hydropower sector was already inflated when I entered. And I had promised I would sell as soon as I profited from the final upward gasp.
Note that I did not use my strategy to buy these two stocks. Now, every book on investment will advise against that. They will tell you to stick to your plan. I myself have harped about trading discipline in the past.
However, I probably bought them because I developed a fear of missing out. Incorporating fear or greed into your investment strategy will destroy your profits in the long run.
I became stubborn this time. But I promise I won’t repeat this impulsive behavior from now on. I know I profited this time purely because of beginner’s luck.
Let’s look at the charts now.
API (Api Power Company Limited)
On the next day after sold, the stock developed a long red (bearish) candle. It opened higher than yesterday’s green candle. However, since the stock eventually closed lower than the mid-point of the previous green candle, a dark cloud cover candlestick pattern has formed. This indicates the potential of a downwards reversal.
HDHPC (Himal Dolakha Hydropower Company Limited)
Although I violated my own strategy, these two trades solidified what I had previously only read: A trend has momentum because of the volume of investors. In other words, a stock is like a heavy truck that takes time to change its direction. Hence, a trend will tend to drift in the same direction for quite some time before having a reversal. This fact saved me even though I had entered the Hydropower buying mania quite late.
The later you enter a rising stock, the more risk you have of trend reversal. Although I entered and exited like a sleek criminal this time, a wise investor would not have taken these risky trades.