HOW TO EXIT FROM LOWER CIRCUIT STOCKS ?
WHENEVER WE MAKE AN
INVESTMENT IN A PARTICULAR STOCK WE WILL DO A LOT OF ANALYSIS BEFORE ENTERING
INTO IT. YOU WILL OBSERVE A LOT OF PATTERNS BEFORE ENTERING INTO A PARTICULAR
STOCK. BUT SOMETIMES YOU WILL GET TRAPPED IN SOME STOCKS ACCIDENTALLY. SO WHAT
TO DO WHEN YOU ARE TRAPPED IN A STOCK.
LET’S LEARN HOW TO EXIT FROM LOWER CIRCUIT-MAKING STOCKS.
DEMAND AND SUPPLY:
GENERALLY, THE PRICE OF THE PARTICULAR COMPANY STOCK WILL
DEPEND UPON THE DEMAND AND SUPPLY OF SHARES OF THAT PARTICULAR STOCK. WHEN DEMAND
IS MORE, MANY INVESTORS WILL SHOW INTEREST IN BUYING THAT STOCK. SO
THE SHARE PRICE OF THAT STOCK WILL GO UP QUICKLY OR SLOWLY BASED ON THE DEMAND
AND SUPPLY.
WHEN THE SUPPLY OF SHARES IS MORE IN ANY PARTICULAR COMPANY’S STOCK AND THE DEMAND IS LESS WHEN COMPARED TO SUPPLY. THAT WILL
AFFECT THE STOCK NEGATIVELY, AND THE SHARE PRICE OF THAT STOCK GOES DOWN
QUICKLY OR SLOWLY BASED ON THE DEMAND AND SUPPLY.
EFFECT OF NEWS ON STOCK :
AS WE ALL KNOW, IT IS VERY DIFFICULT TO UNDERSTAND HOW THE
MARKET REACTS BECAUSE IT DOES NOT MOVE CONSISTENTLY IN A SINGLE DIRECTION.
MARKET MOVES IN DIFFERENT PATTERNS. ANALYSING THAT PATTERNS IS CALLED AS
TECHNICAL ANALYSIS IN OUR LANGUAGE. THIS TECHNICAL ANALYSIS WILL HELP US TO
STAY AWAY FROM LOSSES AND ALSO HELPS US TO GET PROFITS.
EFFECT OF POSITIVE NEWS :
LET’S TAKE AN EXAMPLE FOR UNDERSTANDING THIS. TAKE AN EXAMPLE OF ABCD COMPANY. THE ABCD COMPANY GOT AN ORDER OF 5000
CRORES FROM A BIG COMPANY. THIS AFFECTED THE SHARE PRICE TO MOVE UP VERY
QUICKLY.
EFFECT OF NEGATIVE NEWS :
LET’S TAKE ANOTHER EXAMPLE OF ABCD COMPANY, AGAIN YOU ARE
OBSERVING A SIMILAR STOCK NEXT DAY TO TAKE A NEW POSITION OKAY, THE SHARE PRICE
WAS SEEMED TO GO UP BUT UNEXPECTEDLY THE SHARE PRICE WENT DOWN WHY?
HERE IS THE ANSWER, ACTUALLY THE ABCD COMPANY GOT AN ORDER
OF 5000 CRORES YESTERDAY AND THE SHARE PRICE ALSO REACTED POSITIVELY, BUT TODAY
THE NEWS IS ABCD COMPANY LOST THAT ORDER.
THE ABOVE ABCD COMPANY IS AN EXAMPLE OF MANY REAL-TIME
COMPANIES IN THE STOCK MARKET. AS AN INVESTOR YOU MAY HAVE EXPERIENCED A LOT OF THINGS
LIKE THIS.
OKAY, FINALLY LET’S KNOW HOW TO EXIT FROM THE LOWER CIRCUIT MAKING STOCKS:
TO EXIT FROM A LOWER CIRCUIT MAKING STOCK YOU HAVE TO PLACE
SELL ORDER IN PRE-MARKET WITH THE BELOW CALCULATION EXACTLY AT 9.00 AM OR IN PRE-MARKET.
CURRENT MARKET PRICE X 0.95 = SELL SHARE PRICE.
ADJUSTMENT ( IF NEEDED ): WE ALL KNOW THAT STOCK PRICE WILL
MOVE WITH A DIFFERENCE OF 0.05 PAISE ( NSE), AFTER DOING THE ABOVE CALCULATION
YOU GOT PRICE LIKE 56.89, YOU HAVE TO PLACE TO SELL ORDER AT 56.90.
REASON: IF YOU PLACE THE ORDER AT 56.85 IT WILL
EXCEED THE CIRCUIT LIMIT OF 5%.
