How to get 100% return or more within 1 year in stock market?
What I am going to tell you is something different and it works almost 99% of the time. There are many a time when the price of stock listed companies suffer a lot due to some internal problems within the company or may be due to some announcements made by the competitors of the company.
As an example, if you look at the 5 years chart of Idea Cellular (a stock listed company in India) you will find that on 27 December 2015 the stock price started falling significantly and it reached to INR 68.80 on 8 January 2017 from INR 143 (as on 27 December 2015). If you look at this Wikipedia page you will find that exactly on 27 December 2015 (when the stock price of idea cellular started falling) Reliance Industries (another stock listed company in India) announced the soft launch of JIO.
On 5th of September 2016, the JIO was officially launched and it was declared by the company that it will offer free domestic voice calls and zero roaming chargers till 31st December 2016 and later the free offer was extended further. The company offered the simplest and the most attractive tariff plans in the market with the lowest data rates in the world.
Because of the launch of JIO’s free services, Idea cellular and other telecom providers came into trouble as it was then sure their customers will shift to Reliance Jio’s free services. That is the reason the stock price of Idea Cellular started falling (from the date of announcement of JIO) as there was no doubt the profitability of the company will hit hard by the launch of Reliance Jio.
As you know if the profit of the company is reduced its share price cannot go higher and so all the shareholders of Idea Cellular starting dumping the stock. There was so much selling pressure that even those who bought at RSI oversold (by the technical analysis) were also unable to gain anything as the stock kept falling even in the oversold zone. That is the reason technical analysis doesn’t really work. Technical analysis still relies on fundamental analysis for it to work better.
If the stock price has fallen to 2-3% or more from the top it doesn’t mean you should buy it now (which many traders do) considering RSI is in the oversold zone because this is risky as technical indicators (like RSI) may not work (unless the luck is with you). In order to make money from such falling stocks most important thing is to wait for the right time. If Reliance had launched JIO then it doesn’t mean Idea Cellular was going to sit idle and let their customers go and accept their fate in the business. In such situations, you could always assume that definitely, something was going to come up from idea cellular as well, if they really wanted to retain their customers and it really happened too.
On January 9, 2017, as mentioned here the news came that Vodaphone (a big telecom service provider in India) may merge with idea cellular in order to compete with Reliance JIO and later it became also official. This news was actually a turning point for the stock and from 9 January 2017 onwards the stock price of idea cellular really picked up and reached to 119 from 68 within a month. This was actually the right time to buy the stock.
The thing here to learn is to track stocks which are highly oversold and then wait for some positive news in the stock to buy it. You should never buy an oversold stock (as it may fall further or don’t rise at all) unless there is some positive development in the company which can turn its profitability on the positive side.
When a stock is in oversold zone its valuation becomes quite cheap as its PE (price to earnings) goes down. Price of such stocks recovers very quickly if somehow it is backed by some positive news. I use this strategy myself and keep my money idle unless I get such an opportunity. But I put all my money into such a stock once I find such an opportunity to make quick and big bucks. This is actually a better way to get more returns than investing in mutual funds or investing for long-term by deciding the stocks on your own instead of investing in mutual funds.
Don’t just put a little money when you find such an opportunity as such opportunities are hard to come by. Even if you get only 5 to 6 such opportunities throughout the year it will be enough to get you more than 100% return. Most people don’t want to keep their money idle and that is really the mistake they do.
So once again I want to repeat > track stocks which are popular and which are highly oversold due to bad news on them and then wait patiently till some positive development comes in the stock and then put all your money into it at once. Don’t also wait to sell the stock. Just buy in big quantity (say 3000-5000 shares or more) and sell when the price has risen 10 or 20. From my experience, you will get more than 100% return if you follow this strategy but you need to track the news and it’s a hard work. Also, you need to be patient and don’t feel frustrated when you don’t find such an opportunity for a long time. Opportunity will definitely come and you need to have money on hand at that time.
To check for oversold stocks you can look at their PE(Price to Earnings). Usually, oversold stocks have PE less than 10. Just make use of the search box(at the top) on this page to look at the financial data (including PE) of any stock listed Indian company and then do the research on that stock why it has fallen so much.
Written By: Rajesh Bihani, senior writer at sharemarkethow.com