Deflation more dangerous than Inflation

Inflation This term has been the maximum time used by most of the investors, traders, experts and almost everyone related to market. So emphasizing on this will be just a wastage of time, and straightway i will discuss the impact.

Inflation

Inflation certainly have a negative impact if it raises beyond the purchasing capacity but to some extent it is required for the ecomonic development and to maintain the strength of currency.

Deflation

Major topic to discuss is about deflation which is certainly more dangerous to the economy as if the purchasing power increases and the product is less in that ratio the strength of currency decreases leading to a topple in macro- economic system.

Let me add a story there were two people one was habitual drinker and lost everything but he had a collection of bottles of the drink, other was a miser businessman and made heavy cash by its business, suddenly there were deflation and all the cash collected by businessman was much much less valued than the bottles collected by the drinker.

Several countries like Japan, Brazil have a very high inflation number but developing very fast and the market are on the run, Zimbabwe has very very high inflation no.

Affect of Inflation and deflation on economy

Conclusion is that inflation is certainly not good due to variation in the income group, but deflation is much more dangerous as the value of your money gets down. Thus a balanced inflation rate is always good for growth of the countries economy.

HAPPY INVESTING

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Technical Analysis of stocks

Market moves on speculations and technical analysis, there is no way to study the speculations than to be a regular watcher of news and sites at net but there are some way to analyze a stock technically.
Technical analysis of a stock is based on the following

ATR (Average True Range

ATR is how much a stock moves in a day. It can be calculated from the previous close to the next day’s high or low. Or it can be calculated from the range form high to low in a single day. Whichever is greater is the “true range.”

MACD (Moving Average Convergence or Divergence)

It is a momentum indicator showing the momentum which is indicated for up ward move or downward trend by relating the average of price movement of the stock.

The MACD is the difference between a 26-day and 12-day exponential moving average.
The MACD on 9 days movement indicate a buy or sell opportunities.

RSI (Relative Strength Index)

By seeing the history of a stock and present performance the strength is analyzed.
50 is the index and 30-70 indicates the flattish movement or constant movement while above 70 indicates excess buying and below 30 indicates excess selling.

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Support and Resistance in Stock Market

Often it the market we come to a word called support and resistance. This article explains the exact meaning and how to estimate it.

Support is the point where buying power faces difficulty in the in the current downtrend and resistance is when the selling power faces difficulty in the current uptrend. In easier term

Support is the price point where new lows cease and prices begin to once again rise. Prices will approach the line of support from above. And Resistance is the price point where new highs cease and prices should revert and begin to fall. Prices will approach the line of resistance from below.

Factors Responsible for Support and Resistance of a stock

Market psychology is the most important factor for support and resistance based on the P/E and EPS the valuation of a share is calculated and any ups and down in them depends upon.

But when market runs the traders remember where prices went up so they purchase at support, and they remember when prices declined so they sell at resistance. Their emotional attachment to prices creates these levels of support and resistance. Fear and greed causes them to buy and sell at these points.

How to Derive support and Resistance of stocks

If we draw an imaginary chart of the movement of a stock the area of maximum congestion while going up can be assumed as resistance and the area of maximum congestion while falling downward can be assumed support.

For example if a stock ranges between 1000-1200 and during its movement we have seen that maximum time it ran at 1020 and moved up and maximum time when it went to 1240 if fell. So the support may be derived at 1020 and resistance at 1240.

Advice to Investors

In the current volatile market it is risky to derive any conclusive support or resistance so one should be careful while watching the movement of a stock.

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