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Ammar

The Stock Trading Analysis Report outlines the criteria for selecting securities, including sector performance, market capitalization, volatility, and liquidity, to optimize real-time trading. It details the use of technical indicators and financial statements to inform buy, sell, or hold decisions, highlighting the impact of market events and potential risks. The report concludes with a profit/loss analysis from a two-day trading period, emphasizing the importance of macroeconomic factors and the lessons learned from trading high-volatility stocks.

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Shahzad Jamil
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16 views4 pages

Ammar

The Stock Trading Analysis Report outlines the criteria for selecting securities, including sector performance, market capitalization, volatility, and liquidity, to optimize real-time trading. It details the use of technical indicators and financial statements to inform buy, sell, or hold decisions, highlighting the impact of market events and potential risks. The report concludes with a profit/loss analysis from a two-day trading period, emphasizing the importance of macroeconomic factors and the lessons learned from trading high-volatility stocks.

Uploaded by

Shahzad Jamil
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Stock Trading Analysis Report

Factors Considered When Selecting Securities for Real-Time Trading

The selection of stocks for real-time trading was based on several critical factors.
Sector performance played a significant role, as we diversified our investments across
different industries, including Fertilizer, Oil & Gas, Cement, and Banking, to reduce
risk exposure. Market capitalization was also considered, with a preference for mid-
to-large-cap stocks that offer stability and investor confidence. Volatility levels were
carefully analyzed to strike a balance between risk and return, ensuring that our
portfolio included both high- and moderate-volatility stocks. Additionally, liquidity
was a key factor, as we selected stocks with high daily trading volumes to facilitate
ease of entry and exit during trading.

Technical Indicators and Chart Patterns Used

To analyze short-term price movements, we employed multiple technical indicators.


The Relative Strength Index (RSI) was used to determine whether stocks were
overbought or oversold, helping us time our buy and sell decisions effectively. The
Moving Average Convergence Divergence (MACD) indicator allowed us to identify
short-term momentum shifts, confirming potential trend reversals. Additionally, the
50-day and 150-day moving averages were utilized to evaluate overall price trends
and identify key support and resistance levels. These technical indicators collectively
guided our decision-making during the trading period.

Impact of Financial Statements, Earnings Reports & Industry Position

The companies' financial statements and earnings reports significantly influenced our
trading decisions. Strong earnings performance in stocks like DGKC and EFFERT
provided a bullish outlook, making them attractive investment options. The price-to-
earnings (P/E) ratio was also a critical factor, with MEBL having a low P/E ratio of
4.18, indicating an overvalued stock, while PSO had a moderate P/E ratio, justifying
our hold decision. Moreover, the industry positioning of each stock was evaluated,
with a focus on companies in well-performing sectors, such as Cement and Fertilizer,
which demonstrated potential for further growth.

Average Returns and Volatility Over 1-3 Years

Historical performance data was an essential consideration in our trading strategy.


EFFERT and PSO were identified as stable performers, with 1-year returns of 16.18%
and 21.06%, respectively, showcasing consistent past growth. On the other hand,
MEBL exhibited high historical volatility at 22%, making it a riskier short-term
investment. DGKC and PSO had moderate volatility levels, offering a balanced risk-
reward ratio. By analyzing the average returns and volatility of each stock over the
past 1-3 years, we were able to make informed decisions regarding potential price
movements.

Market Events & Price Fluctuations During the Two-Day Trading Period
Several significant market events impacted our trading strategy. An increase in
interest rates led to a market downturn, negatively affecting stocks such as EFFERT
and MEBL. Meanwhile, oil prices remained stable, which contributed to PSO’s steady
performance during the period. The Cement sector, particularly DGKC, showed
strong earnings growth, leading to a price increase. These market events were
carefully monitored to adjust our strategy accordingly, ensuring that we made well-
informed buy, sell, or hold decisions.

Buy, Sell, or Hold Decisions & Rationale

Based on our analysis, we made the following trading decisions. EFFERT was sold
due to the negative impact of rising interest rates, which reduced its growth potential.
PSO was held as the stock remained stable, and we awaited further indicators of
growth before making a move. DGKC was bought because its strong earnings
performance signaled a continued upward trend in its stock price. MEBL was sold due
to its overvaluation, which limited its potential for further gains. Each decision was
backed by a combination of technical and fundamental analysis, ensuring that our
strategy was aligned with market conditions.

Expected Return Over the Next Two Months

Using both technical and fundamental analysis, we estimated the expected returns for
each stock over the next two months. EFFERT is projected to deliver a return of
9.75%, indicating moderate growth potential. PSO is expected to experience a
decline, with an anticipated return of -6.57%, due to market uncertainties. DGKC is
expected to generate a return of 3.5%, driven by strong earnings performance. MEBL,
despite being overvalued, is projected to have a return of 2.33%. These projections
were used to shape our trading strategy and assess future opportunities.

Potential Risks Affecting Performance

Several risks could impact the performance of the selected stocks over the next two
months. Market volatility remains a key concern, particularly for PSO and MEBL,
which have exhibited high fluctuations in recent months. Macroeconomic factors,
such as rising interest rates, could slow down investment growth and negatively
impact stock prices. Additionally, sector-specific risks, such as fluctuations in oil
prices, could directly affect PSO’s performance. By considering these risks, we
ensured that our trading strategy accounted for potential downside scenarios.

Discrepancies Between Technical & Fundamental Analysis

During our analysis, we identified certain discrepancies between technical and


fundamental insights. For EFFERT and PSO, fundamental analysis suggested strong
earnings and industry positioning, but technical indicators pointed to short-term
slowdowns, leading us to take a cautious approach. In contrast, DGKC exhibited
alignment between both types of analysis, supporting our buy decision. MEBL,
despite its positive historical performance, showed overvaluation in technical
indicators, reinforcing our decision to sell. Reconciling these discrepancies allowed us
to make well-informed trading decisions.
Profit/Loss Analysis & Lessons Learned

During the two-day trading period, our trades resulted in minimal profits, reflecting
the short duration of the trading window. The profit/loss breakdown is as follows:

Stock Buy Price (Rs.) Sell Price (Rs.) Quantity Profit/Loss (Rs.)
EFFERT 223.6 226.31 5 0.06
PSO 335 339.16 5 0.06
DGKC 117.1 119 5 0.08
MEBL 236.13 236.63 10 0.02

The total profit earned was Rs. 0.22, which is minimal due to the short-term nature of
the trades. Several key lessons were learned from this trading experience. Firstly,
high-volatility stocks can be risky but may offer substantial rewards if timed
correctly. Secondly, macroeconomic factors, such as interest rate hikes, significantly
influence market sentiment and stock performance.

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