Value Wave Investing - How to Invest For the Long Term

Published: Sat, 08/08/20

Value Wave Investing

Dear

By now you know that the stock market and stocks follow a 5 wave sequence on the way up and a 3 wave down in any degree of time. Thus long term investment trends in individual stocks also last for 10-15 years and go though phases that change from the value phase to the growth phase to the defensive phase.

After years of working on my Market Analysis Technique when I stumbled upon Sharekhan's original Segmentation of Research into categories like "Ugly duckling", "Emerging Star", "Evergreen", "Vultures Pick", I realized that the thinking behind this naming ceremony had a strong behavioral angle.

The 5-3 sequence of Elliott Wave counts also is a Behavioral model for long term investing as reflected from this one Figure in Frost and Prechter's Elliott Wave Principle. Based on this waves 1-2 are the value phase, 3-4 the growth phase and wave 5 the defensive phase of a stocks business cycle.

This next chart puts this in perspective explaining each phase of the 5 wave sequence in light of how the fundamentals of a company change. This gives a much better understanding of where we are in the long term structure and helps us confirm our long term investing thesis. Stocks that are languishing below their net worth or at throw away dividend yields are in the waves 1-2 phase and fit the value investing model perfectly. It also distinguishes itself from junk that has crashed and may appear like value but is not so. The stock maybe insolvent and despite being at a discount to book lack the cash flows to pay dividends. Wave counts might also not be impulsive but a series of corrective moves. All this can help eliminate bad candidates. I try to look at stocks/Sectors that fit the value wave phase of early investing and track their progress from there under the Stocks Sub-Category Value Wave Investments at Indiacharts. Finding stocks early in their cycle can often result in above normal returns and multi-bagger investments.

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Rohit Srivastava
www.indiacharts.com
For accurate market analysis. Technical analysis is a study of past data to assess future probable outcomes. It is our endeavor to discuss high probability set ups for traders and investors in good faith. However this is not a solicitation to buy or sell stocks futures or options or any security. Trading in any financial market should be done with sound knowledge and the help of a qualified investment adviser. Stocks based on the Elliott wave model are based on the Fibonacci fractal of the market and momentum indicators, Levels are based on Fibonacci maths and are only indicative of what the mathematical model throws up. Readers may download the free Elliott Wave Calculator to do it themselves. This is not a research report. We are not investment advisors This is not a recommendation to buy/sell.
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Value Wave Stocks discusses the short term trading set ups that we use while taking our trading decisions. Value wave Investments. discusses the long term set ups that we use while taking our investment decisions. We may have holdings in these stocks and are interested in these opinions. This is not the only reason considered while taking our actions. Kindly take the help of a qualified investment advisor before trading. We have active open long and short positions in the futures/options/stock/commodity/currency markets at any point of time. The opinions here are for your education and understanding only of how we identify stocks to trade/invest in. We change our opinion daily and even hourly. Any actions taken by you are at your own understanding and risk. We do not offer personalised advise or research of any kind.
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