Microfinance industry loses its most visible face

Many will recall a much-hyped IPO (initial public offering) that hit the Indian markets in August last year. It had a quite a few renowned names on its list of investors- George Soros' Quantum (M) Ltd, venture capitalist Vinod Khosla and Infosys founder N R Narayana Murthy. Then things turned sour, the stock tanked and the rest is now history. Any guesses which stock we are talking about? In case you have forgotten, the company was SKS Microfinance, a Mumbai-based micro financing institution and the only listed company in the sector. From a high of Rs 1,151 after the listing, the stock has lost about 90% of its market capitalisation since then. The company faced severe headwinds after the state of Andhra Pradesh laid restrictions on collections and also capped lending rates. As a result, the company reported a loss of Rs 3.85 bn in 2QFY12, against a net profit of Rs 805.5 m in the corresponding quarter of the previous fiscal. And now, the founder and chairman of SKS Microfinance, Mr Vkiram Akula has announced his resignation. This again raises the old question: Should the microfinance industry be run for profit or should it be a social service run by non-governmental organisations (NGOs)? Akula's resignation is sure to add more fuel to the fire of this all important argument.

Wall Street Thrashed in Worst Week in Two Months

FOX Business: The Power to Prosper
Despite a sleepy performance on Friday, Wall Street was pounded by European debt fears in the worst week since September.
Today's Markets
The Dow Jones Industrial Average slid 25.6 points, or 0.23%, to 11,232, the S&P 500 skidded 3.1 points, or 0.27%, to 1,159 and the Nasdaq Composite fell 18.5 points, or 0.75%, to 2,442.
The Dow, S&P and Nasdaq all finished the shortened trading week by more than 4.7% to the downside, and have now been down for two weeks in a row. Indeed, the Dow has plunged close to 1000 points in that time, while the Nasdaq has shed more than 10%. All three have now fallen deep into the red for the year after a short-lived Fall rally.
The markets have been captivated by worries over Europe's sovereign debt crisis. Financial stocks have taken a particularly strong beating over the past week as worries have stirred over the global financial systems' exposure to the debt crisis.  For example, JPMorgan Chase (JPM: 28.48, +0.10, +0.35%) and Bank of America (BAC: 5.17, +0.03, +0.58%) -- America's two biggest banks by assets -- were both pummeled, far under-performing the broader markets.
Many economically-sensitive energy and materials stocks were slammed on the week too.
Adding to the fears on Friday, Belgium's credit rating was sliced one notch to AA from AA+ by Standard & Poor's, while Moody's slashed Hungary's debt rating into junk status late Thursday.
"While not really a market-moving event, the downgrading of Hungarian bonds to junk status still served to highlight that the same old European debt problems remain," David Jones, chief market strategist at IG Index wrote in an e-mail.
Meanwhile Italy -- Europe's third-largest Economy -- was forced to pay an average yield of 6.5% on a roughly $10.7 billion auction of six-year bonds, far higher than the 3.5% it paid at its October auction, signaling a much higher risk premium.
As a result, the yields on its 10-year bond moved even higher above the 7% level.  While the 7% mark does not have any technical significance, it is symbolically important because countries like Greece needed bailouts around that level as borrowing costs spiked, and refinancing on the private market became difficult.
European blue chips jumped 1%, while the euro fell 0.76% to $1.324.
On the corporate front, AT&T (T: 27.41, -0.14, -0.51%) said Thursday it would take a $4 billion charge to its fourth-quarter earnings as a preparation for a potential failure of its $39 billion acquisition of Deutsche Telekom's T-Mobile.
There are no major U.S. economic releases slated for release on Friday.
Energy markets were mixed.
The benchmark crude oil contract traded in New York rose $1.03, or 1.1%, to $97.20 a barrel. Wholesale RBOB gasoline slipped less than a penny, or 0.15%, to $2.51 a gallon.
In metals, gold dropped $2.30, or 0.14%, to $1,697 a troy ounce.  The yield on U.S. government debt ticked higher.  The benchmark 10-year note yields 1.939% from 1.883%.
Foreign Markets
European blue chips jumped 1.4%, the English FTSE 100 climbed 1.4% to 5,198 and the German DAX rose 1.7% to 5,421.
In Asia, the Japanese Nikkei 225 edged lower by 0.06% to 8,160 and the Chinese Hang Seng tumbled 1.4% to 17,689.

Read more: http://www.foxbusiness.com/markets/2011/11/25/stock-futures-fall-amid-persistent-euro-debt-fears/#ixzz1enPmYJR0

Profiting From Panic Selling

Panic selling occurs when a stock price rapidly declines on high volume. This often happens when some event forces investors to re-evaluate the stock's intrinsic value, or when short-term traders are able to force the stock price down far enough to trigger long-term stop-losses. The entire process creates a tremendous opportunity for bottom-fishers to initiate long positions, especially if the event behind the panic selling was non-material or speculative in nature (such as an SEC investigation or an analyst opinion). Here we shed light on the panic-selling process and introduce a model that can help you predict the right time to take a long position after panic selling occurs. 
The Process Panic selling happens in several phases. Figure 1 illustrates a typical panic selling scenario that occurred as a result of an SEC investigation. The company in this example is Doral Financial (NYSE:DRL), a corporation whose primary business is mortgage banking, but this chart can be read as a general illustration of what happens in panic selling situations. 

Figure 1

Source: Tradecision

Let's break down what happens at each numbered step in the chart: 

Step 1 - Something occurs that causes the stock price to rapidly decline on high volume. 

Step 2 - Eventually, a high volume day occurs when buyers and sellers fight for control of the trend. The winner then takes the trend on low follow-up volume. 

Step 3 - If no significant trend change occurs at point 2 (i.e. a continuation), then there is typically another point of high volume in which a substantial reversal (long or short term) may occur. 

Step 4 - This process continues until a long-term trend is established and confirmed with technical or fundamental factors. 

Now we'll look at how we can predict when a trend change is going to occur. 
The Exhausted Selling Model (ESM) The exhausted selling model (ESM) was developed to determine when a price floor has been reached. This is done by using a combination of the following trend, volume and turnaround indicators: 

• Trendlines 
• Volume 
• Moving Averages 
• Chart Patterns

Figure 2 illustrates how this model works. 

Figure 2: Exhausted selling model

Source: ChartSetups.com

Notice that a variety of indicators are used to confirm that the trend has changed. As a trader, you may choose how many confirmation indicators you wish to use. The fewer confirmation indicators used, the higher the risk and the higher the reward (in the sense that, the longer you wait for confirmation, the less potential gain there will be for you to capture), and vice versa. 
The rules to using the ESM are as follows: 

1. The stock price must first rapidly decline on high volume.
2. A volume spike will occur, creating a new low, and appear to reverse the trend. Look for candlestick patterns showing a struggle between buyers and sellers here (i.e. cross patterns or engulfings).
3. A higher low wave must occur.
4. A break of the predominant downward trendline must occur.
5. The 40 and/or 50-day moving averages must be broken.
6. The 40 and/or 50-day moving average must then be retested and hold.

Note that you may use other moving averages - ideally, ones that connects highs or lows. Typically, a break of a larger moving average is more indicative of a trend break than smaller moving averages. 
As you can see, the ESM combines several techniques to ensure that the trend has changed for the long term. 
Example 
Now let's take a look at Figure 3, which will show the ESM in practice 
Chicago Bridge & Iron (NYSE:CBI) announced that its earnings would be delayed, which sent the stock down 16% in a matter of hours. First, we can see that the low was made on high volume just before 11.26am. Next, the price moves up slightly, but eventually forms a descending triangle, from which we drew a trendline (indicated here by the red line). Next, the price breaks through the trendline and moving averages (indicated by the green dot on the left). It then retraces to the moving averages (shown by the green dot on the right) before moving upwards. 

Figure 3

Source: ChartSetups.com

Finally, we can see that CBI turns around and returns to its previous levels after all of the confirmations are present. Note that if you would have entered after just one or two of the indicators, you would have made more profit, but increased the risk of the trade. 

Conclusion 
Panic selling naturally creates great buying opportunities for well-informed traders and investors. Those who know when the selling is over can benefit from the retracements/turnaround that often occur afterwards. The exhausted selling model explained here provides a safe and effective method to determine where the best entry point is, and the ESM's use of multiple indicators can help you avoid costly mistakes. 

Read more: http://www.investopedia.com/articles/trading/06/ESM.asp?partner=basics112511#ixzz1enOEJ0ao