Jindal Steel and Power has done a sharp U turn on Friday and now has the potential to surprise on the upside.
Have a look at the Jindal Steel and Power daily chart
As you can see in the chart above: Jindal Steel and Power stock had a strong support base at 440 since August 2011…BUT stock failed to hold that level and broke down below it on 31st May 2012. The stock tanked below 440 and consolidated below it for more than a month. What surprised me was that post breakdown below 440 – the volume picked up but there was no follow through in the selling.
Trading Rule: When a stock rejects a pattern in a particular direction – and makes a U turn – the reverse move tends to be very powerful because majority of the market participants are not positioned for it.
Application of Trading Rule: The stock rejects the downside breakdown and does a U Turn: Buy Signal
Forget follow through selling – on Friday – the stock spiked on huge volumes and broke past 440 on the upside. This qualifies as a dramatic turnaround [False Breakdown] and stock now becomes compelling buy at 440-450 zone with price target of 560 in next 4-6 weeks.
Please do your own due diligence before trading.