Whenever we look at any stock chart- following questions pop up in our mind:
- Should one Buy stock at CMP?
- What is the best Level to Buy this stock?
- What should one do if one holds this stock?
- Is the stock a Sell?
The reality is nobody knows the answers to above questions with any certainty but we still make some educated guesses based on principles of Technical Analysis. That's the objective of writing this post....Reading Exide Ind chart and attempting to answer the above question knowing fully well...it's just a guess 🙂
Reading the History of Exide Ind stock price movement:
Phase 1: Amazing Rally in 2009-2010
As you can see in the chart above: Exide Ind stock made a stunning recovery from lows below 40 all the way to 175 in October 2010. It was a stunning recovery. After such a huge rally - a sideways trading happens (Bullish consolidation as per Technical Analysis). That's precisely what happened in Phase 2
Phase 2: Bullish Consolidation with Resistance at 175
As you can see in the chart above: Exide Ind stock created a well defined resistance at 175 between Oct 2010 and Dec 2014. That is a long long time for any consolidation - making a breakout a real game changer.
Phase 3: Breakout in Jan 2015
Finally Exide Ind stock broke out in Jan 2015 - making it a solid BUY. The stock post breakout did some healthy consolidation with 175 as support, indicating a big move is just matter of time
Phase 4: Breakout Failure
Have you seen air coming out of balloon. That's what happens when breakout fails. All Bullish energy disappears from the stock
Breakouts happen either in anticipation of good news or sometimes on development of good news. Exide Ind stock, it seems broke out in anticipation and when results came much below market expectations: stock saw strong selling and the breakout chart got destroyed. The breakout support of 175 became meaningless.
A stock that was expected to start a FRESH BULL MARKET above levels of 175 lost momentum and bullish energy. The breakout enthusiasts abandoned the stock. A Bullish chart became a Bearish chart. This is Exide Ind daily chart
Anticipating Future of Exide Ind stock
We are in a Bull market where fundamentals eventually stabilize the stock and help it form a base for future bull run. The big question: Where is the base for Exide Ind stock?
As you can see in the chart above: one base seems to be at 135-140 for the stock. As per Technical Analysis:
- Rule # 1: When a stock makes a large candle move - and then makes a follow through move, then the base of the follow through candle becomes a solid support until it's broken.
- Rule # 2: In Bull market we give benefit of doubts to Bulls
If we combine the above two rules: Exide Ind stock might be near a solid long term support of 135-140. Now remember, Exide Ind saw a Bullish pattern failure few months back and hence there will be few backers for the stock. Above 135-140: stock might get fundamental buying support and price protection but there is no guarantee of bull run and how long it will take for stock to regain momentum. It means anyone considering Exide Ind stock as an investment should be prepared for long time correction. If stock slips and closes below 130, then the pattern would be considered null and void, and stock can see more selling
What can happen if stock slips even below 135-140?
The stock will see more selling...this time more from folks who follow Fundamentals. Trading community will totally avoid the stock considering two pattern failures and then stock will try to get support around 100. The new support at 100 will come into question and very long term investor might consider the stock around that price.
What should one do?
I have written a very long post to make sure you understand the point I am making 🙂
Please always do your own due diligence before investing/trading. Please do not consider the post as any recommendation. The objective of writing the post is to help you understand the world of Technical Analysis. I would love to hear your feedback.
Please remember Exide Ind stock is expected to announce results on July 30 2015.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers