There are two types of risk in any stock -
1. Price risk - price damage you suffer because of sell off
2. Time risk - Pain you suffer when stock does nothing for long period of time without any meaningful price damage
It is the time risk that tests individual patience. Sometimes, you pick the right stock but then it tests your patience and just when you give up - stock takes off like never before. Is Century plyboard testing the patience right now?
Here's what Century Plyboard has done in 2015 after a huge Bull year in 2014
As you can see in the daily chart above: Century Plyboard seems to be building a base around 170 - a good bullish sideways consolidation before stock can take off again. But here are two questions that seems to be troubling lots of traders -
Question # 1: Will stock once again correct to 170?
As you can see in the daily chart above: the stock found support at 170/200 dma around middle of June. One can assume both of them as supports. The stock is right now at one of those supports i.e. 200 dma. It's quite possible that stock can take support here and rally. The stock might not pullback to 170. But if stock tanks below 200 dma, then a correction to 170 is possible
Question # 2: How should one approach the stock?
The structure is Bullish and hence stock is HOLD. As long as stock maintains the bullish structure i.e. support of 170 - there is only time pain one has to worry. If one is super optimistic on the stock - then one can think of buying the stock knowing fully well that stock can crack below 200 dma and go down to 170. It is only when stock cracks below 170 - then one will have to review the whole bullish assumption
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1. 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.
2. I am not a registered investment advisor. My views are strictly based on my understanding of chart. Please always do your own due diligence before making any investment/trade.