Trading Rule: When a stock breaks out and then pulls back to test the previous resistance as support - then it becomes a strong BUY.
BEML (Bharat Earth Movers Limited) has done just that.
Here's the weekly chart
As you can see in the chart above: BEML broke out above 1165 in June and stock rallied to 1500 by end July. The stock since then has pulled back to retest 1165 as support. Technically, the stock should hold around current levels and rally again.
That's not all - BEML is close to multiple Support lines.
Here's the daily chart
As you can see in the chart above: BEML is also very close to 200 day moving average - very solid support area for stocks in strong uptrend. That's not all - there is horizontal support also around 1145 which converges with 200 dma.
What does this mean?
If Bull market in BEML is for real, then the stock should hold around 1145-1170 area. The stock stands near multiple supports i.e. Breakout support, 200 dma as well as Horizonatl support line and technically an excellent place for it to form base. In markets, nothing is certain and stock despite bullish structure can disappoint. Here, in case of BEML, any decisive decline below 1145 will result in stop loss exit from traders
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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