What will happen if suddenly the floor on which you are walking cracks and disappear - obviously - you will go in for free fall. The same happens with the stocks. Let me share one illustration as the Picture speaks louder than words.
Here's the Lupin Chart
As you can see in the chart above: Lupin developed a great support line at 1610-1620 since Feb 2015. Every decline to 1610-1620 delivered 15-25% returns but in March 2016 - stock cracked below 1610-1620 - blame FDA and treat it as earthquake. And as we always witness - when surface cracks - stocks go for free fall. The same seems to have happened with Lupin. The stock has sold off pretty sharply in last 6 days and it seems like 1610-1620 will now be the resistance for the stock on any rally.
The stock will now underperform for quite some time and this is the reason for large volume liquidation by big institutional money. Pharma stocks are struggling because of the bad Pitch
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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