Nobody knows where the bottom is. But one can always make an assumption about a bottom and buy a stock hoping that level is a bottom. Technical Analysis is a wonderful visual tool to help one do that.
Let me give one illustration: Biocon
I wrote one article on Biocon in Jan 2015 titled - Biocon standing on THE LINE OF HOPE
The Chart then:
The stock is once again at 408-410. Does this mean - stock will bounce again? Well - it should if we go by history. If stock does hold 408-410 without cracking 2-3% down from here - then this can be great buying opportunity
WHAT HAPPENED SINCE THEN
This is in 2015
As you can see in the chart above: Biocon consolidated above 400-410 - rallied to 490 but once again came back sharply to 400-410 in August 2015. This time it again took support and now the stock has run up sharply.
The stock is up 40% from the Jan 2015 levels.
The lesson we can learn
Even investor who uses fundamental analysis can use charts to formulate attractive entry strategy near Value Lows. Traders will keep moving in and out of the stock but Fundamentally inclined investors can use Charts for a proper entry point and then can patiently wait for stock to make the decisive move. Biocon story is a great learning example
Also Read: Market Observations - State of Indian Market as of April 27 2016
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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