On Feb 12: Nifty touched 200 week moving average - in technical - we call it the ULTIMATE support level.
Nifty is right now standing at the ULTIMATE support level https://t.co/Mkf9KW8SsH
— Deepak Singh (@smarket) February 14, 2016
But was Nifty a great buy at that level or some other stock. Let me give you one illustration:
Here's how Tata Motors was positioned on Feb 12 2016:
A big move from 280 to 430 happened between October and Dec and then stock tumbled back to 280 on Feb 12. Opportunity again?
Now 3 months have passed: This is the outcome -
Tata Motors stock has outperformed Nifty by a wide margin.
Tata Motors was technically not a strong stock then but prior to making double bottom - Tata Motors had delivered impressive rally and hence that recent behavior helped stock manage another round of impressive gains. Here's the chart of Tata Motors -
Simple Lesson: If a stock delivers impressive rally but gets pulled down by overall market behaviour, then whenever market forms the bottom - the stock that rallies the most is the one that has rallied earlier.
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