A sample Case Study generally reserved for Science of Stock Price Action readers - today sharing with everyone.
Case Study: Hindalco
This is what Hindalco stock has done in last 17 days
It's a huge move for an index stock in just over 17 days. The stock that was totally down and out till just few months back - A stock in deep downtrend
The stock used to trade near 195 around July 2014 and from there it declined to levels of 65. The stock consistently traded below key moving averages and was always treated on SELL ON RALLY stock.
The first evidence of Weakening of Downtrend
Then stock did something unusual: it moved above 200 dma and not only that - it stayed above it for fairly long period of time. Here's the chart
This was happening all before our eyes but very few were ready to believe it.
When you see something that you cannot believe it, then Trust your eyes over your brain.
I know this rule but still could not believe it 🙁
Hindalco stock did something spectacular. On the pullback near 200 dma, it formed a long legged tail on 24th May, just above 200 dma. It was a clear sign that stock is witnessing buying at lower levels. This is a big change for a stock which was used to SELL ON RALLY problem. The stock was not giving small hints but big one that turnaround is happening and all one has to do: Believe it.
The stock first made a small baby step moves from 86 to 92 and then made a huge GAP UP move to 103. It has been witnessed that such Gap-up moves only leads to more momentum and even after such gap-ups - stocks are considered attractive buys because they happen in a stock which is under owned. It means Shorts are scrambling to cover and new buyers are jumping to be early in the race.
Hindalco stock chart is a great case study to understand the point: Why it's important to TRUST EYES > Opinions and Disbelief Turnaround trades make sharp big moves in very short period of time.
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