This is what happened to Idea stock today -
Am I surprised? No Because stocks do this kind of move when they are in downtrend..It's like same way stocks zoom up when they are in uptrend. That's why there is a simple rule - Avoid stocks when they are in downtrend.
Let me explain the structure of the stock:
Idea stock for long time (years) traded above a solid base of 125
As long as stock was building base at 125 - the stock was excellent buy at 125 with a HOPE that someday stock will rally. There was a time risk i.e. stock not performing but there was no price risk because you were not losing money as 125 was the place where stock was finding support.
But then in Jan 2016 - Idea stock collapsed below 125. The stock became Avoid
Just watch the stock journey since breakdown below 125. The stock first sold off, then pulled back but resisted at 125 and sold off again. What's worse - this has happened during a time period when the entire market rallied like crazy.
Buy Low Sell High works only when stock is in uptrend BUT when stocks are in downtrend - Buy Low Wait Forever strategy becomes very painful. These are simple rules outlined in Science of Stock Price Action Video Book.
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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