In Science of Stock Price Action- we say:
Trends Persist much longer than we can imagine.
Since trends persist, all you have to do is trust them when things are down and out.
In simple words: you have to believe that Buy the dip crowd will come and will not let stock sink below important support levels. Bears will be punished for going against the trend.
Let me share two examples to make a point:
Apple stock was struggling in May. It came down to 200-week ma. This was my tweet back then
Apple is at 200 week moving average NOW - The Utlimate Support level pic.twitter.com/c9ujiMkwiz
— Deepak Singh (@smarket) May 13, 2016
See what Apple stock has done from that level - A nice rally from 90 to 105 levels
I always consider 200 week-ma as Ultimate support. I have shared many times before about the Nifty at 200 week ma on Feb 12 2016 when it was at 6900.
Nifty is right now standing at the ULTIMATE support level https://t.co/Mkf9KW8SsH
— Deepak Singh (@smarket) February 14, 2016
Let's take another example: Bharat Forge. I have shared this setup in Premium Case Study section on how stock is at support and should head higher. Today this is how the chart looked
The company came out with unimpressive results:
Bharat Forge - bad results but management optimistic
EBIDTA margins at 25.5% Vs CNBC-TV18 Poll Of 29%
— Varinder Bansal (@varinder_bansal) August 5, 2016
Yes, it's as simple as that. There is no complex science behind chart reading. All you need to do - keep your eyes open. In simple words, keep the mind open to possibilities that might be opposite to your belief system. I have captured these simple lessons in "Science of stock price action" video book.
If you find my work interesting - I will encourage you to buy the book and access Premium Case Studies. The idea is to demonstrate live how patterns unfold and work. They succeed, they fail but the whole process is real fun. I invite you to be part of it.
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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