State Bank stock was down and out in Feb 2016. The stock was on the verge of a major breakdown.
Thanks to reckless lending under super guidance of UPA Manmohan and Sonia - SBI trading at lows of CY 2009 pic.twitter.com/Mc2C5HheA3
— Deepak Singh (@smarket) February 22, 2016
But then there is a saying - Doobtey ko Tinkey ka sahaara hota hai - SBI got that dose of good news post-Budget on March 01 2016.
What happened as a result?
Please do not mistake me. I am not writing this case study for: I told you so...but to reflect on how our thinking process should work and so that in future - this case study becomes a template for how you should approach such situations
Here's how the whole story unfolded on charts -
So, SBI made a huge gap up opening on March 02, 2016 but then stock filled the gap by May 23 and what a take off stock did from that situation.
Turnarounds are always dramatic
Because so many do not believe it and keep shorting which acts as a fuel for upmove and small institutional bias shift acts as super momentum on the bullish side. Nobody knows how long this turnaround change can continue but what is super harmful...sell and then become bearish just because one has sold it 🙂
There are two main lessons:
1. Never discount a big news flow that has the potential to change the trajectory of the stock. Fundamental Turnarounds lead to Technical turnarounds
2. Once Turnarounds gain momentum, it can surprise on the upside and hence one should avoid shorting
Always remember: All it needs - small fundamental spark for a beaten down broken stock to make a grand comeback
Science of Stock Price Action
I have made a Science of Stock Price Action Video Book to explain these complex concepts in simple to understand format so that you can understand what factors move the market. To make the learning experiential, I then apply these concepts in real life, so that it can help you understand the concept better
Do these concepts work all the time? Absolutely not. But when they work - they reward in a big big way. There are many factors at play primarily the overall market environment. The objective of my website is to put forward many Live case studies before you so that you can learn how these patterns work and why sometimes they fail too. The whole idea is to illustrate and make you understand the whole logic behind it.
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.
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