Support and Resistance - A support is an area from where stock bounces and Resistance is an area where stock stalls and sells off.
What does it mean?
Stocks are good buys at Support and One should book profit at Resistance
Let's apply this rule on Axis Bank Stock Chart
During 2014-2015 - Axis Bank stock bounced from levels of 370 and sold off from levels of 634 - thus creating a line of support and resistance. Hence, when in Jan 2016 - the stock declined to 370 support level - it became a buy. The support worked like magic and stock rallied.
Also, the stock reached the resistance of 634 in September 2016. This time again stock sold off. The bad news now is only intensifying the sell-off. People who sold off the stock at resistance must be smiling
Surge in bad loans take a heavy toll on Axis Bank's earnings. https://t.co/EmwvFpx73A
— BloombergQuint (@BloombergQuint) October 25, 2016
The message is loud and clear. It never hurts to take profits near resistance
Science of Stock Price Action
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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