Science of Price Action: It increases the probability of strong bullish move over next few weeks/months. It's like a stock getting ready for big take off after all the pre-flight checks
When one follows price action - one should keep a close eye on what stock is trying to do.
Let's take One stock Potash Corp as an example:
Evidence # 1: Here's Potash Corp Weekly Chart: The stock breaking out of the resistance - Good sign
A stock breaking out above resistance is always a great sign. It sets the stock up for a solid bullish move.
Evidence # 2: Here's stock taking double dip support at 50 dma which makes it even more bullish
So, the stock has not only broken out but on pullback, the stock is taking support and doing the right thing. The only problem: It's a beaten down stock and hence there is an element of doubt: Can it turn around?
Price Action wise: Turnarounds have high failure rates.
It's a great stock to keep an eye on for next few weeks/months to test this theory: Should one bet on a beaten down stock that has started to do the right thing?
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— Deepak Singh (@smarket) January 27, 2017
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