Answer: The moment is starts performing 🙂
When it becomes a Buy on dips stock from a sell on rally stock. It happens when a stock clears a resistance and sustains above it.
Let me share one illustration:
SDRL (Name of the stock does not matter - focus on the pattern) was struggling below 200 dma. So every time the stock rallied to 200 dma resistance - it got sold. A classic sell on rally pattern
Then in Nov 2016, the stock broke past the resistance of 200 dma and since then has sustained above it
As you can see in the chart above, the stock is now pulling back to test 200 dma (former resistance) as new support. Ideally, the stock should now hold 200 dma on declines. The 200 dma is at 3.01.
Trading Strategy: The stock is attractive between 3.01 and 3.1 with a stop loss below 2.75. Now, it's a great Live case study to observe and follow on how turnaround works. Always remember, in the market, there is no guarantee. There is only hope that if the price action takes a certain shape, then traders/market participants react in a certain way like here they might buy the dip and make the turnaround happen.
The objective of this article is to educate how turnaround patterns work. I took US stock as an example so that trading idea does not become the main focus.
Read another pattern:
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