All you have to do is open your eyes and watch the price volume action on the chart.
Stocks have a behavior of its own and they usually tend to repeat it, till they stop doing it.
Here's one stock chart (Name of the stock is irrelevant)
It's a 4 year price action and see what stock has done- Absolutely nothing. You don't need overanylsis here. What you see with naked eyes is good enough. Most of the stock charts are pretty transparent. You get what you see. There is no hidden agenda/meaning
But I have seen many people drawing weird random lines on the chart to show that stock is ready for a move. That kind of overanalysis usually sucks you into a stock and then you wait endlessly in pain and frustration
Will you buy this stock based on what you see above? Absolutely Not. Why - Because despite a strong bull market - what has this stock done - spiked and sold off. It has consistently done that. Also, look at the volumes, it clearly means not many folks interested in the stock.
But what if stock rallies and surprises on the upside. Yeah anything can happen but what's the probability - very low. Hence, as a Price action follower,you tend to avoid a stock that has this kind of behaviour. The best thing: Wait for the stock to change from trendless state to some trending state
There are two kinds of move that happens in a market: 1. Textbook Tradeable; and 2. Random. Price Action helps you spot Textbook tradeable moves. They are easy to spot and usually make clean moves in a good market environment
Please share your comments on what you think
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