When a bluechip stock does not perform as per market expectation, then the market has a tendency to lock that stock in a prison. It's more like house arrest where the stock has some space to move around but on practical basis it is cut off from the broader activity in the market. Such thing is very punishing for people who continue to believe in that story
The world (traders) loses interest in it. There are research analysts who keep going to prison to meet them every quarter. They keep telling the world where they stand and what their health is but most of the world moves on and shows no interest in the stock.
Well that's the story of Technology stocks. Let's take example of TCS
The stock is in this range of 2200-2700 for now more than 3 years and still there is no clarity on when the stock is expected to move out of this House arrest. Anybody who remains invested feel let down because just see how the broader market has moved in last three years.
What can we learn?
It's important to avoid stocks that are under House arrest. Never get too emotional with an idea. It's much better to back it when it's out of the prison and ready to make a fresh move. Example: Reliance. The stock was in prison for 7-8 years
Reliance has not crossed resistance of 1150 since June 2008 pic.twitter.com/njsbmvfdTR
— Deepak Singh (@smarket) December 13, 2016
and just see how well it has done in 2017 after moving out of prison
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