Charts never lie. They tell you about the state of the stock as it is. All you have to do - Trust your eyes and Accept the reality.
This was the state of Lupin earlier this year: It looked like a Value Buy at 1400
But then Lupin stock did this: It broke down below 1400.
Now, I have always said - You never know what stock will do. You make an assumption and put a trade hoping a trend will stick. But what happens when things don't go your way - you recognize it and say It's better to exit. This is what I said on Twitter: see the date
Breakdown below 1400 in Lupin is disturbing. It's better to exit and watch than watch in pain. One can always jump back in https://t.co/JdoPwH6SvW
— Deepak Singh (@smarket) April 24, 2017
Here's what Lupin stock has done since then: Just see how smart move it was to exit at 1370
The stock is down 40% post breakdown below 1400. When a stock breaks out, we don't know how high it can go. Similarly when stocks breakdown, you don't know how low it can go. That's why a classic Value Buy becomes big Value trap on breakdown
1. Don't close your eyes when you see something uncomfortable. Just Sell and Avoid the emotional Pain
2. Don't question the market's wisdom
Price Action is one of the best ways to make good investment decisions. That's what I teach all the time.
If you find Price Action fascinating - then Science of Stock Price is a good place to start. It's a website designed to help you learn various Price Action concepts.
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