When the Surface cracks, then things fall through the cracks and it happens with the stocks too.
The beauty of following price action -that stocks do tell you in advance about things to come - good or bad. Example: When a stock starts breaking support - it's a clear sign that something big and bad about to happen. All one has to do: Trust one's eyes and take notice.
Case Study: Teva Pharmaceuticals (Listed in US stock market)
As you can see in the weekly chart above: Teva Pharmaceutical stock was holding on to horizontal support level of 52 which it cracked with big candle in May 2016. It was the first big warning sign. The stock then took support at 200 week moving average (Value buy Opportunity) and then pulled back but could not clear level of 52 - another warning sign.
Then Teva Pharmaceutical stock broke down below 200 week ma with a large candle - the surface just cracked with a big hole. It was a clear sign that something is not right with a company. And it's no surprise that investors just fell through the cracks. How deep?
Well, Now a year later - here's how Teva stock stands today
Now it's a difficult concept for Buy Low Value investor to grasp but see how one could have saved oneself even after selling just post-breakdown at $44. It's a great case study to understand the importance of following Price Action and be vigilant to what's happening on the screen.
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