In Financial market - things work in an extremely funny way. Once a market falls in love with a sector, then stocks of the sector start making a textbook bullish move one after another and they do so for a long long time.
Example: Real Estate
The Bull Market started way back in March 2017 and even in December, momentum has sustained.
One sector in India where there has been pretty visible breakout in stocks with huge volumes: Real Estate
All Bad news priced in?
— Deepak Singh (@smarket) March 23, 2017
How it all started?
Breakout in Brigade Enterprises: There was a breakout on weekly chart and now 9 months later - the stock is up another 50% from the breakout point
Breakout in Godrej Properties: Few weeks after Brigade Properties stock breakout - there was breakout in this stock and see what has happened to this breakout
Then next stock to Breakout was Sobha Developers: Sobha Developers stock broke out next and see what has happened to this breakout
Indiabulls Real Estate stock breakout: Indiabulls Real Estate stock broke out next in April and it was a momentum breakout
Now the sectoral breakout has spread to even smaller names like Kolte Patil and other small housing construction stocks. The above case study is a great example of what market does to stocks when it starts loving a sector. Even a technically weak stock like DLF made a grand comeback in last few months from a moving average support. Just look at the daily chart below
What lesson we can learn?
The Chart does not tell you about the future but it does tell you how smart money is positioning in a theme for a big bullish move. Getting the theme right helps you chase the right kind of stock for a good bull run. Here's one sector where in last 8 weeks - smart money has been positioning itself for big move.
The Business of Investing is not same as Investing in business. You have to know how stocks make a move and try to capitalize on that opportunity. It means following fundamental newsflow and its impact on Price Action.
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