Here’s Summary of Trades:
Nifty at 200 week moving average
Feb 12 was major turning point for Indian stock market.
Science of Stock Price Action: A strong Bull market usually takes support at Long-term moving average especially if there is history of doing the same. The 200 week moving average for a long term Bullish asset is Deep Value.
Source: Chartalert.com
As you can see in the chart above – Nifty had a history of taking support at 200 week moving average. It did in August 2013 and repeated the same this time. Nifty took a solid support at 200 week moving average and now about 4.5 months later – Nifty is up 17.7%. The pattern is an excellent example of how text book situations work in real life and how should one approach deep value situations.
Ashok Leyland – Bullish Base Camp in a multi Year Bull Market
Science of Stock Price Action:When a stock enters a multi year Bull market – it rallies in following fashion – it rallies a distance and then builds a base camp and trades in that range for months before rallying again. The base of the bullish camp is buying opportunity for investors with patience..
Source: Chartalert.com
As you can see in the chart above – Ashok Leyland stock was at the base of the Bullish Camp on Feb 12 around price of 80. Just see how beautifully the stock has bounced from that level.
The above principle can be applied on HDFC Bank and LIC Housing Finance. Here’s the chart – quite self-explanatory
HDFC Bank at Base of Bullish Camp
Source: Chartalert.com
LIC Housing Finance at Base of Bullish Camp
Source: Chartalert.com
Please remember the concept of Bullish Base camp only works for stocks that are in strong Bull market.
SKS Microfinance – Turnaround and Double Dip
Science of Stock Price Action:When a stock is struggling to cross a resistance for some time, then any breakout past it – results in either immediate momentum or turnaround type move. In Turnaround – stock pulls back retests previous resistance as support. The rally is very brutal if it retests it twice called as double dip..
Source: Chartalert.com
As you can see in the chart above – SKS Microfinance turned around and retested 100 dma twice before rallying in a pretty amazing fashion.
Yes Bank – Breakout and Vertical Move
Science of Stock Price Action:When a stock breaks out from a well defined resistance, then sometimes it results in immediate momentum and stock does a pretty explosive move in short period of time..
Source: Chartalert.com
As you can see in the chart above – Yes Bank broke out from a well-defined resistance and never looked back – pretty vertical move for a large cap.
The above principle can be applied on IndusInd Bank, Manappuram Finance and Shriram Transport Finance. Here’s the chart – quite self-explanatory
IndusInd Bank Breakout
Source: Chartalert.com
Manappuram Finance Breakout
Source: Chartalert.com
Shriram Transport Finance Breakout
Source: Chartalert.com
Indiabulls Real Estate Breakout
Source: Chartalert.com
Hindalco = Turnaround + Disbelief Move
I have explained the pattern here in detail.
Lesson:
I hope these patterns will help you understand how stocks move in text book style on charts.
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