One of the basic principles of following Price Action:
You trust the trend and not anticipate reversal knowing fully well that one day trend will break the established support but till that time - you just keep assuming that trend will work.
Let me share one recent example: Ctrp.com
Ctrip.com is an Online Travel Agency (OTA) and a great way to play Chinese consumption growth. It's an indirect way to play India's growth story too with its investment in Make My Trip
Here's the weekly chart
As you can see in the chart above: the stock has always bounced from 100 week moving average. The stock is right now at 100 week moving average. Ideally, it should find the support and bounce. The big question: Will it? Price Action says - Trust the trend but don't be blind and close below 45 and one should be out of this stock.
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