Let us look at the Raymond stock journey over last few years:
Phase 1: Raymond stock Breakout
Source: Chartalert.com
Raymond stock broke out above 620 in March 2017 and despite surging above 620 with a large candle – it sharply pulled back to near 620 in May 2017, which tells you about patience one needs to have with breakout. Breakout plays work well when you hold them for 6-9 months. Raymond stock over next 9 months did not disappoint and delivered 85% returns. Not surprising for the breakout stock.
Raymond stock sharply pulled back in 2018 along with the broader market but it took support at 50 week ma – the same moving average level from where it had bounced before breakout. On daily chart – 50 week ma coincides with 200 day moving average
Raymond Daily Chart – Source: Chartalert.com
Raymond stock offered multiple opportunities between Feb 06 2018 and March 23 2018 at 200 dma and then the stock did bounce with intensity about 27% over next 6-8 weeks -to previous high but that’s about it. This stock is a great example of why it matters to follow price levels on chart. Raymond stock stalled at Previous high and sold off and ususally when that happens – it raises the risk of breakdown and that’s precisely what happened with Raymond stock.
Raymond weekly chart – Source: Chartalert.com
Raymond stock not only broke down below 50 week moving average on the way down but the stock has sustained below it despite Bullish market environment.
Lessons we can Learn
1. When you buy a breakout stock – have a holding period of 6-10 months as long as the stock holds its support level.
2. Breakout stock is a great buy at moving average level from where it bounced last time
3. If the stock sells off from an important resistance point, then don’t rule out breakdown and one should not fight with that trend on the way down.
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