There is a general belief that a smart strategy is BUY LOW SELL HIGH, but in reality much smarter strategy is BUY HIGH SELL HIGHER. Generally, the best time to buy is when stocks breakout to NEW HIGH because such stocks over a period of time go much higher..sometimes even beyond imagination.
Trading Rule: When stocks breakout to NEW HIGH – then they run a distance in very short period of time.
Let me share few examples:
Yes Bank Case Study:
Yes Bank was one of the major breakouts of 2016. Here’s what happened.
Yes Bank broke out above a well-defined resistance of 900 to new high. The breakout was for real and stock not only sustained above the resistance of 900 but rallied vertically.
Piramal Enterprises Breakout
Source: Chartalert.com
Piramal Enterprise stock broke out and then almost doubled in no time.
Biocon Breakout
Source: Chartalert.com
Biocon stock broke out and then almost doubled in following few months.
Tata Communications Breakout
Source: Chartalert.com
Tata Communications stock broke out above 490 and then rallied with intensity over following few weeks.
Power Grid Breakout
Source: Chartalert.com
Power Grid stock broke out and then rallied 25% in following few months.
Bajaj Finserv Breakout
Source: Chartalert.com
Bajaj Finserv stock broke out and then rallied 65% in following few months.
Escorts Breakout
Source: Chartalert.com
Escorts stock broke out with a large candle above 200 and then almost doubled in following few months. A Large Candle breakout usually turn out to be MUST BUT plays
The Lesson:
The concept is simple – when a stock breaks out with a large candle – then one can jump on the opportunity on minor decline and wait for 6-12 weeks for impressive results.
One question: Lots of my readers ask – Should one position for a breakout? It means should one enter the stock before it actually breaks out
The answer: It depends
All one needs to do – Observe stock behavior near breakout resistance. If the stock starts trading sideways and belongs to a bullish sector, then there is a high probability that stock might break out. Even a better strategy: keep an eye on the stock and jump on the vehicle the day stock exhibits momentum and shows sign of breakout.
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