Science of Stock Price Action:
When a stock rallies a lot from lows all the way to Previous Highs, then there is no harm in taking profit at the Resistance. It usually looks good and everybody thinks – New high, Fresh Breakout but if for any reason – the stock stalls and pulls back from the highs/Resistance, then it’s vulnerable to big sell-off.
It’s very easy to comment in the future on what one could have done but this does serve as a great example of how to approach such situations in the future.
Emerging Market in Jan 2018:
Emerging market scales a very important level…peak of 2011 pic.twitter.com/bld3VSSjsj
— Deepak Singh (@smarket) January 19, 2018
Now this was the same when the bullishness was at the peak but something else was happening:
Two Major things happened today:
1. EEM at 2011 Peak
2. US 10 Year Treasury Yield at 2.62% – This was the high it made post Trump winning election— Deepak Singh (@smarket) January 19, 2018
Dollar bottomed out and Interest rates broke out above the resistance. Both these factors damaged sentiment around Emerging market and EEM pulled back and finally sold off from the levels of $51.
Emerging market is now down 16% from the highs it made in January 2018.
If an asset rallies a lot from the lows – then there is no harm in taking profit at the previous high
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