JSW Steel has delivered an incredible 35% run over the last 1.5 months. It’s quite similar to what we saw on United Breweries rally of 27% in the month of August 2018. There is a very interesting lesson we can learn from both the rallies.
Lesson: Strong stocks are attractive buys on a pullback near 200 DMA especially if it has bounced from the same level in the past.
Case Study: United Breweries Double dip at 200 dma
Source: Chartalert.com
I covered the United Breweries stock as 200 dma around last week of July and what made the stock attractive was the fact that it bounced from the same level in the past. Hence, this month pretty impressive 27% bounce does not surprise me and now with the move – the stock has become a fresh breakout buy candidate too as I covered it few days back.
But I missed covering JSW Steel which formed a similar pattern around middle of July 2018.
Case Study: JSW Steel Double dip at 200 dma
Source: Chartalert.com
JSW Steel declined to 200 dma and considering it bounced with huge intensity last time, it was no surprise that stock has rallied 35% in no time this time.
So, next time when you see a similar pattern like this one – then don’t hesitate to ride it 🙂 obviously with a protective stop loss. Because always remember, in the financial market – nothing is guaranteed. Lines on the chart are like lines on the sand and any bad event can wipe it.
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