Bharat Financial (SKS Microfinance) stock price action was in this condition in 2015 and early 2016:
Source: Chartalert.com
As you can see in the chart above- the stock was first facing major resistance below 100 dma and then it crossed above it. The 100 dma resistance became the new support and stock retested 100 dma twice only to confirm that.
The stock caught our attention back in Jan 2016. This is screenshot of what I said back then:
The stock exactly did that – it pulled back to 100 dma twice.
What Bharat Financial (SKS Microfinance) did after forming this pattern
Source: Chartalert.com
Bharat Financial stock rallied like crazy after forming this pattern. It’s a great case study on why one should turn super bullish when one sees such pattern.
The Pattern at play: Turnaround + Double Dip = Stage set for Big Rally
What happens:
- An under performing stock does a turnaround – by moving up sharply above a predefined resistance/moving average.
- Once the stock makes the turnaround move – it then declines to the previous resistance to retest it as support.
- Lots of times – it retests the previous resistance as support twice, technically called as Double dip – and when that happens – it sets the stage for strong rally.
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