“Go with the flow” – This is the basic rule of momentum. Buy High Sell Higher is going with the flow. When any stock gets a powerful trend behind it, then it usually surprises on the upside. The best way to trade them is to Buy High and Sell Higher. I know it’s very counterintuitive but it works like magic.
Case Study: Infibeam Avenue
Infibeam Avenue stock rallied from 14 to 22 i.e. 50% move in September 2023. Now I completely missed it. The move came out of nowhere. When a stock makes a move like this, most people think they missed out and do not see it as an opportunity stock. The argument – How can you buy a stock that’s already up 50%? But if you are a trend trader, you love it because you see this as an opportunity.
When a trend is in motion, stocks make a perfect textbook move. They rally to some levels and then pull back to kiss some moving average and flirt with it before surging higher again. Infibeam stock did just that. The stock did nothing for 2 months after rallying to 22 levels. The stock kissed 50 dma twice in the last week of December 2023 and generated a buy signal at 22. I gave the buy recommendation at 22. [Point 3]
Infibeam stock rallied to 40 in just 6 weeks (the month of January). That’s an 80% move. Now nobody knows the peak, so, even if you sell now, it’s 65% returns. Is the stock done with its upmove? Nobody knows but the stock has created a support base at 30. So, next time the stock dips to 30 levels, there will be buyers. The stock should keep moving higher till it breaks the support.
Buy High Sell Higher is a perfect method to trade a stock that’s in an uptrend. All you have to do is keep buying pullbacks to support levels and then ride it as long as the stock is doing the right thing.
Source: Chartalert.com
Learn the Science of Stock Price Action
Fundamentals don’t drive stock prices.
How people perceive those fundamentals drives stock prices.
As a market participant/trader, keep an eye on how the market views the fundamentals than being obsessed with your own version of fundamentals. It means looking at the price action and it tells you without bias what the market thinks about the stock. Once you read the price action, go and find the reason why the market has such a view on the stock, and be aligned with it.
This is the level one mind training every individual requires to be in sync with market thinking. This is the real fundamental of Investing. I call it the Science of Stock Price Action
If price action fascinates you – then Science of Stock Price Action is a great place to start. I only cover the Indian stock market here.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. 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
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