Financial market is an amazing place to draw a similarity between what we see in real life situations and what we see in a market. One of the things we see all the time in financial market: Relay race
How a market falls in a love with a sector for some strange reason and the leading stock of that sector makes a big move and then baton is passed on to the next one and then the next one. Why does that happen? Human behaviour Oops I missed the obvious one and so let me chase the next idea in the sector.
The thinking looks pretty straightforward:
A stock has made a big move.
B stock belonging to the sector is making a move
C stock belonging to the sector will make a move.
And then everybody starts chasing B and C and so even though you miss A – you can make up that missed opportunity by chasing B and C. I have shared this example many times under Science of Stock Price Action Premium Case Study. Here’s another sector where this relay race is in progress.
Case Study: Fertilizers
Deepak Fertilizer stock broke out in 2016 – Leadership stock
Source: Chartalert.com
Demonetization period created a great entry opportunity in this breakout as stock pulled back to retest previous resistance as support but as this stock was taking leadership role – another stock broke out: Chambal Fertilizers. I covered this stock when stock broke out way back in January.
Source: Chartalert.com
Chambal Fertilizer has done pretty well when it comes to breakout and then baton was passed on to quiet Coromandel International. I also covered this one.
Source: Chartalert.com
Coromandel International stock breakout also made a good progress. And while this continues – two more stocks broke out –
1. SPIC and 2. Aries Agro
Source: Chartalert.com
SPIC broke out in week of September 07 2016 and pulled back only to rally – the stock is at 40 now 🙂
Aries Agro Breakout also looks well positioned for good 2018
Source: Chartalert.com
Lesson we can Learn
When a Bull market starts in a sector, then it has a tendenecy to spread to another stocks of the sector and they become the best breakout plays
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