Everybody wants to buy at lows. It gives an intellectual kick but how can we know for sure that panic bottom is in.
Pattern: Panic Bottom = Buying Opportunity on retest
When a stock in downtrend forms a low and rallies with intensity then it leaves behind a low that everyone watches in awe. This low becomes the new reference point and for whatever reason the stock slips to that level again, it invites fresh set of buyers and this time it results in sustainable bounce.
Example # 1: Gilead Sciences
Gilead Sciences stock managed a huge rally from the levels of 64 to 85 in CY2017. It then came down to levels of 64 again in late April and early May this year and no wonder the stock has bounced 14% from that level.
Example # 2: Qualcomm
Qualcomm stock went through hell for few years but things seem to be falling in place for now. The stock managed a huge bounce in Nov 2017 from levels of 50 to 70 and so when the stock declines to the levels of 50 again in end April, traders jumped in and now 5 months later – the stock is up 48%+ 🙂
Live Case Study: Panic Bottom Buy – NXP Semiconductor?
NXP Semiconductor has formed a similar pattern. It bounced big last time from $90. The stock is once again at that panic low: Buying Opportunity?
Bank of America Merrill Lynch has upgraded NXP Semiconductors NV (NASDAQ: NXPI) from Neutral to Buy and raised the price target from $110 to $120
Chalte Chalte
There is no guarantee in the market. All you can do – when you see a pattern, you take a bet knowing fully well that there is no guarantee and one should be ready to exit if it does not work out. But if the pattern works, it can be rewarding experience.
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