Let’s look at the Bullish Journey of Apollo Hospital stock
Apollo Hospital stock Breakout above 310 in Dec 2009
Source: Chartalert.com
The breakout above 310 resulted in a rally of 4.5 times over following 5 years.
Lesson # 1: When a stock breaks out – the upsides can be huge in following 2-3 years. Sometimes, breakouts can be like a lottery ticket.
After a steep rally – stocks ususally consolidate so that long term moving average can catch up.
Source: Chartalert.com
As you can see in the chart above – Apollo Hospital stock has been consolidating between 1140 and 1470 for last two years and now even 200 week ma has come up to the base of the consolidation range . The convergence of 200 week moving average and low point of the range offers attractive entry point. Just a rally back to the high point of the range can lead to 22-25% returns over next 6-12 months.
Lesson # 2: Never write off a stock just because it has rallied 3-5x. A strong trending stock can continue to surprise on the upside.
In market nothing is certain – a breakdown below 1140 can be bad for the stock and hence any trading position should have proper stop loss to protect from a sudden big breakdown in the stock.
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