Science of Stock Price Action: When a stock forms a base or takes a support at a horizontal line – then one can hope for Bullish action ahead. But there are times when the stock cracks through the surface, and whenever that happens – the stock can go in for a free fall. This is one reason that one should have a stop loss whenever the stock cracks through.
Case Study: JD.com
One stock that appears compelling buy on Charts: https://t.co/tuZl2TbKqR
The stock has underperformed for over a year now, stands at critical support level where believers seem to be accumulating. If the stock slips below $34, then it would mean something is wrong. pic.twitter.com/HpP4miggkg— Deepak Singh (@smarket) May 30, 2018
But then the surface cracked
It's never a great sight when you see a stock breaking down a week before the earnings announcement. https://t.co/tuZl2TbKqR. The stock now at $33.87https://t.co/ytwavE0i6w
— Deepak Singh (@smarket) August 15, 2018
It was a clear signal to exit the stock at 33.87. And lots of times people ignore it thinking oh the stock will recover. But see what happens –
The lesson is very simple:
One can buy the stock near the base but always exit whenever the surface cracks because you never know what can happen. A small loss is far better than unbearable big loss.
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