There are times when somebody wants to buy a stock based on personal fundamental research and then they look at the chart and say – Oops missed it. Example: This is the Tata Chemicals stock chart. As you can see, the stock was a great buy at 550. The stock is now already up 19%.
Source: Chartalert.com
The big question:
- Should one let it go?
- Should one buy but then what about WHAT IF I AM WRONG Plan? Can you afford to put a stop loss of 25%
- Which level offers attractive risk-reward opportunity if one still wants to get in and not miss the move.
Here’s how one can do it.
Nobody knows the future and the best path forward – make some assumption about the future and go from there. Let’s plot some moving averages to begin with and see whether they make sense. It’s hit and trial
Source: Chartalert.com
The 20 week ma and 50 week ma looks ok on the chart and we can see Bullish Moving Average Cross over buying signal. As one can see in the chart above – 20 week moving average is about to cross above 50 week ma. This is considered very bullish signal and if the trend is for real – the stock should not decline below that converging point.
What does that mean?
One can look to buy Tata Chemicals stock near 610-625 with closing stop loss below 589 and hope this uptrend gains more strength with time. No matter how much you like a stock, never chase a stock on way up. Wait patiently and the stock price will come to you. If it does not, then let it go
The article has been written for educational purposes.