There is nothing more appealing than buying an out of favor stock. It sounds intellectually cool. Let us look at ITC stock chart
Case Study: ITC
Source: Chartalert.com
ITC stock created a base at 190-200 between 2013 and 2016 before finally taking off over next 18 months between March 2016 and July 2017. ITC stock rallied almost 90% during that time but then the stock saw a large candle sell-off in July 2017 and it broke the back of the stock trend
What happened in that week of July 2017
ITC’s share price plunged as much as 15 percent, wiping out nearly Rs. 60,000 crore of investor’s wealth after the GST Council increased compensation cess on cigarettes.
The stock has not been able to make any significant recovery since then. ITC is totally out of favor stock and it needs to decline to that base again before investors start looking at the stock again. It means if you have to buy ITC stock – do not buy till it declines to 190-200 levels with a stop loss below 180
The article has been written purely for educational purposes.
Thank you Deepak.
This post on ITC really helps to understand the enigma ITC stock has become in last 5 years (with BJP rule consistently increasing tax on cigarette culminating with the July 2017 GST council lead sell off). Your post is a good guiding light for buying on further downside.
It’s also likely the stock never sells off to below 230 levels and meanders around for few more years between 230 to 300. What would be breakout levels you would consider on the upside – 322 level or 345 level, for buying?
I would avoid ITC stock for now but for diehard fans – it can be a good stock to add near 200 with stop loss below 180 to hold for a long time. And it’s very difficult to imagine breakout right now 🙂
In worst carnage in recent past it did not go below 234. Probably tells floor is in place. P/E contracted dramatically from 30s to near 20 now. If not buy now then when? Sure it can test patience. But move should be amazing.