“I’ve learned to ignore what you think should happen in favor of what actually is happening.” – J.C. Parets
When it comes to financial markets, it is essential to pay attention to what is happening that you can see through the naked eye.
Let me explain this with one case study – UPL
UPL stock between August 2022 and June 2023 [See chart]
UPL stock found a bottom at 656 last October (Point 1) and rallied vertically to 800 by early December. The stock then declined to 696 and found support there multiple times. The stock even started rallying (Point 3) with the market but for some reason broke below it in May despite market strength. Point 4 – This is how the stock tells you about its weakness. Just see how the same level of 695 became the resistance at a time when every other stock was flying higher in the market
Trading Rule: Never have Hope in a weak stock as they are inclined to breakdown
Just imagine when the midcap smallcap end of the market was ripping higher, UPL stock broke down with a Gap after forming a resistance at 695. That’s what weak stocks do, they eventually break down
And now see where the UPL stock is [Remember Selling matters, especially in a weak stock]
The point I am trying to say is why it matters to focus on what the stock is doing in the market because lots of times the fundamental reasons for the fall come much later. Every stock should be judged on its merit.
There is a very important lesson to learn here – If you see a stock breaking down, then one is better off exiting it before it gets very late
Source: Chartalert.com
Learn Science of Stock Price Action
About Membership
Fundamentals don’t drive stock prices.
How people perceive those fundamentals drive stock prices.
As a market participant/trader, keep an eye on how the market views the fundamentals than being obsessed with your own version of fundamentals. It means look at the price action and it tells you without bias what the market thinks about the stock. Once you read the price action, go and find the reason why the market has such a view on the stock, and be aligned with it.
This is the level one mind training every individual requires to be in sync with market thinking. This is the real fundamental of Investing. I call it Science of Stock Price Action
If price action fascinates you – then Science of Stock Price Action is a great place to start. I only cover Indian stock market here.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. 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