When a stock breaks down below a Line of Support, then it attracts fresh Selling. Most of the times they turn out to be big Value traps. There is no guarantee that they might decline big time. They can turn sideways too. But as a general rule:
One should never buy a stock that breaks down in name of Value
Three stocks one should avoid:
1. Cipla
Source: Chartalert.com
As you can see in the chart above, Cipla stock used to hold levels of 460-480 levels and hence one should stay away from the stock considering it has broken down.
2. Aurobindo Pharma
Source: Chartalert.com
As you can see in the chart above, Aurobindo Pharma stock used to hold levels of 500-540 levels and hence one should stay away from the stock considering it has broken down.
3. LIC Housing Finance
Source: Chartalert.com
As you can see in the chart above, LIC Housing Finance stock broke down below 390. It pulled back and even then it sold off again.
The Big Picture
Avoid these three stocks even if somebody talks big Value.
The article has been written purely for educational purposes.
Sir How is Cholamandalam Finance, has it broken out. Is it a momentum stock now ?