Let us have a look at the Sunpharma Chart.
The stock was going through a down Trend from March, a move which culminated
on the 29th of May (Marked A on the chart). We saw a widespread spread bar which gapped
down on ultra high volume and which closed
on the lower part of the Bar. Obviously this was not a “Stopping Volume
Bar” considering the lower close.
However the next bar was a narrow spread up Bar closing above the previous
close (B). The volume was also high. This bar clearly indicates that the there
was a lot of buying in the previous wide spread Bar. If selling completely dominated
the previous bar then the next bar would not have been up bar. So the narrow spread Bar on the 30th
May indicated that the down trend has been capped. Then the stock moved up slowly
and lethargically for the next 50 days before moving down again. Today he stock
again tested the last price support level of 502. Today we saw a wide spread
Bar on high volume closing on the upper side, a classical “Stopping Volume” Bar(C). Clearly good amount of buying has come in the
previous support zone. Then ideally we should see the stock travel back the
last price rejection level of 578.
However we should wait for a confirmation on Monday. Good SL would be
492.
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