Todays theme is how do we identify that a correction is over ?? We thought Bhart Forge would go through correction but it found support at lower levels , bounced back and closed above previous days high. Therefore, the question comes when do we buy a stock ? The best way is to buy it once it gets over the correction phase and resumes its original trend .
Lets take a real life example . Patni Computer is in uptrend . It is correcting after making a yearly high of 488. On a daily candle stick charts it has made lows on last four days. It may see some more down days -- when do we identify that correction is over and we buy again ?? Today the stock made a high of 428 and it closed in negative at 417. If on any day the stock closes above 417 with some rise in volume ie makes a green ( UP) candle we buy it. If it closes below 417 tomorrow then we do not buy it. Should we go short on it ? The answer is no . In an uptrend one should always trade along with the trend. Since the trend is up we should always look for buying opportunity. If the stock closes above 417 and Nifty remains supportive we may see the stock pulling back to 488.
Have fun and learn to trade
Thursday, September 24, 2009
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