The NIFTY 50 sold off to the 20-day exponential moving average (EMA) early last week, which was mentioned as support level #1 in last week’s report. The price drifted higher into the declining 10-day MA by last week’s close, but in the short-term, the sharp selloff could lead to further selling if support at the 8070 level does not hold.
A break of the 20-day EMA should put active swing traders in more of a defensive mode, meaning to cut back on trading new stocks until the market is able to find some traction.
A break of the 8070 level would increase the odds of a pullback to a very strong support level around 8000. The weekly chart below shows support from prior swing highs and the rising 10-week moving average.
Commentary:
Both long setups last week in WONDERLA and IGL triggered. $IGL broke out on heavy volume, and should continue to work its way higher after a short break. However, if market conditions weaken, a return to the 590 area is possible.
WONDERLA cleared 400, but did so without a pick up in volume. Aggressive traders may want to sell partial size due to the lack of volume to confirm the entry point. One could also set a stop below the two-day low 390 for partial size or the entire position since the volume was weak. The 374.49 stop is still good as well for those who want to give the stock a little breathing room.
We have one new buy setup in this week’s report, which is a breakout entry in RAMKY.
RAMKY recently broke a 5 year long downtrend line in February of this year on heavy volume, which is best viewed on a monthly chart. The chart below is a daily chart, detailing the bullish cup with handle pattern that is forming.
The cup with handle pattern is a bullish basing pattern that usually forms after a strong uptrend. The rise from 40 to 80 the past few months would certainly qualify as a strong trend.
The pattern is currently forming the handle portion, which began on June 1 and bounced off rising 20-day EMA around 66 two weeks ago.
The buy entry is over the two-day high, with a fairly tight stop just below 70. Due to this stocks volatility, the position size should be a bit smaller, as a fairly tight stop is about 10% away. A tight stop can usually be described as one that is 3% away, with normal stops in the 5-7% area. Any stop at 10% or more, usually tells us that the stock is volatile, which means that the share size and risk should be reduced. For example, if you risk 1% on past trades, risk maybe 0.5% on this trade.
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India market is the most potential market, the article is very good
I agree, there is quite a bit of potential. Thanks for the kind words.
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