This is a follow-up to the the earlier post. If you have not read the earlier one, please click here to read it now, in order to get the context of this post. I could have written this post a couple of days earlier (and would have made far more sense from trading perspective) but refrained from doing so, for the fear of violating regulator norms. This post is just to drive home the point that after breakouts, price does a retest and would offer a better entry. Have a look at the daily chart featured below.
Price corrected after the breakout. Notice how price corrected to the breakout point highlighted in the previous post. This phenomenon happens across all time frames. Is there is a reason why price turned where it turned during the correction? Be my guest and have a look at the 15-minute chart posted below.
It is not surprising that the price retested the prior breakout area in the 15-minute time frame. Take note of the green wide ranged bar and spike in volume. Price comes back and seeks support right at the selling tail formed on Jan.19 at 2.15 PM. Price seldom halts because of some harmonic pattern, moving average or fib ratio. It halts where buyers or sellers turn aggressive. The tools mentioned above help us facilitate in identifying those areas and not the other way round.
Hope you will think twice the next time when you are confronted with the urge to chase price thinking that you will miss out on the move. It is difficult, but please develop this habit.
One little clue before signing off: If price seeks support at a prior selling tail, is it not logical to expect a prior buying tail as a potential resistance area? I see selling tails near Rs.137 formed in Jan-Mar 2011. The context for remaining bullish would diminish vastly if the price falls below the recent swing low of Rs.103.
Disclosure: I own shares of Sintex Industries and my risk management parameters are in place. This post is not meant to provide any view or opinion on Sintex Industries. The objective is to highlight how price behaves.