Even at the cost of sounding repetitive, I am going ahead with the post as similarity between the recent examples are striking. In the recent posts on Lupin and Sun Pharma, I had highlighted how price makes a move, ahead of the newsflow, to an area of resistance / support and the news follows suit, facilitating pro-money to take advantage of. This theme is so very common that I can write reams citing examples. But, I will stop short with Sintex Industries.

As highlighted in the above chart, there was a big rally on July 7, accompanied by higher volumes. Am sure this stock would have popped-up in the scanner-list of lot of analyst and traders after this move. The stock does nothing for the next two days and then cracks big time, courtesy disappointing earnings.

It costs me nothing to answer the above questions by spending a little time and typing a couple of paragraphs more. But, I think that would rob the learning opportunity. Hence, I am winding up the post rather abruptly and expect some feedback from you in the comments section below. A detailed analysis from your side would be appreciated. Will post a trade idea in Sintex in the premium segment over the weekend.

Note: I own shares in Sintex Industries

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. 

Regular readers of this blog and my posts elsewhere would be aware that I suggest not to chase price, especially breakouts of well-advertised levels. Let’s consider the case of Sintex and understand how the pro-money (call it operators, HNIs, FIIs or anyone else with enough money to move price) work. The idea behind this post is to show how price/volume can be misleading and green candle with huge volumes need not necessarily be a signal to jump on board.

Have a look at the daily chart of Sintex featured below. The data is updated until Monday, January 19, 2015.

It is apparent from the above chart that the price closed near the day’s high, with huge spike in trading volume. This price action backed with increased trading volume would have enticed quite a few traders to buy the stock first up this morning. Why? If price breaks key resistance of Rs.105 then it means a breakout. What is the sanctity of Rs.105? Have a look at the weekly chart featured below to understand the importance of Rs.103-105 zone.

Am sure, Sintex would have popped up yesterday, in the regular scanner that most traders run at the end of the day. The price action and volume was compelling enough to go long first thing today else we end up missing the move. How many of you bought this morning? Am sure quite a few and many would fail to admit they fell for the bait.

I have no problem in admitting that I have fallen prey to this phenomenon and ended up buying at the day’s high and even at 52-high in certain cases, only to realise that I was handed a lemon. Have a look at the updated chart of Sintex which includes today’s price action.

Notice the selling tail or the wick. What does it indicate? Now pay attention to the volume. The traded volume today was almost 89% of yesterday’s volume. So, it was an equally high volume day but price retreated from the day’s high of Rs.111.20 and closed at Rs.107.15. The close was a good 3.6% from the day’s high.

The pro-money will do whatever it takes, to trap gullible traders, in their search to get relatively cheaper entry. Just imagine, if everyone was desperate to buy this morning, who will they buy it from? You need a seller for every buy or vice-versa right! Think!!

Even at the cost of ending this post abruptly, I am not going to post any further information / analysis. Not for a moment am I saying that Sintex has hit a peak and would start selling off. Am not giving any opinion or analysis about where this stock is headed.

Am also not saying that breakouts are always a failure. Please do not bother to send mails / reply showing examples of where breakouts worked like a charm. They do work, but try to understand where the move originated and the source of the actual breakout would be retested more often than not.

I appreciate comments / questions and will try to respond as quickly as possible.