How Recognizing Patterns Can Boost Your Investing Game ?
For many investors, catching stocks at the perfect moment seems like a magical ability. But what if I told you the secret simply lies in understanding patterns ?
While no pattern guarantees 100% success, recognizing them significantly increases the odds of a stock reaching its target.
Now, some patterns are rockstars, like the head and shoulders. Imagine a price chart with a left shoulder, a larger head, a right shoulder, and then a dramatic drop below the neckline. Or picture the opposite, like Natco Pharma’s recent bullish move – left shoulder, massive head, right shoulder, followed by a sharp climb above the neckline. Many investors bet on these patterns, with the head and shoulders target being the height of the head (almost 400 points for Natco Pharma).
But why do patterns work? It’s a self-fulfilling prophecy! With enough people watching and reacting, the pattern itself gains momentum. A trend line breaks, more people jump in, and voila, the trend strengthens.
Another example? Laura Labs’ head and shoulders (with a twist – two left shoulders!). As soon as the neckline broke, the stock plummeted, reaching its 150-point target within weeks.
These rapid plays highlight the key: once you spot a triggered pattern, join the ride with a small, strategic stop-loss. Remember, patterns are probabilities, not guarantees. But by harnessing their power, you can unlock a valuable tool in your investing arsenal.
Strategy Spotlight
MRPL probably may not have been on anyone’s radar till recently. Why so ?
Simple. The stock has been an absolute non performer for TWO MASSIVE DECADES.
MRPL hit a high of Rs149 back in Jan 2008 and had been struggling within a tough range for a long time but things changed in March 2023.
The stock made a higher low indicating that the worst may potentially be over. It was in Jan 2024 that MRPL made a new all time high and has clocked a mammoth 100% gains since break out and an astronomical 5x gains (as on 19 Feb 2024) since Mar 2023. Mi ATH 2 picked the stock at Rs 121 back in Dec 2023 and has enjoyed a quick 132% gain in no time (as on 19 Feb 2024)
This once again proves two things
– Power of a long term breakout
– Power of non discretionary (momentum) style of investing where potential winners are allowed to enter without any bias and are also allowed to run till momentum dries out.
If you have any questions, please write to support@weekendinvesting.com
