In this post, i discuss a simple way of when to start paying attention to a particular sector or a stock, with the example of IT sector
1) At point 1, as nifty is forming a bottom, IT is attempting to form a bottom as well, moving along with the index
2) As nifty continues to move higher, it forms a higher low at point 2, whereas IT has a big gap down and forms a lower low, clear underperformance.
3) at around point 3, this is the first time IT attempts to outperform the markets, printing a clear wide range candle, still underperforming overall. start paying closer attention once this happens
4) at point 4, nifty peaks and corrects, and IT falls along with the index, right from its previous resistance zones.
5) IT was a laggard, and continues to fall with the index, but after swing low, bounce back is of more magnitude, wide range candles are starting to form
6) point 6 is where we get clear confirmation of outperformance by IT index, as nifty forms a lower low, whereas IT forms a clear higher low. things are starting to change
7) even though IT remains in a stage 1 structure, signs of outperformance in the coming cycle are starting to show. when this happens, start going through individual stocks in the IT sector and prepare for the next cycle
1) At point 1, as nifty is forming a bottom, IT is attempting to form a bottom as well, moving along with the index
2) As nifty continues to move higher, it forms a higher low at point 2, whereas IT has a big gap down and forms a lower low, clear underperformance.
3) at around point 3, this is the first time IT attempts to outperform the markets, printing a clear wide range candle, still underperforming overall. start paying closer attention once this happens
4) at point 4, nifty peaks and corrects, and IT falls along with the index, right from its previous resistance zones.
5) IT was a laggard, and continues to fall with the index, but after swing low, bounce back is of more magnitude, wide range candles are starting to form
6) point 6 is where we get clear confirmation of outperformance by IT index, as nifty forms a lower low, whereas IT forms a clear higher low. things are starting to change
7) even though IT remains in a stage 1 structure, signs of outperformance in the coming cycle are starting to show. when this happens, start going through individual stocks in the IT sector and prepare for the next cycle
Trade active:
while nifty is attempting to form a bottom, IT index had a clear range breakout, ahead of nifty, and many stocks within the IT index, even had excellent follow throughs. once we identify relative outperformance in a sector wrt nifty, the next step is then to start focusing on individual stocks breaking out within that sector
Trade active:
today is a valid follow through day in IT index, this is just the beginning of a much larger move, which will materialize over next many months
