Two ways to look at this candle:

1. Stock is too strong as it fell down and was again pushed up by buying pressure
2. It is getting stretched because at least sellers were able to take it down.

That is why textbooks after a point are tougher to make money.

AWL

In this thread, I will explain to you the psychology behind the cup & handle pattern. The attached chart is of Balaji Amines.

Point 1 = Profit booking by many traders and fresh short positions opened taking the stock down till level 2 where there is no more selling

Point 2 - a level wherein the stock becomes attractive again for fresh buyers and short positions will be covered adding strength to the stock.

It moves back till point 3 which is now the psychological resistance level and would again see profit booking by weak hands.

But, this time the stock fell till point 4 wherein the buyers (smart hands) are willing to pay a higher price and further push out the weak hands absorbing all their selling. This is the ideal entry point for a risk-loving trader as this is the closest to the stop-loss point.

Finally, you see - in the whole process - the stock has shifted hands from uninformed retail investors to "smart hands". And finally followed by a cup and handle breakout. The target will be the depth of the cup projected upwards from the breakout level.

When to take entry for a conservative investor? At candle no 5 - the breakout candle and stop-loss a few % below breakout level.

In the next thread - I will explain to you how the same principle works for most of the patterns (No need to mug up the pattern names)

#Infosys #NSE - another example of a stock in an uptrend. Consolidating nicely during its upwards journey. Giving multiple trading opportunities on the way for a short-term trader. For an investor, holding it till the weight of the evidence signifies trend reversal.

Varun Beverages - so far a stronger name holding up above all key MA.

Prince Pipes - a major H&S top in formation on a weekly scale. the breakdown should be with a strong candle closing below 575 for the confirmation