In this post, we will try to analyze the trend of Maruti. We will also find where an investor/trader should make a fresh position in the stock.
Let us start with 14 month chart of Maruti.
The above image is a daily chart of Maruti. During the 14 month time, Maruti made a high of 9400 and a low of 5446.
First of all we need to divide our time frame in 3 different phases.
- Bearish & range-bound market
- Entirely bearish
- Bullish/ Trend reversal
In order to identify the long/medium-term trend in stock, we need to find lows and highs of the stock. A trending stock will always make higher lows and higher highs.
What is low and high?
A low or high is a region in stock where stock changes its trend. Using a single low or high we cannot identify the long or medium-term trend of the stock. But when we plot several lows and highs in stock we can identify medium/ long term trends.
Now, we will check every phase of the market in Maruti stock
- Bearish trend & Range bound: Stock has been making new lower lows and lower highs but still it is moving in the rangebound area.
2. Entirely Bearish: Maruti was moving in range-bound area for a long time but on Jun 19, it broke major support of 6300-6500 with heavy volumes. This created a panic in stock and dragged stock to a new low of 5445. During this phase, the stock formed lower lows and lower highs. This phase is highly volatile and stock can drop 10-25% easily during the phase.
3. Bullish/ Trend reversal: After staying in a bearish phase, Maruti started forming higher highs and higher lows, This is the time a stock changes its Medium or long trend. Maruti had a strong resistance at 6500 and stock changed its trend once it broke that level with heavy volumes. In the below graph we can easily identify that Maruti is forming higher highs and higher lows.
Once Maruti has closed above 6500 we can assume with high probability that stock will continue to make news highs in coming weeks. This is a very important phase in the market as every trader/investor initiates fresh long positions for medium and long term.
The trend is your friend and one should always stay with it.
Rules you need to follow for finding out trend in stock
- Set 12- 14 months time frame of stock
- Plot lows/highs in the stock.
- Divide the time frame of stock in bullish/bearish.
- Identify the trend in the stock.
- Find the resistance line which could change the trend.
- Initiate a long position.
I hope this post helped you in identifying the trend in the stock.
