Sudden Change In Trend

Siva,

Yes this is called fakey or false positive. When you have a strong support that is being tested then there are panic creator which just tries to breach level which is strong support (or resistance) and the panic can help them make huge chunk of money but if the panic does not creep in, they are just making the smaller profits.

So let us look at axis bank charts for 3 months. Long term chart would tell 1100 is a good support.



Now on Feb 14th there is a breach of the support of 1100. So let us look at the chart of Feb 14 in Google finance.



See the first big candle that takes the stock under 1100 with huge volume means that it was completely a good sign that shorting was being played on this stock. Second breach of 1100 is again with huge volumes and so idea was to create a panic and they managed to get even below 1090 which would have triggered lot of margin calls and suck the money out of automated stops and then in the end of the day it was all covered up because the panic did not make too much fall in the stock.

I hope this explains what you see and the avoid this is to use stops. The fakey is not very easy to detect but if you happen to short the stock in spike in Axis bank but did not see the support being maintained, you should be getting out of it at your stop which should have been 1110 at max.

 

The pleasure is all mine.