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Support and resistance level

Discussion in 'Investment Analysis' started by ankur, Jun 5, 2021.

  1. ankur

    ankur Member

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    Hi Shabbir Sir,

    I have read about support and resistance level on blog but have few questions.
    1. When a share reaches to 200 DMA then how we would know that will it act as support or resistance .As a investor point of view , we always think of accumulation of units in dips but at the same time it shouldn't be sharp fall below the support level.
    2.As a long term investor , should we always set a stop loss . If it is yes then at what price -200 DMA ?
    3. Example : I was checking WABCO india and it CMP is 6865 and 200 DMA is 6625. Although, it is trending upward now . Can we accumulate this ?

    Regards,
    Ankur
     
    ankur, Jun 5, 2021
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  2. shabbir

    shabbir Administrator Staff Member

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    Accumulation can be done in any dips of 10%, 20% etc from the top. If the market and the sector as a whole is doing well and is in bull market, there is more likely that stock will not break 200DMA. One should wait to see if the 200DMA is breached or not and then buy in the leg up.
    Stop loss are for traders but that doesn't mean the investors shouldn't have stops but the stop should not be based on the price only but business environment.

    As an example, I invested in Amara Raja batteries because no matter what happens to EV, the future of lead acid batteries was not in danger. To start an EV you need lead acid battery. However, with recent technical changes, research is on to replace lead acid betteries with something more modern. So my view is now the business can be disrupted.

    So I am stopped out of my investment. I prefer such kind of stop losses when investing. Once my view for the stock has changed, I can still hold with a stop of say 200DMA or last major support level to sell only if the stock starts falling.

    Depends on your view and growth outlook for the business than anything else.
     
    shabbir, Jun 6, 2021
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