Inox wind chart put up shows an evening star candlestick on weekly charts. This pattern consists of 3 candles wherein first candle is a bullish candle, second candle has a smallish body ( nearly a doji preferably with large upper wick) and third candle is a big bearish candle whose body covers the body of the first candle. I have also put up Fibonacci retracement levels to watch out for in the future for possible supports.
Inox wind had a breathtaking rally from levels of 200-220, especially after it took out a 7 year high resistance of 229 in Nov 2023. The stock price raced to post a high of 540 in Jan 2024 and posted a near 2.5 times upmove from levels of 200-210 within 2 months. This is typical of a parabolic move.
The psychology surrounding this move is that in the initial phase there is strong sectoral chatter ( tailwinds is the real deal, but the chatter is where everyone extrapolates order books into future revenues, unmindful of any hiccups the company might suffer) , lots of newsflow/rumours related to the sectoral opportunities, very high visibility of company representatives ( CEO, MD, promoters any or all of these) on TV channels and interviews in magazines promising very rosy picture. All this happens well before actual numbers are reported. And the stock price takes off only on narrative. Before the actual earnings are reported, the best upmove in the stock price is already done. Future stock price movement will depend on the actual numbers that will be reported in the future but a lot of future positives will already have been captured in the upmove. (for anyone wanting to do a self study kind of comparative study, look at the chart of Som distilleries. Stock price posted a rally of nearly 3.5 times from Jan-Feb 2023 to Oct 2023 a six month period where the story was of capacity expansion, product approvals and launches in various states, lots of newsflow, TV fanfare etc and then a slew of bad news including an income tax raid leading to a major correction in price. And the company still manages to post decent results, management is very bullish in commentary, announcements related to company’s launch of products in various states continues and still stock price does not go anywhere. )
Usually during such strong upmoves within a short period of time as seen in Inox wind, Som distilleries etc, everyone who is bullish, or turning bullish on the stock has joined the bandwagon, unmindful of the valuations. Smart money knows where to exit and do exit at right time. Rest of the crowd gets caught up in the narrative and is not able to exit in time. So even if the numbers keep coming, stock price remains lackluster till all the froth is removed from the counter. And if still company continues to perform well, in future another upmove can begin. ( We saw such upmove in Neuland labs, where after a crazy upmove to around 2800 levels stock price collapsed to around 1200 and then again rallied hard on the back of better than expected earnings)
disc: no holding. posted only for academic purposes to demonstrate frothy upmoves in a stock, which can be a reminder for future such situations.
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