Case study of "GSFC"(Technical Analysis)

"Strong Breakout Stock"

(Please read the Full Analysis and don't miss the Key Takeaway Points)

Important Points:

Breakdown of the case study:

•As you can see in the chart(from the left side), the price was sold off heavily with rising volumes. After days of continuous selling, the pace of the selling cooled off and the price formed a doji candle as you can see in the chart

**A doji candle is a candlestick pattern in trading, signaling market indecision with its small or non-existent body. It may suggest a potential reversal and it is used to identify shifts in sentiments after a trend**

•The doji candle which was formed on(23 March '20) acted as a point of reversal. This reversal was confirmed when the price moved upwards in a higher high/higher low structure with a gradual rise in volumes.

•As the price moved higher, it reached the previous sell-off levels as shown in the chart. The price then tried to break out of the structure but ultimately failed to do so as shown in the chart as fakeout(I). The breakout failed mainly because of the resistance levels of the sell-off point and the resistance points of the broadening channel pattern.

•The broadening channel pattern's resistance levels were further solidified when the price broke out of the sell off resistance points(which can be seen in the chart)and moved higher when ultimately it tried to break out of the broadening channel pattern again but failed to do so as shown in the chart as fakeout(II).

•After the failed breakout attempt from the fakeout(II) stage, the price again went into a consolidation phase where it retested the support levels of the broadening channel pattern and bounced back.

•After the price bounced back from the support levels, the price again tried to break out of the broadening channel pattern but failed to do so for the third time which ultimately resulted in a buying climax scenario followed by a distribution/consolidation phase.

**A buying climax in a chart is a peak in buying activity, marked by a rapid increase in prices and trading volumes. It often occurs after a sustained uptrend. It signifies the end of a buying accumulation phase, with smart money selling to the public.**

•As the distribution phase unfolded, the price gradually went lower and lower by creating lower highs/lower lows before ultimately forming a demand zone as shown in the chart.

•As the demand zone was being retested and solidified, the price was forming a structure known as the descending triangle pattern which is marked on the chart through dashed lines. The price then gave a strong breakout of that structure with a huge breakout candle supported by massive volumes. A big bodied breakout candle was formed which indicated the presence of strong institutional buyers.

**Note: As you can see in the chart, after the distribution phase, the price formed a descending triangle structure inside the consolidation phase. The breakout of this structure can be considered as a cheat entry before the breakout of the original consolidation phase.**

•After the breakout of the descending triangle pattern, the price rose higher and retested the supply zone multiple times before finally giving a huge breakout with strong volumes as shown in the chart as a stage(I) breakout.

•After a quick upward rally of 25-27% from the stage(I) breakout, the price went into a small consolidation phase of around(36 days)before giving a huge breakout with massive volumes as shown in the chart as a stage(II) breakout. Again, a big bodied breakout candle was formed which indicates the presence of strong institutional buyers.

•Currently there are no resistance zones/levels at this point.

•The support zone is around two levels. One is around the previous breakout levels of 208-204. Another is around the supportive trendline which is shown in the chart.

•The price can give a brief rally of around 15-20-30% if it doesn't break the overall Higher High/Higher Low structure. The price can retrace and retest the previous breakout levels but it shouldn't break the overall structure or the price will be weak.

 Key Takeaways from this case study:

•After the initial point of reversal, the price has been moving in a higher higher/higher low structure. Forming a base and then breaking out of it with huge volumes and then sustaining above it. Until this structure is broken, the price will remain strong.

•The breakout volumes are always massive indicating that there are strong institutional buyers present in it.

 Also, one interesting point to note is that whenever the price hovers near the demand zone levels, the price takes solid support from it and zooms upwards supported by massive volumes. This tells us that we should have a close watch on the price whenever it hovers near the demand zone levels.

•Another point to note is that the price has been moving in different pattern structures over a period of time like the Broadening channel pattern, Descending triangle pattern & Parallel channel pattern which is shown in the chart. So, one can look out for a pattern structure in the future.

Disclaimer: This is not a BUY/SELL recommendation. The charts shared are only for EDUCATIONAL purposes.