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Asian Paints – Runaway Price gaps and Momentum Divergence

Share price of Asian Paints is undergoing a rough time. In the beginning of August 2018, Stocks were trading close to 1480 per share and now it’s somewhere around 1170. Overall Market sentiment is Negative and Investors are pessimistic on the Share prices. But some technical factors are changing, which is worth to keep an eye on. The 5hr price chart of Asian Paints reveals the present conditions with clarity.

Asian Paint Share prices – Runaway Gaps and Momentum Divergence

Asian Paint Share prices - Price action shows Runaway gaps and Momentum divergence

When we look at the chart, it’s pretty obvious to notice the Downtrend. Share prices almost lost 20% in comparison to the peak value of 1480 back in August. The primary reason for the selloff has to do with a combination of factors such as disappointing Earnings report, overvalued stock prices and Pessimistic market sentiment.

Within the Downtrend, we can see multiple pattern failures and traps. All these are resemblances of stocks shifting from Smart players to weak hands. One such example is the formation of false support at 1280. Price action has trapped weak hand players who initiated long trades at the zone and later share prices drastically fell from the support. I have highlighted this with Pink box on the chart.

After crossing 1280, price gaps significantly increased. It’s an indication of liquidity issues. Some technicians would call this as “Runaway gaps”. Along with this, we can also see Momentum (Measured by MACD) diverging from Market action. Prices are making lower lows, whereas momentum is making higher highs. These technical factors imply that Market conditions might change in coming weeks.

Traders should watch the Price action of Asian Paints and should take decisions based on setups and formations. Also monitor the Overall Market sentiment.


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About the Author:

Balaji is a Speculator, Investor and Trader (All in All!!!) and self published author. Trading in the Markets since decade, have seen more ups and downs along with institutional trader's lifestyle. He usually trades Nifty, Bank Nifty, Commodities, Futures cum Options around both Indian and global Markets. Balaji applies highly analytical and systematic Price Action strategies He blogs passionately about Trading strategies, Price Action Trading, Technical analysis, Macro events, Market setups, Financial and Economical topics. Apart from Trading and Blogging, Balaji also mentors aspiring Traders and Investors on becoming successful in highly competitive financial Markets.

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