Larsen & Toubro: Geometry At Play

November 21, 2012 . FundsIndia Desk

The daily chart of Larsen & Toubro is a treatise on the concept of Action-Reaction lines. Also, the simple concept of gaps acting as support  / resistance is also at play. Direct your attention to the daily chart featured below.

Notice how the prior gap acted as a resistance first up in February. Price then sailed past this resistance level in September and is now acting as support. Notice the key reversal day pattern completed today at the crucial support level. This is a sign that buyers are active in this neighborhood.

Also notice the blue set of action-reaction lines at play. The price was repelled from the reaction line and it took support at the centre line. If the reaction line dons the role of a centre line,  expect then a rally to the magenta reaction line at Rs.1950, based off the prior action Line.

The bullish view would be under threat if the stock falls below Rs.1,420.

Trade Safe and Don’t Get Hurt.

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