Identifying Stock using ADX and Rounding bottom formationMay 20, 2022
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It is possible to capture massive moves in stocks using price patterns along with simple indicators like the ADX (Average Directional Index). Check out how we selected WELCORP which has rallied more than 25%.
ADX- The average directional index (ADX) is a technical indicator used by traders to determine the strength of a trend. It commonly includes three separate lines. These are used to assess whether momentum is building on the stock or not.
We published the following research on WELCORP pre-market on 20th May 2022 in "The Financial Waves Short Term Update” which our subscribers receive pre-market every day.
WELCORP as on 9th may 2022 (Anticipated)
WELCORP as on 20th may 2022 (Happened)
Wave analysis as we published on 9th May 2022
On the daily chart, in the previous session prices formed a bullish candle. Prices has recently given breakout of rounding bottom pattern at 194 levels and now it has retest to the same breakout level hence it is expected to move higher. We have shown ADX indicator which gives an indication if the stock is trending or in a trading range. The low readings of ADX indicates that the stock is in a range. The ADX of this stock is 28.42 giving an indication of a trending market. The reading above 25 means strong directional strength.
In short, the trend for this stock is positive. A break above 201 can lift price higher towards 218-220 as long as 188 holds on the downside.
As Rounding bottom was formed and as per ADX trending move was expected. Due to high volatility in the market, the stock moved in a lackluster fashion, and later we finally got the break above 201 levels which took the price higher towards 249 levels which is nearly 25% up from mentioned levels.
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