₹50,000 Crore Wiped Out in a Single Day !
- Rohit Musale, CFA
- Jan 2
- 2 min read
This is a daily timeframe chart of ITC.
ITC collapsed close to 10% yesterday.
Ofcourse, taxes and stuff.
But, that is not the point.
The question is not,
"Why did it happen?"
The real question is,
"Could this have been avoided by a professional, retail, swing or positional trader worth his salt?"
"Could the trader have stayed away from this carnage?"
And the answer is: 100% yes.
If you are a value investor, there is no problem, because you are not supposed to look at charts at all.
But if you are a swing trader or a positional trader and you had a position in this stock, then chances are.....
......you are not yet aware of "Stage Analysis".
It is not your fault.
I have been there too.
You can learn Stage Analysis and avoid stocks like ITC, way before they collapse.
Mark Minervini has already discussed stage analysis in his book, "Trade Like a Stock Market Wizard"
Every stock goes through 4 stages.
1 - Consolidation
2 - Uptrend
3 - Distribution
4 - Downtrend
Stage 2 and Stage 4 are very easy to identify.
Stage 2 is:
Price > 50 SMA > 150 SMA > 200 SMA
on the daily timeframe chart.
Stage 4 is exactly the reverse.
200 SMA > 150 SMA > 50 SMA > Price
Now look at this chart of ITC
Back in April 2025, the stock entered Stage 4 - Confirmed Downtrend.
I have marked it with yellow on the chart.
Anyone who knew about Stage Analysis could have easily avoided ITC, long long ago.
In fact, the stock started going down since Sep 2024.
If you are a professional swing or positional trader, this entire disaster was avoidable.
The moment, the price breaks below the 50-day SMA, especially on high volume, that's it.
The story is most likely to be over for the stock for quite a long time to come.
This happened in ITC on 4 October 2024.
It was the day when the stock broke the 50 SMA on higher than average volume.
That was the day, ideally for a trader to be out of the stock.
A value investor would argue that, "My time horizon is 20 years."
Fine.
Warren Buffett too never looks at charts.
But if you are a trader, you must understand chart reading.
₹50,000 crore of market cap wiped out in one single day in one single stock.
That's a lot of money.
Basic professional stock market education matters.
Invest in your own education.
What happened in ITC yesterday is a grim reminder of what can happen in stocks, no matter how "great a company is" or no matter "how great the cashflow is, for a company"
Be aware.
Be cautious.
Be smart.
Avoiding stocks like these, is a far more valuable skill than selecting stocks.
Atleast stay away from stocks trading below their 50 Day SMA.
Regards,
Rohit Musale, CFA
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