Never Ignore This Simple Indicator

This is a daily timeframe chart of IDFC First Bank in India.

And there’s a story behind it that still stays with me.

Towards the end of 2024, during a 1:1 coaching session, a client told me he had invested a meaningful amount of money in this stock.

He was worried because he had been losing money consistently.

I asked him a simple question.

When did you buy it?

His answer surprised me.

6th October 2023.

We immediately pulled up the daily chart.

And what I saw made my heart sink.

That very day, 6th October 2023, the stock broke below its 50-day simple moving average.

A clear, objective, textbook bearish signal.

If you’ve read Mark Minervini’s Trade Like a Stock Market Wizard or Think and Trade Like a Champion, you know the Trend Template Criteria.

He is only interested in stocks trading above the 50-day SMA.

Once a stock in an uptrend breaks the 50-day SMA from the top, that is an extremely bearish signal, especially for positional trades.

No volume analysis.

No stories.

No opinions.

Pure price action.

That single event turned out to be a defining moment in the life of this stock.

Because over the next 18 months, IDFC First Bank collapsed by more than 40%.

Let that sink in.

18 months of time gone.

40% of capital eroded.

That is a double loss.

Time and money.

This is exactly why I pay obsessive attention to moving averages in my own trading.

For positional trades, the 50-day SMA is non-negotiable.

If it gets violated, I am out.

No debate.

For swing trades, I closely watch the 21-day EMA.

If that breaks, I step aside.

Even William O’Neil talks about this.

In How to Make Money in Stocks, he highlights the 10-week moving average.

A decisive break of the 10-week line is considered a sell signal.

And yes, the 10-week SMA is roughly equivalent to the 50-day SMA.

This is not about one stock.

I have seen this pattern repeat itself across countless charts.

Once the 50-day SMA is broken, the probability of trouble rises sharply.

Not always.

But often enough to respect it.

No wonder Mark Minervini insists on alignment of the 50, 150, and 200-day SMAs before even thinking about buying or considering the stock for a watchlist.

My client bought the stock on the exact day when, technically, it should have been sold.

That mistake was expensive.

Learn from this chart.

Respect the 50-day SMA.

It exists to protect your capital.

And your time.

Thank you

Regards,

Rohit Musale, CFA

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