4 stocks witnessing consolidation after strong trend, shows ADX scan
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Signs of Caution?
ADX or Average Direction Index is a technical analysis tool that helps to quantify the trend strength. ADX is computed based on a moving average of price range expansion over a given time period. Here, we have identified 4 major counters whose ADX has gone below 40. Note the data here is from the previous trading day (Source: StockEdge).
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Importance of ADX
Following this trend helps to minimize losses and also increases the scope of potential gains. Also, employing the scan enables traders to identify the strongest and most profitable trends to trade.
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Significance of ADX moving below 40
In case the ADX moves below 40 from above, it generally hints at likely consolidation in stocks after a strong trend.
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Dixon Technologies
ADX: 38 | Previous ADX: 40.84 | Closing price: Rs 4260.8 | Change: 1.3%
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Grindwell Norton
ADX: 38.69 | Previous ADX: 40.55 | Closing price: Rs 2191.25 | Change: -0.9%
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Godrej Properties
ADX: 39.22 | Previous ADX: 40.07 | Closing price: Rs 1598.7 | Change: 2.5%
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SBI Life Insurance
ADX: 39.68 | Previous ADX: 40.34| Closing price: Rs 1292.95| Change: 0.1%