Dear Rangarajan,
When in uptrend my 200 SMA is always reference point for going longs for many.But for me its not a level itself, infact it is showing improving sentiment towards stock for past 200 days...
For trading purpose i keep 100 EMA as a reference guide for me on daily...Now as you said, BASF...yes it is in downtrend....But one thing to notice is, we are not going long anticipating +ve divergence on daily only...In downtrends, +ve divergence fail and has lesser success ratio...
Why it attracted is becoz, it had good momentum setup developing...what it is...??
On weekly it is showing +ve divergence from many days....so it is showing on higher timeframe, stock is loosing momentum for downside....Now we want entry, so we look at lower timeframe, i.e. daily here...Again on daily too when +ve divergence occurred and stock got bounced off from strong S/R weekly levels, it is low risk long area...Bcoz we had bettered chances in our favour...
Now, one thing to remember is when you are in downtrend and trying to go long your position size should be always lesser than what you do when same stock is in uptrend...that is basic difference while playing long in uptrends and downtrends...You need to see, in what phase you are going in, so your profit booking should also be on same lines...
