We know for a fact that the coronavirus has caused pretty bad damages to the tourism industry with Disneyland and other theme parks closing down temporarily. So are airlines being forced to halt flights in and out of China. The F&B and casinos are not spared either.
So, with diseases lurking , people wants to find a cure. That started the frenzy and crazy buying of many biotech stocks worldwide that may or may not have a direct relationship to finding the cure for the virus. Some are still in incubation stage or indirectly involved in the medical chain but traders and investors are drumming up the prices to rocket high without considering the valuations of the company.
Let's assume you bought after the breakout at around 0.99 level. It shoot up to a high of 1.30, a 30% returns in a very short period of time. This temptation drives speculators into the market and greed overcomes logic and everyone tries to fool everyone that there is a next higher price.
This post mortem analysis helps us to stay grounded to using trend line strategy. First you buy but you need to know where to take profits. At 1.24, it was the Nov 18 peak which tells you if the price does visit this or cross this level, you must be extra careful.
The circle zone are where you should take profits (last resort) or you could have place your targets at exactly 1.24 as well. Say you were caught in the frenzy and sold off at 1.16 , 2nd red candle closing price, that would gave you more than 20% profits. Every 1000 invested , you get 200 profits.
But if you are greedy and let emotions run over your logic, then when it plummet down to 1.04, you are left with barely few cents of profits if you managed to get out.
Will the price goes higher ? Possibly as it has already broke out of the bearish trend line or it might consolidates for a while unless new evidence supports it to go higher.
Thus, by combining trend line and price action, you can have your cake and eat it.
To many traders, it is not just the profits they are after but the fact that they got it correct, predicting the right direction and maximising the profits that truly makes their day. Of course, there are traders who are good at that but the majority of us are not that skilful. We must know our strength and weaknesses to play this game. If you can gain 30 profits out of 100 and out of 10 games, you win 5, in the long run, you are going to be OK. It is the consistency of winning that is the challenge.
So, keep on practising and keep the rules of trading tattoo to your heart. Always use a SL, apply appropriate risk and capital management. When greed takes over, one may increase his position unnecessarily , hoping to gain more at a shorter period of time. This is very dangerous and done in a reckless manner, it can blow your accounts after accounts.
So, with diseases lurking , people wants to find a cure. That started the frenzy and crazy buying of many biotech stocks worldwide that may or may not have a direct relationship to finding the cure for the virus. Some are still in incubation stage or indirectly involved in the medical chain but traders and investors are drumming up the prices to rocket high without considering the valuations of the company.
Let's assume you bought after the breakout at around 0.99 level. It shoot up to a high of 1.30, a 30% returns in a very short period of time. This temptation drives speculators into the market and greed overcomes logic and everyone tries to fool everyone that there is a next higher price.
This post mortem analysis helps us to stay grounded to using trend line strategy. First you buy but you need to know where to take profits. At 1.24, it was the Nov 18 peak which tells you if the price does visit this or cross this level, you must be extra careful.
The circle zone are where you should take profits (last resort) or you could have place your targets at exactly 1.24 as well. Say you were caught in the frenzy and sold off at 1.16 , 2nd red candle closing price, that would gave you more than 20% profits. Every 1000 invested , you get 200 profits.
But if you are greedy and let emotions run over your logic, then when it plummet down to 1.04, you are left with barely few cents of profits if you managed to get out.
Will the price goes higher ? Possibly as it has already broke out of the bearish trend line or it might consolidates for a while unless new evidence supports it to go higher.
Thus, by combining trend line and price action, you can have your cake and eat it.
To many traders, it is not just the profits they are after but the fact that they got it correct, predicting the right direction and maximising the profits that truly makes their day. Of course, there are traders who are good at that but the majority of us are not that skilful. We must know our strength and weaknesses to play this game. If you can gain 30 profits out of 100 and out of 10 games, you win 5, in the long run, you are going to be OK. It is the consistency of winning that is the challenge.
So, keep on practising and keep the rules of trading tattoo to your heart. Always use a SL, apply appropriate risk and capital management. When greed takes over, one may increase his position unnecessarily , hoping to gain more at a shorter period of time. This is very dangerous and done in a reckless manner, it can blow your accounts after accounts.
Comment:
Hope is not a strategy if that is what some traders are banging on. Just because some biotech stocks surge triple digit gain during this period, it does not mean all will and that is the tricky part for many. They do not want to spend time to study the company indepth but rather follow the herd, if they are lucky to catch the train before it moves off, they might make a handsome profit. But if they are late and the price reversed, then they might be caught pants down and still dunno why they are making losses while others are laughing their way to the bank
Comment:
This chart is useful to learn a few things
1. If you were the one who chased the high price and bought at the red circle area and for some reasons were holding it, what will you do now ? Most likely, you will want to see some or all of your shares to take back your money. What a relief, you might say 1
2. Assuming you had shorted this stock at the peak and did not take your profits, what happened now ? You probably don't feel too good seeing your profits evaporated into the thin air.
So charts on different time frame are useful if you know what you are doing.
1. If you were the one who chased the high price and bought at the red circle area and for some reasons were holding it, what will you do now ? Most likely, you will want to see some or all of your shares to take back your money. What a relief, you might say 1
2. Assuming you had shorted this stock at the peak and did not take your profits, what happened now ? You probably don't feel too good seeing your profits evaporated into the thin air.
So charts on different time frame are useful if you know what you are doing.
Comment:
wow, what 2 months could make such a big difference. After hitting a low below 0.70 which probably many retail traders would have sold off due to buying at high price at 1.20, the big boys would come scooping up and ride the trend up all the way to current price of 2.33