Stock Market Logic Series #9

Two Daggers Buy Pattern EXPLAINED

This is a super powerful pattern for a buy. Especially if you are a value investor.

What do you want to look for?

1. You must see TWO daggers to the downside.

A dagger is an extremely abnormal drop in price with a HUGE volume.

You want to see the first dagger, and then pray for the price to continue falling at a normal rate.
Normal rate = people are trying to pick the bottom (without success).
Then you want to look for (wait = put alerts) for the SECOND DAGGER.

Then after the second dagger arrives and you get a second sharp drop in price, then you want to expect a rejection up and a new strong trend up should emerge.

2. Exterme volume on the daggers!

Ideally, you want the volume of the second dagger to be bigger than the first one.
This means that someone is loading all he can get since he KNOWS KNOWS KNOWS that the price is going to get higher for sure.
I bet you would have done the same... if you KNOW KNOW KNOW its going UP!


This pattern does not happen all the time, and it is more likely to happen near the end of a bear market. But prices get so unreasonably cheap, that its obviously for fundamental reasons that they are wrong! so someone who KNOWS will take all the money he can get to load into this stock at this price.

Comment:

Here is another case, the same pattern in Crude Oil

Oil Prices reached zero, so obviously this pricing is non-logical fundamentally.
Obviously, little chance to catch it in real-time since this was only for 1 day.
But you don't have to catch the very bottom.
Price will be still very much unreasonable cheap (but for real), so everyone will jump on this catch and they it will shoot for the sky.

Comment:

Here is another recent example from SOLUSD.
Same pattern.
Please note that the Dagger needs to have both High Volume and HUGE decrease in price.