I short, you long and we both make money, how can ?
Looking at this chart reminds me of Next Digital which I had posted yesterday.
This stock tells me a few things :
1. Weekly chart is on a long term bearish trend
High of 72 in Sept 2014 to a low of 4.00 in 2020
(This warrants further investigation)
2. Reasons for buying this stock
What attracts you to buy this stock ? Is it in an industry that you are familiar with ? Like Jim Rogers said, buy stocks that you have extensive knowledge in or at least can get hold of these information easily.
Next, time frame - how long you want to hold this stock will determine your strategy. If you are a short term trader, then weekly or daily chart data will be quite meaningless to you. Look at Hertz, Tesla and Nikola that are heavily punted by Robinhood newbies. They are riding on the herd instincts to drive up the prices.
And the time frame you choose must suit your current lifestyle. For example, if you are holding down a day job and are always in and out of meetings, rushing reports and all , then day trading may not be suitable as you cannot be watching the chart as frequently as you like. Plus, a dip in prices may affect your emotions and cause you to make mistakes at work unnecessarily. I often said trading/investment must offers you peace of mind, something that you enjoy with.
With that as background, then we can fall back into the chart.
On the day chart, we can see the price action has broken out of the inner bearish trend line. You can see clearly there are a series of LL and HH.
The probability of it breaking out of this channel is high as it climb out to close the 2nd gap.But, it could also meet its resistance once it touches the upper channel and reverse gear and retrace to either the lower channel at 3.02 level or falls further towards 0.87 to 1.15 level, which is the all time low for this stock.
Also, pay attention to price action that breaks out of descending wedge at 2.33 level. A good example would be Natural Gas. From the NG chart, you can see multiple fake breakouts from 3 different bearish trend lines. Each breakout offers you a false hope only to disappoint as it goes lower in prices. On hindsight, we can see it takes about 6 months of consolidation before we see the genuine price breakout of the main bearish trend line (see 26 June candle)
Then come the opportunity costs question which is hard to answer in some cases. Between this stock and another, which would give you a better risk/reward ratio? Again, low or cheap price may not necessarily mean the potential upside is HIGHER. The consolidation could take months to years before a decent breakout happen. This will eat into your available capital for trading/investment.
In Singapore , there are quite a lot of traders/investors who love SIA stock thinking that Temasek rescue will push the price up.
Yes, this may be true but WHEN is a million dollar question that nobody knows ? This latest piece of article confirms my analysis that travel and tourism, hospitality and selected retail stocks are best to avoid for now , no matter how attractive the price may be.
So remember, when other authors said bullish or bearish , they could be right or wrong depending on the time frame that you are trading on. Another thing to take note would be portfolio turnover. That is if you treat these stocks as your armies of soldiers and when you have a high turnover (replacing one company with another over short period of time), no matter how good your training, war strategies may be, you would have a hard time leveraging on the strength of your armies. It would lack the leverage factor that you can ride. Experienced soldiers who had been through wars can better guide the newbies so you have less to do and can concentrate on other important things.
That means, if you have a portfolio of core stocks (say 10) , then your job is to go indepth to understudy the strength of each company, finding opportunity to add on the shares when others are fearful (eg. I am vested in Tencent and the recent 7% drop is an opportunity for me to add more).
I hope my train of thoughts can offer you some insights and is helpful in your decision in taking a position with this counter. All the best, GBU.
This stock tells me a few things :
1. Weekly chart is on a long term bearish trend
High of 72 in Sept 2014 to a low of 4.00 in 2020
(This warrants further investigation)
2. Reasons for buying this stock
What attracts you to buy this stock ? Is it in an industry that you are familiar with ? Like Jim Rogers said, buy stocks that you have extensive knowledge in or at least can get hold of these information easily.
Next, time frame - how long you want to hold this stock will determine your strategy. If you are a short term trader, then weekly or daily chart data will be quite meaningless to you. Look at Hertz, Tesla and Nikola that are heavily punted by Robinhood newbies. They are riding on the herd instincts to drive up the prices.
And the time frame you choose must suit your current lifestyle. For example, if you are holding down a day job and are always in and out of meetings, rushing reports and all , then day trading may not be suitable as you cannot be watching the chart as frequently as you like. Plus, a dip in prices may affect your emotions and cause you to make mistakes at work unnecessarily. I often said trading/investment must offers you peace of mind, something that you enjoy with.
With that as background, then we can fall back into the chart.
On the day chart, we can see the price action has broken out of the inner bearish trend line. You can see clearly there are a series of LL and HH.
The probability of it breaking out of this channel is high as it climb out to close the 2nd gap.But, it could also meet its resistance once it touches the upper channel and reverse gear and retrace to either the lower channel at 3.02 level or falls further towards 0.87 to 1.15 level, which is the all time low for this stock.
Also, pay attention to price action that breaks out of descending wedge at 2.33 level. A good example would be Natural Gas. From the NG chart, you can see multiple fake breakouts from 3 different bearish trend lines. Each breakout offers you a false hope only to disappoint as it goes lower in prices. On hindsight, we can see it takes about 6 months of consolidation before we see the genuine price breakout of the main bearish trend line (see 26 June candle)
Then come the opportunity costs question which is hard to answer in some cases. Between this stock and another, which would give you a better risk/reward ratio? Again, low or cheap price may not necessarily mean the potential upside is HIGHER. The consolidation could take months to years before a decent breakout happen. This will eat into your available capital for trading/investment.
In Singapore , there are quite a lot of traders/investors who love SIA stock thinking that Temasek rescue will push the price up.
Yes, this may be true but WHEN is a million dollar question that nobody knows ? This latest piece of article confirms my analysis that travel and tourism, hospitality and selected retail stocks are best to avoid for now , no matter how attractive the price may be.
So remember, when other authors said bullish or bearish , they could be right or wrong depending on the time frame that you are trading on. Another thing to take note would be portfolio turnover. That is if you treat these stocks as your armies of soldiers and when you have a high turnover (replacing one company with another over short period of time), no matter how good your training, war strategies may be, you would have a hard time leveraging on the strength of your armies. It would lack the leverage factor that you can ride. Experienced soldiers who had been through wars can better guide the newbies so you have less to do and can concentrate on other important things.
That means, if you have a portfolio of core stocks (say 10) , then your job is to go indepth to understudy the strength of each company, finding opportunity to add on the shares when others are fearful (eg. I am vested in Tencent and the recent 7% drop is an opportunity for me to add more).
I hope my train of thoughts can offer you some insights and is helpful in your decision in taking a position with this counter. All the best, GBU.