Morning Scoop
I believe we won’t have any major speakers today, at least I hope so 😅. It’s been a pretty volatile week since the stocks tumbled on the first day of Powell’s testimony, and we’ve been trading in a range since Tuesday. Let’s see how the stocks will perform for the rest of the week.
Markets
- News:Tesla’s ($TSLA) stock is down this morning following a federal probe into a fatal accident that may have been caused by its auto-pilot feature.
- S&P 500 futures update: We’re still in this range from earlier, As I write this; price is near the top of the white line attempting to breakout, unsure if we will see that come to fruition but I’d proceed with caution.
- Forecast: Waiting for price to confirm a breakout, or perhaps we get another false breakout and we see more downside. Let’s stay flexible and wait for price action to tell us.
Chart Analysis
Technical Analysis Stocks Trend: Understanding Price Movements
When it comes to trading stocks, it’s easy to forget that prices don’t simply move straight up and down. There’s a process and flow to pricing that’s influenced by the emotions of hundreds of thousands of people trading their own entries, exits, longs, shorts, and more on a daily basis. All this information is like a memory bank that affects price movements. This is where technical analysis comes in.
The Importance of Technical Analysis
By examining price charts, we can gain insights into the psychological areas where there is a potential for high interest, and identify trading opportunities with defined risk. Technical analysis helps us understand price movements and gives us an edge in the market.
Breaking Down the Chart
While trading can seem simple, it can be difficult to execute ideas in real-time. Let’s take the example of AMD. In 2022, we saw a series of lower lows and lower highs, indicating a downtrend. However, in February 2023, something happened that hadn’t occurred in a year: the price broke the down trending white line and took out the previous last high indicated by the red line.
The Emergence of a New Trend
This signaled a new trend was emerging. Instead of seeing more lows, we got past the red rectangle and made a fresh high. While the price recently dipped back to the retracement area, it has continued to push higher. This is an example of a stock going through the full trending motions, transitioning from a downtrend to a sideways consolidation before moving into a new trend.
The Beauty of Trading and Defined Risk
It’s important to note that levels don’t always hold, which is where the beauty of trading lies. We can use the pullback as a stop loss to ensure defined risk. To succeed in trading, you must be willing to admit when you’re wrong and cut your losses quickly. Identifying trends like the one seen in AMD can help us do just that.
By using technical analysis to understand price movements, we can gain an edge and improve our chances of success in the stock market.
Tricks of the Trade
Types of Trends
Price trends, which means we have ups, downs, and areas where we move sideways or a period of time. Let’s take a look at how we can identify each sequence.
Uptrends: Are periods of time where a chart makes what are called higher highs, and higher lows. This is a bullish sequence where you want to be long and buy dips or fresh breakouts to the upside.
Downtrends: These are opposites of uptrends. This is a bearish period where stocks are making lower lows and lower highs. These you sell or short when price makes a move up and cover when it goes back down.
Consolidation: This is the other type of price movement we can have which sideways movement. we’re not making new highs but were also not making any new lows. We’re in a sort of transition period. Which is currently where the SP500 has been stuck for the last 10 months now.
Wrap-up
I’ve placed a total of 3 trades this week. I’m itching to put some more on but I’m in the middle of trying to create a profitable trading strategy and I don’t want to take unneccessry losses just because I felt like trading. I’ll wait for my set up and if it’s there I’ll pull the trigger and if its not, I’ll hold on to my hard earned cash.
Be patient out there, don’t trade because you see someone on twitter or stocktwits saying something is going to “moon”. Trade your style, perfect it, and become a sustainable trader yourself.
disclaimer
Although I am an investor by profession, I am not YOUR financial advisor. All content and information on this website including our programs, products and/or services is for informational and educational purposes only, does not constitute financial advice and does not establish any kind of financial advisor-client relationship by your use of this website. A financial advisor-client relationship with you is only formed after we have expressly entered into a written agreement with you that you have signed including our fee structure and other terms to represent you in a specific matter. Although we strive to provide accurate general information, the information presented here is not a substitute for any kind of professional advice, and you should not rely solely on this information. Always consult a professional in the area for your particular needs and circumstances prior to making any professional, legal, investing and financial or tax related decisions..