Do you read current content to look for innovation and future value? Do you hold moving averages above all else? Look for a big increase in volume on a traditionally flat mover to indicate institutions taking a position? Or my personal favorite: just see what social media is pumping the hardest and go balls deep? I value the opinion of ET and curious what you folks look for. Mods feel free to move if you deem it necessary, I just primarily trade options and favor this forum.
I look at market internals. I know every sector that is outperforming and every sector that is underperforming. When consumer staples is lagging the s&p, and bonds are dropping in price, and high yield out performs t-bills, it screams what environment we are in. It’s risk on, and there are no signs of risk off, save for a slightly persistently high Vix, and possibly, possibly sentiment. Though that will change in the coming weeks. You can actually watch money flow, if you compare asset classes to each other. It’s pretty slow and easy to catch. Right now, small cap value (not today, but since November) is where the money is rotating to. Rotations take months/even years. And the. It’s time to rotate again. If you’re patient enough, swings don’t matter. combine that with an understanding of accumulation, reaccumulation, and distribution structures. I also find PnF charting very useful for targets.
I look for the first sign of weakness after the trend has changed in order to enter a trade. Then I usually look to hedge with options, although I am looking for better types of hedges. The way I define a trend, or more specifically a trend change, is with the way in which I calculate and use a moving average (lowpass filter really.) I exit at a predefined profit target, or if the indicator says the trend has changed against me.
Oh, you asked for primary triggers. I like to try and focus on buying at the bottom of an accumulation structure. If that’s missed and it’s during a trending period, the 20dma is an easy entry point. In a bull market it should bounce there. If it doesn’t, you stop out (1.5x atr, or some other stop that gives your position some room to breathe, while managing risk) and wait for the 50dma. If that fails, I’ve read things wrong and I’ll wait and see how things unfold over time.
"...Accumulation Phase The Accumulation stage is caused by increased institutional demand. Bulls are slowing gaining power and as a result, they are poised to push prices higher. Although the Accumulation stage is related with the bulls gaining authority, the price action on the chart is flat. In other words, the process of accumulation is illustrated by a ranging price structure on the chart. Higher bottoms within the range is usually considered a signal that the price action is currently in an Accumulation phase. Markup Phase The Markup is the second stage of the trading cycle. " https://forextraininggroup.com/price-action-analysis-using-wyckoff-trading-method/ "...Nasdaq Hints At More Institutional Accumulation In Stocks Today; Why Novocure Is In Buy Range " https://www.investors.com/market-tr...umulation-stocks-today-novocure-in-buy-range/ How To Invest In Stocks: Why Learning Base Patterns Gets The Ball Rolling https://www.investors.com/how-to-in...learning-base-patterns-gets-the-ball-rolling/ "...about how to identify large operators' accumulation and distribution of stock with how to take positions in harmony with these big players. His time-tested insights are as valid today as they were when first articulated. " https://school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method
That's right @easymon. I also love to see long tails on the higher lows. It shows strong accumulation. Those are the buy days. It's where the weak hands transition to the strong hands. And the amount of top-callers on ET back slapping each other because of a 10% drop Bitcoin right now has those nice long tail accumulation days with higher lows. It's a classic reaccumulation structure. I'm not in it, but this bitcoin run is nowhere near being done. Having said that, we are about to enter a re-accumulation phase in the SPX, imo. ABC type. I really don't think you want to miss out on the long opportunity following that. I don't know if I can say that emphatically enough.
Some other tips, I use for reading the tea leaves... which is really the paramount thing to do in position trading - or what I call campaign trading. Volatility isn't really a big thing in a bull market. And I measure volatility by ATR. But a normalized ATR (divided by price). If that's spiking - the market is for sure tanking. The VIX is also a wealth of information, which is all I use it for. Anyhow, entries aren't all that important. Exits are what matters. In campaign trading, that's long time off, or you're stopped out relatively quick (days). And most of my time is spent dancing hedges, or more aptly shaping the position. The biggest risk I face is boredom at the lack of consistent capital deployment since the amount of trades are small (<50/yr). And I have to remind myself daily to ignore great setups (e.g. bitcoin right now) because my capital isn't infinite and there are a lot of great setups right now. HG, CL, SI, GC, BTC, shorting ZB, PA is screaming to buy, all long term.... you have to pick your lanes. Some of these are drool worthy, imo. You have to let go of FOMO. I try not to watch the markets during the day unless it's nearing an entry or exit point. I also find if I'm euphoric about the run up, trim the position immediately as I’m overlevered.
Excellent post thank you. Never heard of Wyckoff and enjoying every bit of it. thank again. EDIT: I read about the 4 stage cycle theory in one of Mark Minervini's books...dont remember him mentioning Wyckoff though.
Zg- you can check out gme, before it popped. It’s a classic accumulation structure since June(that’s a lot of weak hands exiting). I wasn’t watching it, as I don’t do individual stocks, but using PnF, you could have gotten within 10% of the top. Relative volatility during the accumulation phase yields very strong hands. Silver is exhibiting this currently as is Bitcoin. All while the dollar is getting stronger (relative to other fiat currencies). I don’t do fundamentals, because nobody knows anything in macro econ, but if you need a story there, when everyone prints money, alternative currencies rally. ♂️ The map, I feel, is pretty easy to read right now.