3 stock trading patterns a stock trader must know.
If you discuss stocks with a person who is not into it, it is highly likely that the person will call stock trading nothing but a pure gamble, where he might share a story how an acquaintance got lucky and made good money in stocks while others lost all of it.
“In God we must trust, rest everything brings data” The random movement of stocks or any other publicly traded contract can be analysed based on its historical movement. If you know the science of reading this data, I strongly believe you are good to go.
Below, I am sharing a few patterns which can help you to understand or lets say, hint you towards the science of reading historical stock price movements. You know what is P³? Pattern pays for patience.
Saucers: A long term downtrend of a stock, followed by a short term sideways movement. This pattern can be interpreted in many a ways. Sideways movement indicates, the price is consolidating in that range, the price is bottoming out, investors sentiments are positive, price is already a corrected, margin of safety is very high, potential downside is very limited.
Channel breakout: Long term channel break out. When a stock is trading in a particular channel for a long time, it indicates it is getting ready for something really really big. Channel movement indicates, long term investor’s faith in the company, management and the work they are into. This pattern is tough to find and even found, conviction is a must. Like the stock mentioned below, has been in this range for over 10 years. Patience is the key to trust this pattern.
Life Time High:If a stock is hitting life time high: There are strong reasons behind it, which not everyone would truly know. It is the best time to consider that stock for a long term view. Entering at life time high will give you negative returns in short term but its up to you whether to see it as negative returns or an opportunity to buy the same thing at a cheaper rate. Perception is they key, conviction is the lock. How you fit in both, what really matters.
I do understand it will be a challenge to find these gem patterns and actually believe in them, time and a lot of practice will enable you to master the art of finding the right pattern at the right time.
You have a doubt, feel free to post it, happy to be of any help.
#AE
