In a quote by Ray Dalio, he says “In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money.” Trading requires a lot of skill in order to be successful. Moreover, a strong mindset in trading requires you to have control over your emotions. Once you are able to achieve this, trading will simply be a walk in the park.
@ichigo33 takes the spotlight for this week’s featured trader as he shares his knowledge with us on stocks from the PSEI. Let’s take a look at how @ichigo33 uses this to his advantage.
@ichigo33 shared his thoughts on $SCC and its potential course of action
During this specific trading period, @ichigo33 has plotted out multiple indicators which helped in identifying the potential direction for $SCC. Let’s start with the exponential moving averages ranging from 10-50. This EMA provides a regularly updated average price to aid smooth out price data. Typically, a stock is in an uptrend if price is above the EMA. Conversely, it is in a downtrend if the price is below EMA. The RSI, a momentum indicator, can also be seen in the chart. This indicator tells us whether or not a stock is overbought (above 70) or oversold (below 30). We can also see support and resistance lines which help determine market psychology and supply and demand.
TECHNICALS OF THE TRADE
Technically, $SCC at the time was at a downtrend movement. As we can see in the chart below, the price is below all EMA indicators ranging from 10-50. This typically means that a stock is in a downtrend. Notice how every time the price touches the EMA line, it bounces back. This is because the EMA is already acting as a resistance line. We can also see that RSI is below 50, meaning that most traders are selling their current positions. Lastly, there seems to be a consistency in selling volume. Though it may seem like a good time to buy, it’s best to check out the stocks fundamental news.
With all the information gathered and collected, @ichigo33 was able to predict price action and avoided a possible 20-30% loss.
FUNDAM ENTAL S OF THE TRADE
As officially disclosed in the PSE EDGE platform, $SCC has reported a Q3 profit of P10.1 billion, around 153% up from the 3rd quarter of 2021. However, it is currently down 6% from the second quarter of 2022, around P10.8 billion in profit.
$SCC then said that this could be the cause of high coal and electricity prices in the past months. Moreover, they noted that Q3 performance is at its lowest as a result from bad weather and low demand.
WHAT SHOULD BE MY NEXT MOVE
In the daily timeframe, $SCC seems to be reversing. The MACD, a trend following indicator, is showing signs of reversal. Not to mention, the RSI is also heading upwards, but towards a resistance level of 30 which can be a problem. We can also observe that the price is gaining buying volume after being in the bearish side for the past days.
Given this, it is preferable to buy a few shares with its current price action. Once RSI has broken 30, you may buy more shares as well. Because the stock price is down so deep, accumulating shares of this stock would be the best option.
It would also be sage to buy the dips without spending a lot of money in view of the condition of the market. Always do your analysis and stay up to date on news that is pertinent to the stock you have picked.
Once again, KUDOS to @ichigo33 for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.
If you’re into trading or investing, you’ve probably heard about moving average strategies. These strategies are widely utilized in trading systems. If you’ve ever spent even a brief amount of time studying or reading price charts, you’ve probably observed that a stock’s price tends to go up and down. Fast-moving markets can cause the price to spike upwards before falling and then rising again, increasing the possibility of false signals. To see the average value, the moving average can assist smooth out and filtering out the noise caused by unpredictable price movements. A moving average strategy can commonly be seen within trading systems, largely due to their ability to boost the signals of a trading system.
What are Moving Averages?
Moving averages are utilized to spot trends and verify trend reversals. We consider an uptrend on the chart if the price is above the moving average line. On the other hand, we consider a price to be in a downtrend if it is below the moving average line. Furthermore, a trend reversal is typically implied by the breaking of the moving average line.
Moving averages are lagging indicators since they are based on historical prices. The lag increases with the increasing moving average period. As a result, it won’t inform you beforehand but will confirm when a trend change has occurred. Traders see the price crossing up and over the moving average as a buy signal. On the other hand, if it falls beneath the moving average line, it is seen as a sell signal.
Moving Average Strategy: Following the trend
Since we know that moving averages tend to act as dynamic supports and resistances, we can use this as part of our strategy. For example, down trending charts would tell you to sell when prices reach your moving average. If you’re shorting, you can also use the same moving average as a guide. By putting a stop-loss above the moving average, you can protect your shorts.
Conversely, if the chart is on an uptrend, you can use moving averages as a guide. If your system involves buying at support when following the trend, you can look for the moving average that tends to act as the stock’s dynamic support. Of course, the same moving average would also tell you where you can place a meaningful stop loss.
This strategy might seem simple, but don’t let the simplicity fool you. The systems of some prominent traders revolve heavily around this tactic. When combined with proper risk managementand a deep understanding of trends, this can produce a very strong technical system.
Moving Average Strategies: The Golden Cross and Death Cross
The Golden Cross can be used by traders to help them choose the best time to enter and exit the market. When an asset’s 50-day short-term moving average exceeds its 100-day long-term moving average, a Golden Cross, a technical indicator, appears in the market (200-day). A Golden Cross on a chart is regarded by traders as a sign of a strong bull market.
Additionally, traders can use the indicator as a tool to better understand when it makes sense to sell and when it’s preferable for them to buy and hold.
Buyers may occasionally enter the market when a security’s price rises over the 200-day moving average rather than waiting for the crossover of the 50-day moving average. This is because there is a chance that the Golden Cross will be a relatively lagging indicator.
Conversely, the death cross marks the change from a bull market to a bear market. This technical sign appears if a security’s short-term moving average (such as the 50-day) crosses a long-term moving average from above to below the 200-day.
Trading volume is one of the most widely used technical indicators to confirm a long-term trend change. If the bearish cross pattern is accompanied by substantial trade volume, it is regarded as a more reliable indicator.
Moving Average Strategy: Combining different MA lengths
One of the common mistakes for new traders is that they are confused about which Moving Average to use. This can be a problem for many, and may even affect trades in the long run. Not only that, but traders also often don’t know how many to use. Some use too many in the hopes that bombarding charts with indicators will lead them to profits. There are many ways to mix and match which moving averages to use and how many. However, it all boils down to functionality. In short, will your slew of indicators help you in making decisions? If properly incorporated into a system, even using just one moving average can net you big profits in the market. What you need to focus on is learning the use cases of each moving average, and identifying how they fit your trading style.
The most popular moving averages for identifying significant, long-term support and resistance levels as well as broad trends are the 50-day, 100-day, and 200-day moving averages. These longer-term moving averages are thought to be more accurate trend indicators and less prone to transient price changes based on historical data.
On the other hand, the 5,10, 20, and 50 Moving Average is used to spot near-term trend changes. These short-term moving averages can be used as possible clues to spot long-term trend changes. A crossover by the 50 moving average to the 20 or 10 is considered significant in identifying trend changes. The moving average strategy of combining different length MAs can be powerful as it will give you a wide variety of information regarding the trend.
Moving Average Strategy: Using the MACD as a pullback indicator
One indicator that utilizes moving averages is called the MACD or “Moving Average Convergence Divergence,” created by Gerald Appel. The MACD is an indicator for identifying moving averages that are signaling a new trend, whether it is bullish or bearish.
The MACD is commonly used by placing buys whenever a MACD-signal line crossover occurs. However, a technique you can also use with the MACD is to identify when consolidations within uptrends are about to end.
In uptrends, we want to see short-term profit takers be shaken out of the market during pullbacks. The MACD going closer to 0 signals that there are fewer short-term traders in the market, since by this time the shorter moving averages have already been broken, triggering trailing stops. Therefore, you can use the MACD as a gauge to see if the consolidation is near its end. However, take note that this is for longer consolidations. Momentum patterns like bullish flags and the like most of the time don’t cause the MACD to go back near 0.
Last Remarks
By utilizing moving average strategies, you will be able to identify if a trend is going up, down or if it’s ranging. It can tell you if a trend is still in motion and if it is reversing or losing momentum. Technical indicators such as the exponential moving average (EMA) and simple moving average (SMA) create a smooth trend line for the price of an asset using historical data.
It’s essential to remember that no moving average is a better indicator than the others. Going deeper, it’s also important to note that no specific strategy is absolutely stronger than another. It comes down to which tactic fits your style of trading and can blend with your system.
Want to learn more lessons to help you build a crisis-proof system? Check out the Investa Summit 2022: Opportunities in Crisis! Our world-class and industry-leading speakers will be giving you in-depth experiences and lessons on the bear market we’re facing, and how we can find opportunities moving forward.
In a quote by Dana Allen, he says “The purpose of trading is not being right, the purpose is to make money, and I think that’s my number-one rule. Don’t get hung up on your current positions.” Earning money through trading may sound simple at first, but it’s not. In order to be profitable, you must have a proper trading strategy that will guide you along the way. Continue learning more each day to increase your chances of success.
@bogscab takes the spotlight for this week’s featured trader as he shares his knowledge with us on stocks from the PSEI. Let’s take a look at how @bogscab uses this to his advantage.
@bogscab shared his thoughts on $FNI and the potential course it might go after analyzing commodity prices.
During this specific trading period, @bogscab has plotted out multiple indicators which will allow us to understand where price action might be headed. Let’s start with the MA from 50-200. A common stock indicator in technical analysis is the moving average, which provides a regularly updated average price to aid smooth out price data. A stock is in an uptrend if its moving average is increasing, whereas a downtrend is indicated by a dropping moving average. Next we can see the Parabolic SAR (dotted yellow), which is used by traders to determine trend direction and potential reversals in price. When the price is rising upward, a dot is placed below the price, and when it is trending downward, a dot is placed above the price. We can also see support and resistance lines which help determine market psychology and supply and demand.
TECHNICALS OF THE TRADE
Technically, $FNI at the time was in a downtrend movement. As we can see in the chart below, it has formed a bear flag indicating that the price would soon drop. Moreover, we can observe that prices were below the MA 50 and 100 indicators, meaning that it is in a bearish situation. Looking at his original chart, we may also see that he stated “death cross” of MA 50 and 100 which indicates a bear market. We can also observe it in the Parabolic SAR indicator as the price is below the yellow dots.
With all the information gathered and collected, @bogscab was able to predict price action and avoided a possible 18-20% loss. Moreover, he also based his analysis on the price of Nickel at that time, in which it was seen to be low.
FUNDAMENTALS OF THE TRADE
The demand for nickel may rise by a four-fold increase globally over the next 30 years as electric vehicles replace conventional cars in a practically full fashion. The largest miner in the world predicts that by 2040, nine out of 10 cars will be sold, driving up demand for nickel and other crucial battery components internationally. The nickel industry is already evolving as vehicle batteries overtake stainless steel as the key market for expansion.
WHAT SHOULD BE MY NEXT MOVE
In the daily timeframe, $FNI seems to be heading downward. The MACD, a trend-following indicator, is showing signs of reversal. Not to mention, the RSI is also heading downward to oversold levels. We can also observe that the price is below all 3 MA (50,100,200) meaning that it is bearish. The next support for this stock is seen to be around 2.00 levels, a possible entry point to accumulate this stock.
Given this, it is preferable not to buy yet and wait until the price reaches support. With everything going on in the market, it is best to play safe and not let our emotions get in the way.
Considering the state of the market, it would also be wise to buy the dips without spending a lot of money. Always conduct thorough research and keep abreast of news that is relevant to the stock you have chosen.
Once again, KUDOS to @bogscab for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.
Although one of the prominent formulas in the financial industry, not a lot of traders are familiar with the term Market Risk Premium. While jargons and buzzwords like this usually make it seem difficult to understand, the Market Risk Premium is really just a simple formula:
In a nutshell, the market risk premium is the measure of how much excess returns a portfolio gets from the market in return for the increased risk taken. Its application in the real world is widespread. Financial models and quantitative trading used by institutions usually take this into account.
UNDERSTANDING THE MARKET RISK PREMIUM FORMULA
First, we need to understand the components. Essentially all you would need are the expected market return and the risk-free rate.
RISK-FREE RATE
The risk-free rate is the easier of the two to find. Traditionally, risk-free rates are based on treasury yields.
The reason for this is simple: would you doubt the government’s ability to repay you? There is a very small chance of a nation’s default. However, the probability of it happening is so small for most cases that treasuries are considered virtually risk-free. If you’re not convinced about the safety of certain treasuries, you can change it with the returns of a “safer” asset. The rule of thumb is that the risk-free rate is ROI you can get with almost no risk.
EXPECTED MARKET RETURN
The expected market return is where many start to have different opinions. Different groups and individuals will have varying opinions on this. Some may prefer using the Capital Asset Pricing Model (CAPM). Others might prefer using their own market valuation methods, using a custom slew of fundamental indicators. Whichever method is used, the gist is that the expected ROI from the market is used
MARKET RISK PREMIUM: HISTORICAL, EXPECTED, AND REQUIRED
The formula can also reflect the historical, expected, and required market risk premium. In order to succeed in the markets, you need to have a holistic view. The historical risk premium can tell you how much excess returns market participants have demanded in exchange for increased risk. The expected market risk premium is an attempt at finding what the risk premium might be. The required market risk premium is where you start with the return you want and try to figure out the values of the variables.
When you use the formula solely for equities, the name can be interchanged with equity risk premium. Over the past decade, subtracting the compounded annual rate of return of long-term US government bonds against the S&P500 yielded an equity risk premium above 10%. Basically, the market has been looking for 10% returns above risk-free rates over the decade.
Throughout 2022, interest rates have been rising – causing treasury yields to soar. This has caused the expected equity risk premium to fall, swaying investors away from stocks. As seen below, US equities have been in a slump as treasury yields continue to rise. For investors who require a higher risk premium, they would rather wait for better conditions and more lucrative rewards before allocating funds.
The gist of the market risk premium is that it helps investors find how big additional returns should be to justify investing in riskier assets. It’s important to note that there are a lot of other models and calculations used to price securities. However, understanding and knowing the market risk premium is an essential first step towards valuating assets.
Want to learn more lessons to help you build a crisis-proof system? Check out the Investa Summit 2022: Opportunities in Crisis! Our world-class and industry-leading speakers will be giving you in-depth experiences and lessons on the bear market we’re facing, and how we can find opportunities moving forward.
In a quote by Jaymin Shah, he says “Don’t blindly follow someone, follow the market and try to hear what it is telling you.” To become a successful trader, you should be able to do your research and due diligence. Expand your knowledge by studying the market and learning new strategies. Through this, you will be able to become profitable in the long run.
@candlestocks takes the spotlight for this week’s Investagrams featured trader as he shares his knowledge with us on stocks from the PSEI. Let’s take a look at how @candlestocks uses this to his advantage.
@candlestocks gave his thoughts on $SECB and the potential course it might go after price action reached support levels
During this specific trading period, @candlestocks has plotted out a simple support and resistance line which will help guide where the price might retest. As shown above, the chart is heading in a bearish direction. We can also see an RSI, a momentum indicator, forming a bullish divergence pattern, which typically means that a stock is gaining momentum. Moreover, it also means that it can be a perfect opportunity to buy. @candlestocks has also informed us to expect resistance around the 95 levels. Typically, you would want to avoid buying around those levels as prices are most likely to drop.
TECHNICALS OF THE TRADE
Technically, $SECB at the time was gaining a downtrend momentum. But despite that, indicators have shown that a price reversal was possible First, we can see that price was at its support levels. As a trader, you would normally want to buy at this level as prices tend to bounce right back up. We can also see that the MACD has slowly shown signs of uptrend reversal. Moreover, as told by @candlestocks, the RSI formed a bullish divergence pattern, meaning that the price was most likely to bounce right back up.
With all the information gathered and collected, @candlestocks was able to successfully make a good trade. He was able to anticipate the support line retesting, allowing him to earn about 9-10% in profits.
FUNDAMENTALS OF THE TRADE
As officially disclosed on the PSE EDGE platform, $SECB has recently announced a declaration of cash dividends. The Amount of Cash Dividends Per Share will amount to Php1.50 per common share. The ex-dividend date is said to be on Nov 7, 2022. The record date will be on Nov 10, 2022. Lastly, the payment date for the cash dividends will be on Nov 24, 2022.
WHAT SHOULD BE MY NEXT MOVE
In the daily timeframe, $SECB seems to have more momentum to push the price even higher. It ended the week with a good close and volume traded. Moreover, it is expected to retest around the MA100 level. Looking at the chart, we can also see that it is right above the Fibonacci resistance of 0.5 (86.10), meaning that price is most likely to bounce right back up. Additionally, the declaration of cash dividends is also a good sign to buy $SECB.
Given this, it is preferable to set aside some cash to buy and hold this stock for the long term and the cash dividends.
Additionally, it would be wise to buy the dips without spending a lot of money considering the status of the market. Always do your research and stay up to date on news that is pertinent to the stock you have selected.
Once again, KUDOS to @candlestocks for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.
Investagrams has a full suite of indicators for traders using technical analysis. Among them, the Average Directional Index (ADX) is a commonly used indicator. Trading with a strong trend lowers risk and boosts possible profits. Since the ADX can serve as the best trend indicator in many situations, it can be very useful for traders. Let’s deep dive into the details and use cases.
WHAT IS THE ADX?
Sample ADX graph
The ADX is an indicator that tries to quantify the strength of a trend. This is done by quantifying how much price ranges are expanding to one side. The indicator turns this into a number that we see on a scale from 0 to 100. It’s important to note that the ADX is non-directional. Meaning, it will only tell you how strong a trend is but won’t tell you in which direction.
READING THE ADX
The ADX can help you distinguish if the trend is fit or not for trend-trading strategies. For example, any reading below 20 would tell you there is no trend. It wouldn’t make sense then to use trend-follow strategies. A reading between 20 – 25 could tell you that there is a budding trend. While any reading 25 and above would indicate the presence of a clear trend. In these situations, you should be looking for continuation chart patterns.
$ACEN had low ADX readings while it was in a long consolidation. Once an uptrend started, ADX readings spiked.
When determining trend strength, the ADX line’s direction is also crucial. A rising ADX would translate to a trend gaining more momentum. Whereas, a falling reading means that the trend is weakening. A common misconception here is that a falling ADX translates to a reversal of the trend. However, in reality, it only really means that prices are pulling back. Hence, the trend losing some momentum. The rule of thumb here is that as long as ADX is above 25, you can still consider the current trend to be strong.
While $MAC’s ADX fell significantly, this was only due to its retracement. The trend was still strong and the stock continued on its uptrend.
USING THE ADX INDICATOR
While using the ADX would mostly be for identifying the existence and strength of trends, this can still be a very powerful tool within trading systems. For example, breakouts are easy to identify, but often times these breakouts can fail to advance. However, you can use the ADX to help you find legitimate breakouts. If it gives you the signal that a trend is present, then the probability of a continuation is strong.
Likewise, you can also use the indicator to identify if prices are just ranging. Breakout traders tend to have trouble in ranging environments. Although easy to avoid in theory, in practice ranging environments often cause traders to experience a “death by a thousand cuts.” When the trend has slowed and is entering ranging conditions, the ADX will give a signal. A reading below 20 will clearly indicate that prices are now just ranging. As such, it would be wise to switch to different strategies more suited for range trading.
LAST REMARKS
Generally, the ADX can be treated as a “supporting” indicator. The readings won’t give you buy and sell signals. However, it amplifies the signals you would get from other techniques. A significant advantage for traders is the capacity to find and measure trends. Being able to do so lets you identify which strategies will work best. It will also help you figure out when to be aggressive, and when to stay on the sidelines. Remember, trading is all about risk management and optimizing your risk to reward.
Want to learn more techniques and strategies to help you build a crisis-proof system? Check out the Investa Summit 2022: Opportunities in Crisis! Our world-class and industry-leading speakers will be giving you in-depth experiences and lessons on the bear market we’re facing, and how we can find opportunities moving forward.
Jodee a.k.a. @batangtrader29 takes the spotlight for this week’s featured trader as he shares his knowledge to us on stocks from the PSEI.
In a quote by Charlie Munger, he says “The world is full of foolish gamblers and they will not do as well as the patient investors.” By exercising patience, you can avoid responding rashly and making choices that could reduce your chances of gaining money. Additionally, it gives the market’s ups and downs ample time to balance themselves out, ideally leading to earnings that are satisfactory to you. Let’s take a look at how @batangtrader29 uses this to his advantage.
@batangtrader29 gave his thoughts on $ALI and the potential course it might go after price action reached the demand zone.
During this specific trading period, @batangtrader29 has plotted out a rising wedge pattern which typically indicates possible breakdowns in price action. We can also see an RSI, a momentum indicator, closing in its oversold levels (around 30) which typically means a stock is undervalued. Moreover, it also means that it can be a perfect opportunity to buy. The two green boxes that we can see in the chart are known as the demand zone, meaning it is the price area wherein traders usually buy. The 3 gold lines are known as the golden zone which are considered key retracement levels for a stock or an index.
TECHNICALS OF THE TRADE
Technically, $ALI at the time was gaining a downtrend momentum. Five days after his initial post, @batangtrader29 has replied in the comments about where he expected the price to go. Because price has reached the demand zone, he expected massive buying actions around that area. Moreover, if we take a look at the RSI, it is below 30 meaning that it is a great opportunity for many investors to buy. Lastly, if we take a look at the chart pattern, we may notice that it is currently forming a double-bottom pattern. This usually means that there is a huge chance that the price will bounce right back up.
With all the information gathered and collected, @batangtrader29 was able to successfully make a good trade. He was able to achieve the forecast of meeting the rising wedge target as well as the demand zone reaction with bullish divergence. This earned him around 14% – 16% in total gains.
FUNDAMENTALS OF THE TRADE
The first batch of charging stations will be made available in Ayala Land Malls and Estates, according to Ayala Land Inc. ($ALI), which is currently preparing to expand them out across the country’s residences. According to reports, $ALI and the energy platform ACEN Corp. finished baselining their greenhouse gas emissions, including Scope 3 emissions in their value chains.
WHAT SHOULD BE MY NEXT MOVE
In the daily timeframe, $ALI seems to be heading towards a resistance at PHP26. While indicators may seem positive, it is best to wait for the breakout. This allows you to properly execute a trade while at the same time, reduce the risk of having a loss. Moreover, it is best to keep a look out for disclosures on updates about their existing and current projects.
Given this, it is preferable to set aside some cash to buy and hold this stock for the long term.
Additionally, given the state of the market, it would be prudent to buy the dips without expending too much of your money. Always conduct your research and keep abreast of news that is relevant to the stock you have chosen.
Once again, KUDOS to @batangtrader29 for being this week’s featured trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.
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