As time goes on and the upcoming end of the economic cycle, we need to think about how we need to invest in a recession. The current strategy will give you a more conservative view of how to trade stocks in a fall in stock markets.
Instruments - Equities
Chart- Monthly
Price Action signal for Short
The Price Action Action Signal has two varieties. On the chart in left, two sets are depicted. The first one starts with a white (whip) candle, which must necessarily form All Time High. After the white candle, we must have three bears of candles no matter what kind they are. Three Doji bars are also a valid signal.
The second set of candles (on the right of Figure 1) begins with a black candle that must also have formed All Time High. Here again all the candles can be Doji.
Entry criteria and where to look for valid alerts
1. Find a share that is in a pronounced upward trend. The strategy does NOT work in the Chopi Market.
2. The trend should be at least two years.
3. In order for the Short signal to be valid, it must necessarily be at the top of the trend. In this way we will position ourselves as well as possible and avoid false signals.
4. Sell on opening in the month immediately after the alert.
Examples:
1. American International Group - AIG.
At AIG, we'll be looking at the first set of begging candles at the top of the upward trend. As the chart shows, the company has grown steadily over the decade, and at the end of the trend, we have a short signal, after which the company's shares dropped by more than 47% on the first wave.
2. Amerisource Bergen Corp - ABC
Like the first example here, we also have a short signal formed by a white candle on top, followed by three bearish bars. In this case, if we enter Short right after the signal, the best move we can make is 35% of the first wave.
A little statistics
Percentage of successful alerts - 42%
Percentage of false alerts - 21%
Average Decrease Rate after Short Signal - 43% of Share Value.
Time to Next All Time High - 3.7 years
Read more:
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