One of the primary objective of price2action.com is to help you understand how price action investing works. In this section, I am going to cover some case studies to help you understand some simple concepts so that when a real opportunity presents itself, you can take advantage of it.
Silver SLV Trade: +22% in 2.5 months
Science of Stock Price Action: A strong bullish trending asset forms a bullish base after a rally. This base then becomes the base for another rally. The best time to buy the stock is when its at the base again, as indicated in the chart. That’s precisely when I recommended the ETF.
It’s trading at 25.1 now and sooner than later, it will breakout to new high. It’s a good buy and hold ETF.
Fubo FUBO Trade: +75% in 1 month
Science of Stock Price Action: A strong bullish trending asset becomes a buy on dip. The best time to buy is when its testing the support.
The stock did not disappoint and rallied big from that 100 dma support of 26-27. The stock is not done with the rally and considering how much the market likes the theme, one can anticipate another strong upmove. The stock continues to be hold.
Why SPCE rallied 100%
Science of Stock Price Action: Never underestimate the power of Gap-up. When a stock gaps up on bullish development in a strong momentum market, then be ready for a big move. I somehow missed this opportunity.
The stock gapped up on the news that ARK Investment Management has launched a space exploration exchange-traded fund ETF. Considering there are not enough players in the space, the liquidity boost helped the stock to rally 100%
AMD ~ Long term Buy and Ride with Add on dips
Science of Stock Price Action: When a stock is in Long term structural bull market, then one should keep adding the stock on dips. I recommended AMD when it was at 52 back in June 2020 and then again few days back when it tested 100 dma at 86.
The stock has always rewarded dip buyers and did not disappoint this time either.
One big lesson we can learn from Vaxart price action
Never underestimate risk when you are trading momentum stocks. They can lose 50% value overnight with no exit option. Take example of Vaxart. The stock rallied from $10 to $26 and then the market discovered that its vaccine is not as effective as the market thought it to be and the stock crashed 45%.
The lesson: Never ever invest more than 8% in one stock. Trading momentum can wipe your account if you are not careful with stock selection and position size. Today is an extremely volatile day and I hope these case studies will help you understand how price action investing works.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers
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