Bear market? Follow these 3 methods
I am late to the topic again :(
Bear market= Definately not very good to see the portfolio in red. Right?
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Note the $Meta Platforms(FB.US$ in my portfolio is only very little. thus the drop looks scary but it does not really draw down my portfolio.
But, always remember, bull market makes us feel good, bear market makes us RICH!
Remember to watch until the end. The last method is my golden secret, which I only shared here to contribute back to MooMoo community.
To me, bear market is just another oppurtunity. However, the game is pretty different from the bull market. Let's start:
(The video is still in progress, will upload again once it is done)
1. Short/Mid term trade= Short the market.
Never fight the trend. The current market trend (daily chart), is a clear downtrend.
Let us take $Nasdaq Composite Index(.IXIC.US$ as an example here:
Let us take $Nasdaq Composite Index(.IXIC.US$ as an example here:
In a down-trend, the market is forming lower high and lower low.
The 2 easiest indicators to check for a down-trend, is when a price is below SMA200 (red line) and EMA20 (pink line), and both moving averages are sloping down.
As trend is our friend, shorting has higher probability to profit in short and mid-term.
To short the market, it is extremely important to set stop loss and profit target. As we never know when the market will rebound. In addition, one of the best entries to short the market is when the price hits the resistance (could be EMA and SMA), as indicated in the yellow circle below.
Then, set a stop loss 1 ATR above, and ride the trend downwards. Take profit at least 2x of your stop loss distance to make the statistic favours in your side for more trades. Let me know if you need me to illustrate more on this.
An important point shared by @Cow Moo-ney - to ride on to this pointer, I would see if it gets rejected at the resistance levels and whether it creates a lower high before entering. "
Ok, as we know that shorting a market has unlimited risk. What if I have no gut to short the market?
Then, let's look for the second rule:
An important point shared by @Cow Moo-ney - to ride on to this pointer, I would see if it gets rejected at the resistance levels and whether it creates a lower high before entering. "
Ok, as we know that shorting a market has unlimited risk. What if I have no gut to short the market?
Then, let's look for the second rule:
2. Only buy at the critical support
At the bear market, we do not when it will be recovering. It could be tomorrow, next week, next month, or even next year.
As mentioned in the rule 1, we do not fight the short and mid-term down trend. But, we can change our chart to weekly instead. Use $S&P 500 Index(.SPX.US$ as an example. Now, it is back to up-trend as we are looking at a long term propective!
At the bear market, we do not when it will be recovering. It could be tomorrow, next week, next month, or even next year.
As mentioned in the rule 1, we do not fight the short and mid-term down trend. But, we can change our chart to weekly instead. Use $S&P 500 Index(.SPX.US$ as an example. Now, it is back to up-trend as we are looking at a long term propective!
The supports I use here are: SMA50, SMA100, SMA150, SMA200, EMA20, EMA40. These supports, I call them: Critical supports.
In the bear market, I will only buy stock when it reaches the critical support. This is to consever my capital, and average down properly, without burning and effecting my emotion. Thus, if SPX reaches 3700 (SMA150, the green line), I will shoot my bullets again and buy stocks again.
If we look at the previous dips, during the China-US trade war, the market recovered after reaching SMA200. During the Covid-19 crashed, it falled below SMA200 for about 3 weeks, then recovered from there.
In the bear market, I will only buy stock when it reaches the critical support. This is to consever my capital, and average down properly, without burning and effecting my emotion. Thus, if SPX reaches 3700 (SMA150, the green line), I will shoot my bullets again and buy stocks again.
If we look at the previous dips, during the China-US trade war, the market recovered after reaching SMA200. During the Covid-19 crashed, it falled below SMA200 for about 3 weeks, then recovered from there.
Ok, what if the stock plunged below the SMA200 of a weekly chart? Then look at the 3rd rule:
3. Wait for the reversal signal at daily chart (or weekly chart, if you are patience enough).
This is a pretty advanced technique, but it works wonder. To confirm a reversal, we need 3 points as below:
Point 1: Stock moves above the previous swing high.
Point 2: Form a higher low than the previous swing low.
Point 3: Break above point 1 to form a higher high.
Point 2: Form a higher low than the previous swing low.
Point 3: Break above point 1 to form a higher high.
This is one of the most reliable reversal signals I have observed thus far. Thereafter, we can see the stock just went higher. Do you know what is the earliest stock that showing the reversal signal after the Covid-19 crash? It was $ARK Innovation ETF(ARKK.US$
Thereafter, the crazy move happened.
Thereafter, the crazy move happened.
In fact, I am now monitoring different sectors on which will be forming the reversal signal.
If you want to get to know it first hand when i manage to spot the stock, please follow my Moo Moo account here.
If you want to get to know it first hand when i manage to spot the stock, please follow my Moo Moo account here.
If you want to learn more about this technique so you could monitor yourself, I will prepare a video here if I manage to hit 320 subscribers in my Youtube here.
Lastly, please do not forget to watch my previous post on the general rules such as cash conservation etc.
See you in the next post!
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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learn investing in my YouTube channel at "JM investment journal"
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Shuseido : Good sharing. Thanks!
JM investorOP Shuseido: thank you!
Cow Moo-ney : “one of the best entries to short the market is when the price hits the resistance (could be EMA and SMA), as indicated in the yellow circle below.” - to ride on to this pointer, I would see if it gets rejected at the resistance levels and whether it creates a lower high before entering.
Great sharing btw!
JM investorOP Cow Moo-ney: thank for pointing out! yep, the risk will be even lower with a confirmation candle
70994963 Cow Moo-ney: Where can I see the parameters of SMA?
JM investorOP 70994963: I prepared a tutorial video on moving average last time
https://youtu.be/k1GpVqvU0Mg
70994963 : Great. It's very practical for beginners.
JM investorOP 70994963: Thank you!
BullyMoo : thanks for sharing