Market timing: Moving beyond following trends to start catching opportunities
Why is market timing important?
One can only time the market using technical analysis (TA). TA can be used to identify resistances and supports for swing tops and swing bottoms. Market timing can maximise profits and minimise losses.
TA is not 100% accurate, so you should have a stop loss strategy in place. If the price dropped by 10% from your buy price, you should sell and cut your loss. Conversely, buy at 10% above your sell price if you short sell a stock. You may change it to 15% for more volatile U.S. and Hong Kong markets.
There will be opportunities for you to buy at a better price or buy a better stock later.
Xpeng
In Oct 2023, $XPeng(XPEV.US$ fell to 13.22 near its strong support of 13.10 and near its MA200. Being above the MA200 indicates long term bullishness. This is a good buy point. Indeed, the trend reversed to up and moved above the MA5. Then it crossed above the MA20. The price surged and broke out of the falling wedge pattern. The MA5 is about to cross above the MA100 which will indicate more bullishness. It may rise to resistances around 19.96 and 23.62.
IFast
$IFAST(AIY.SG$ shares started rising in Dec 2020 from SGD2.44 and surged to SGD10 in Sep 2021. If you wanted to buy in May 2021, look at the chart first. You could see that the price already surged a lot, that's a danger sign that the trend may reverse down soon. The price was also in an uptrend, but there was rsi divergence with the rsi in a downtrend. This indicated that buying was waning and the price may drop soon. That was the second danger sign. Indeed, it formed a bearish double top pattern and reversed down in Oct 2021.
The FA guy would have bought at SGD7.80 because the target price or fair value was SGD14. For him, it was undervalued and he doesn't look at charts.
For the TA guy, he could have stayed out until the double top pattern was formed or bought and sold at the formation of the pattern. He could have sold the shares short at SGD10 and bought back the shares at the swing bottom in Oct 2022 at SGD3.50.
Seatrium
$Seatrium(S51.SG$ shares formed a bearish double top pattern with peaks at SGD0.147 in Jul 2023 and Aug 2023. The TA guy could have sold the shares short at 0.147 at the second peak. Then the MA5 crossed below the MA20. The price fell below the neckline of the double top which confirmed the pattern. It remained below the MA20 since then and fell below the M200. These are bearish signs. The price rebounded to 0.13 from the support near 0.123, but got rejected at the MA200 and fell back.
It is approaching the supports around 0.105, 0.102 and 0.101. It may be good for the TA guy to start buying the shares back for a trend reversal soon.
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TestLa Kopi : The first sentence is already wrong...
Fungicide : Hindsight is 20/20
bullrider_21OP TestLa Kopi: Can you time the market with FA?
bullrider_21OP : Patterns always repeat themselves. Once a pattern has formed, a TA guy may predict what is likely to happen.
TestLa Kopi : TA is always about being reactive, never predictive. If you can predict what happens next, you wouldn't be in these chats.
To made an calculated guess you need macro, financial and TA all 3 considered together, never any single one factor alone. always remember this.
bullrider_21OP TestLa Kopi: I don't use TA alone. I use TA together with fundamental analysis - at the macro and micro level. But FA can't be used to time the market, only TA can. TA is not reactive, it's predictive. It uses past data to predict future prices. Past data captures human sentiment. Human sentiment remains almost the same.
bullrider_21OP TestLa Kopi: TA has a high degree of accuracy. Of course not 100%. Nothing is perfect.
TestLa Kopi : Thank you for the clarification, which is different from what you first posted about using TA alone.
"One can only time the market using technical analysis (TA)"
You are teaching the wrong thing. You used 'only'. Timing the market only using TA can be suicidal. That's why I have to call you out, to warn others.
TA is reactive, NOT predictive. TA tells us what has happened and could, and should, be used as reference for taking actions after DYODD. But never for prediction of and/or timing the market.
bullrider_21OP TestLa Kopi: "One can only time the market using technical analysis (TA)". This is true. Please show me if you can time the market using FA or other methods. Do you believe in TA? Those who don't believe in TA would say it's reactive. I've used TA to predict price movements. My followers have seen that a good level of accuracy is possible.
TestLa Kopi : Good luck to you and your followers.
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