One of the biggest myth: One should follow "Price Action" only for Trading and it has no use in making a long-term investment decision.
In next few weeks, I will share many examples to break this myth. Let's start with one example: Gold
Once Upon a time, everybody was super Bullish on Gold. Yes, even the fundamentally inclined Value investors too
Indian Middle Class is convinced that the only two safe investment in the world: Gold and Real Estate and the conviction is getting stronger
— Deepak Singh (@smarket) August 29, 2012
There was a reason to be bullish on Gold: First Gold was in a solid uptrend and second INR depreciation was leading to lottery kind of gains. Here's the Gold chart of that period in USD...mindboggling returns
As a price action follower, it was difficult to argue against this trend. One could see a base at $1535-1550; and hence I tweeted in Feb 2013 that any case for panic can be built only below $1525.
If Gold prices correct below 1525 with Fed saying slow QE....expect dramatic collapse of Gold in next few weeks on hedge fund liquidation
— Deepak Singh (@smarket) February 21, 2013
The Logic was very simple: Overenthusiasm but no price rally. It was a sign that smart money liquidating
The unbelievable belief that Gold can never correct sign was so visible...that I had to tweet this (purely following Science of Stock Price Action). Just look at the time - Feb 2013, when Gold was firmly in solid uptrend.
There is huge advantage of following Price Action: You are ready when things happen
On April 12 2013: Finally Gold collapsed...I live tweeted that day only because we were following it
Gold Bulls are getting undressed...almost naked now...Gold now at 1497
— Deepak Singh (@smarket) April 12, 2013
What happened when Gold broke down - it was a panic sell off...as I had tweeted earlier:
As a price action follower, this fall was not a surprise...Generally, the tendency is to buy the decline. But price action message: Avoid Gold
Gold is an abandoned baby right now and every institution in the world is out with the report titled "I hate you & get lost"
— Deepak Singh (@smarket) April 16, 2013
Looking at how USD index is behaving...the likely target of Gold is $1200 and may be even lower depending on how US economy behaves
— Deepak Singh (@smarket) May 29, 2013
Was the breakdown a Short term move? See for yourself, Now its more than 3 years and where Gold price is -
The Investment decision to Sell and Not Buy when the breakdown happened turned out to be a great call. Price Action is a great way to track financial asset. I hope you found the article useful
If you want to explore a new world of financial markets through charts - I invite you to buy "Science of Stock Price Action" and explore the new world.
I love charting. I am challenged by charting. I am entertained by the charts.
— Peter Brandt (@PeterLBrandt) July 28, 2016
Science of Stock Price Action
There is a logic that stocks follow when they make big moves. I have tried, to sum up, those concepts in a methodology called Science of Stock Price Action.
Do these concepts work all the time? Absolutely not. But when they work - they reward in a big big way. There are many factors at play primarily the overall market environment. The objective of my website is to put forward many Live case studies before you so that you can learn how these patterns work and why sometimes they fail too. The whole idea is to illustrate and make you understand the whole logic behind it.
If you find my work interesting - I will encourage you to buy the book and access Premium Case Studies. The idea is to demonstrate live how patterns unfold and work. They succeed, they fail but the whole process is real fun. I invite you to be part of it.
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. 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