Stocks are not people but people buy and sell stocks. While a stock may not have a personality, the price patterns people create in a stock definitely can. If you find a reliable pattern that is working for your trading style, a key part of the success is to make sure the stocks you are using behave the way you want.
We have looked at using bullish MACD crossovers as a way to spot breakout moves. (you can read it here) The success of this pattern is dependent on a consistent price pattern. Let’s take a look at two examples.
Here is one we looked at yesterday that has very clear signals telling us when a trend will change.
Each of the lines shows where we see a MACD crossover that is confirmed by a move across the 10 day moving average. You can see we get clear entry and exit signals from this pattern. This doesn’t mean it will happen every time but when it has been happening consistently it increases the likelihood of it repeating.
On the other hand there are stocks that throw out false signals when using this pattern. Take a look at a stock where this approach doesn’t work.
Walgreens churns out false signals for this approach like a machine gun. There may be other approaches to use to trade WBA effectively, but it not the MACD crossover.
Take the time to look at the patterns a stock has created historically to see it its personality fits your trading strategy and style. The more you increase the likelihood of of winning, the more you’ll win.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
Recent Comments