Technically Correct Is the Best Correct
Hey! Hey, Great Ones! What day is it?
That’s right: It’s Reader Feedback day, awww yeah!
Today, we answer your questions on technical trading analysis — Oh, look at the big brain on Brad! — Google (Nasdaq: GOOGL), Roku (Nasdaq: ROKU), Tesla (Nasdaq: TSLA) and its egocentric CEO Elon Musk.
So … are you ready to have your deepest, dankest stock market questions answered yours truly?
You? No, where’s Mr. Great Stuff?
Nobody wants Hargett no more. They want Mr. Great Stuff. I’m chopped liver. Well, if you want Great Stuff this is what I’ll give you … an opportunity to appear in next week’s edition of Reader Feedback. How about that?
If you want to get in on the fun next week (you’re clearly too late to make today’s issue, unless you’re a time traveler), just drop us a line at GreatStuffToday@BanyanHill.com.
And now for our featured presentation:
Hi Mr. Great Stuff,
Everyone keeps talking about buying stocks off highs. Great Idea. I have seen a few graphs shown by advisors selling their wares that show highs at the top 0% and the off highs dropping down against horizontal time. Looks like a great idea to show when to buy and when to take profits. Only thing is I don’t know where to find them or what they are called? Any ideas?
Keep up the good work, always love reading your banter.
Cheers, Graham C.
Welcome back, Graham! Thanks for writing in again … and with an intriguing question.
Now, I’m no Chad Shoop — editor of Quick Hit Profits and Chartered Market Technician (CMT) — but I’ve been known to bust out some technical analysis on stocks and the market from time to time. And that appears to be exactly what you’re looking for — though what kind of technical analysis is the question.
You mention stocks dropping off their highs “against horizontal time.” Honestly, since time in most stock charts is displayed horizontally, this could refer to any number of technical indicators.
Your use of percentages, however, makes me think you might be talking about Fibonacci retracements and ratios.
See, despite sharing a first name with one of the Teenage Mutant Ninja Turtles, Leonardo Fibonacci was a brilliant 13th-century mathematician. He came up with important relationships between numbers in a series.
Specifically, a Fibonacci retracement forms when you take two extreme points — such as the all-time high and all-time low of a stock’s price — and divide the vertical distance between those points into ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Stock market traders eventually picked up on these ratios and noticed that stock prices tended to regard the corresponding price points as support or resistance. In short, Fibonacci retracement levels can be crucial pivot points for stocks.
Lost yet? Banyan Hill’s own Ian King did a much better job of explaining Fibonacci retracements here for Investopedia. (Check out the video in the link for Mr. Ian King himself.)
In layman’s terms, technical traders use Fibonacci retracements as buy and sell indicators … much like the “horizontal time” levels you’re talking about, Graham.
Typically, if a stock falls 23.6% or 38.2% from its recent high, technical traders will view this as a buy signal. At 50%, those same traders will go into wait-and-see mode. If the 50% retracement holds, and the stock’s price rebounds, this is a buy signal. If not, then look out below!
Let’s see an example from some random stock:
As you can see, this stock found support at its 50% retracement level, prompting a round of short-term buying. But while that support halted this stock’s decline, the shares have now entered a sideways trading pattern with price resistance forming near the 38.2% retracement.
Unfortunately, free stock-charting services rarely offer Fibonacci indicators. StockCharts.com is the only one that comes to mind, if they still even offer Fibonacci indicators. (For what it’s worth, the ticker lookup tool on the Banyan Hill site offers some user-created Fibonacci indicators, but your mileage may vary.)
Now, you can dive much deeper into Fibonacci retracements and how they can impact and even improve your trading habits. And, if you dive really deep into technical indicators, your stock charts will start to look like Rorschach tests.
Personally, I’m not down with all that. I prefer the KISS method of technical analysis: Keep It Simple, Stupid. I use a simple 10-day moving average for short-term buy and sell signals, and a simple 50-day moving average to determine entry points for long-term, buy-and-hold investments.
And now I’m curious. With Graham using things like Fibonacci levels when trading, what do the rest of you Great Ones use? What indicators do you look at? Do you KISS? Or do you go all out with lines and bars and candlesticks?
Drop me a line at GreatStuffToday@BanyanHill.com and let me know!
Also, if having someone else work out those fettuccini retracements for you is more your investing speed, no judgment here! We’ve got just what you need.
One of the perks of being a financial editor is that I get to see a variety of trading strategies. If I learn about a trading strategy that’s consistently delivering impressive results, I get to let y’all know about it.
Take a look at Chad Shoop’s Quick Hit Profits. Chad’s trading system cashes in on an aspect of the market that doesn’t get much attention. What really stands out are the double- and triple-digit gains, with trades lasting just 30 to 60 days on average.
I’ll be honest — y’all went on some … “inventive” tangents over the past week. And I wouldn’t want it any other way!
Normally, I’d ask what y’all have been drinkin’ to come up with more than the usual crop of craziness, but as Dick K. and Robert L. have assured me, it sure isn’t hard seltzer. Glad I’ve found some kind of temporary sanity in this…
Anyway, here’s the best of the best — the emails we pulled out of the stanky haze over at GreatStuffToday@BanyanHill.com. (And while you’re here, you might as well get a jump on next week’s edition of Reader Feedback if you don’t see your email below. Drop us a line now!)
Roku Riled Up
Thanks for writing in, Angela! I knew there’d be a fair share of anti-Google sentiment in the inbox this week, and y’all didn’t disappoint. Shout out to Danielle W. and Tim P., who are also trying to un-Google their lives. Good luck, and I’ll see you off the grid (or not, I guess).
At this point, I don’t know what else there is to say unless Roku calls in Obi-Wan Kenobi for more “aggressive negotiations.” Which honestly, I’d watch. Google’s M.O. in the public relations mud is ruthless, and as we noted, only makes its monopolistic might that much more obvious.
Number Nine, Number Nine, Number Nine
Jay, thank you for confirming the test.
Already, I think you know where your suspicions lead.
You’ll be contacted when it’s time.
Stay woke and tell me what the numbers mean, Jay.
I think we finally found someone who has really been far even as decided to use even go want to do look more like. Maybe you can help Jay out? Thanks, Keyona.
All By Mars-self
Joseph, it’s been a while since I’ve sent you an email, and I didn’t want you to think your biggest insane fan left you in the lurches. I don’t want to be “that guy” who sends an email constantly and you roll your eyes each and every day say to yourself: “Does this guy have a life?” Elon has done all he’s interested in with Tesla. I really believe he’s bored with it now and is looking to see how much money he can get with government contracts taking people and freight into space.
He wants to get to Mars as soon as possible, which is why he even teamed up with NASA to begin with so he could fleece the best and brightest the government has to offer so he can claim Mars as his and go down in the history books as the guy who started the next generation of space exploration…
Oh well, getting long-winded and for sure not my best, but it’s my two cents, and if anyone asks for it I try to oblige. Always enjoying the Great work you do! Keep on keeping on! Be well, — James S.
James! It’s OK — be that guy who emails us every day. Around here, we love that guy because, frankly, we are that guy… Also, you know the drill, I had to keep your email a bit brief here, though the whole team and I enjoy your Pollock-esque pieces of pithy ponderings.
Speaking of being that guy, I agree that Elon’s definitely the type to boldly, bluntly and bashfully claim he kicked off the next age of space exploration. How’s that saying go? “You either die a meme, or you live long enough to become a space explorer?”
With his mind on the Mars race — and the Mars race on his mind! — still dealing with Tesla probably bites. Imagine you’re trying to usher in the next phase of your transition to a space-traveling Bond villain, and everyone just wants to talk about “battery problems” this and “brake failures” that. Ugh. What a drag.
And I think the more Tesla’s competition rears up and closes in on him, the less Tesla feels like a fun project to fill up the weekdays.
Your Call Is Very Important To Us
How can a major airline put you on hold for one and a half hours to speak to an agent??? Watsayu? — bddski
How? Pretty easily. As to why, I presume you paid in advance?
It’s time to take to Twitter, bddski. Apparently, that’s where you get free stuff for ranting, which sounds like it’d be right up my alley. Hmm…
A Title Goes Here
I’d like u to continue sending me emails. Thank u. — Wendy B.
Thanks, Wendy, you keep on sending me emails too, mmkay?
And you (yes, you there) should definitely write me an email for next week’s edition of Reader Feedback — whether you’re Mr. Great Stuff’s biggest fan like James S. up there or just want to rant in the wind like … well, also James S. up there.
GreatStuffToday@BanyanHill.com. Thanks to all y’all who wrote in this week, and we’ll catch you right here again tomorrow!
And for all those numerous readers like Wendy writing in saying “Send me more!” “Add me!” or “Sign me up!” … how are there still more of y’all not signed up?! All you have to do to subscribe to Great Stuff is click here!
Once again: Just click here if you want to sign up for Great Stuff!
Finally, remember what Mr. Great Stuff always says: Like Stuff? Share Stuff! So be sure to share ‘Stuff with everyone right down your email list. Send it all! But, if that’s still too many virtual hoops to jump through, why not follow along on social media? We’re on Facebook, Instagram and Twitter.
Until next time, stay Great!
Editor, Great Stuff