DON'T get wedgied!
Updated
Peak excitement on Friday - as retail traders pumped various markets with billions in cash. This was alongside institutional traders who had been bailing out.
Well, retail won a significant limb of this, from the bottom edge of what now looks like an ascending broadening wedge following a major bullish drive. Biden echoed the FED's mantra on transitory inflation in the last few days. That seemed to be a signal for retail traders on the apps to dive in.
Ascending broadening wedges after long bull drives north, are usually a signal of weakness. Just to be clear (and read my disclaimer below), this does not mean that the market will crash now. Price could move significantly up and whipsaw the top of the wedge before heading for the moon! 🌛
This wedge formation creates probabilities. Probabilities exist in minds. The probability estimate based on this snapshot (right now), is for a significant correction. This is not advice! This is opinion - a very different thing to advice.
How probabilities work: If 'you' estimate there is a 51% chance of a correction, that leaves a 49% chance there will be no correction. A lot of novice traders forget about the lesser probability, which does not favour their mindset.
There are other silent probabilities adding up in the background (DYOR): 90 year economic cycle, coinciding with 20 and 10 year cycles - and we're not out of the woods with a major pandemic. We are at year 11+. Some say 'cycles mean nothing'. Everybody is entitled to their own belief. I think these are dangerous times to be throwing money into the market going long.
If you are about to short this position, you have to have money that you can afford to lose. Read that again. If you can't lose money, stop trading - instantly!
Alternative reasoned perspectives are most welcome.
Disclaimer: This is not advice or encouragement to trade securities or any asset class. This is not investment advice. Chart positions shown are not suggestions intended to assure you of an advantage. No predictions and no guarantees are supplied or implied. The author trades mostly trend following set ups which has a low win rate of approximately 40%. Heavy losses can be expected if trading live accounts or investing in any asset class. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
Well, retail won a significant limb of this, from the bottom edge of what now looks like an ascending broadening wedge following a major bullish drive. Biden echoed the FED's mantra on transitory inflation in the last few days. That seemed to be a signal for retail traders on the apps to dive in.
Ascending broadening wedges after long bull drives north, are usually a signal of weakness. Just to be clear (and read my disclaimer below), this does not mean that the market will crash now. Price could move significantly up and whipsaw the top of the wedge before heading for the moon! 🌛
This wedge formation creates probabilities. Probabilities exist in minds. The probability estimate based on this snapshot (right now), is for a significant correction. This is not advice! This is opinion - a very different thing to advice.
How probabilities work: If 'you' estimate there is a 51% chance of a correction, that leaves a 49% chance there will be no correction. A lot of novice traders forget about the lesser probability, which does not favour their mindset.
There are other silent probabilities adding up in the background (DYOR): 90 year economic cycle, coinciding with 20 and 10 year cycles - and we're not out of the woods with a major pandemic. We are at year 11+. Some say 'cycles mean nothing'. Everybody is entitled to their own belief. I think these are dangerous times to be throwing money into the market going long.
If you are about to short this position, you have to have money that you can afford to lose. Read that again. If you can't lose money, stop trading - instantly!
Alternative reasoned perspectives are most welcome.
Disclaimer: This is not advice or encouragement to trade securities or any asset class. This is not investment advice. Chart positions shown are not suggestions intended to assure you of an advantage. No predictions and no guarantees are supplied or implied. The author trades mostly trend following set ups which has a low win rate of approximately 40%. Heavy losses can be expected if trading live accounts or investing in any asset class. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
Note
After more careful notice of the pattern, it is:1 - a broadening wedge.
2 - it is at what could be near a long bullish trend.
3 - it is more horizontal than ascending.
Some probability estimates from the net:
A. Ascending broadening wedges: upward 48% downward 52.2% (these are not highly reliable figures).
B. Descending broadening wedge: upward 51% downward 49%
Scenarios
- and
There may be many other scenarios.
Note
No promises
FED balance sheet 42% of GDP @ 2020-01-26. Does money have value anymore? [Different perspective on the virus youtu.be/NjTdvALChwk ]
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Disclaimer
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