They teach you this stuff at technical analysis kindergarten.
Buy support.
Sell resistance.
Of course, in the real world, with our primitive monkey brains, implementing this into a trading system is easier said than done. Just take a look at the squeeze you're seeing in real-time in all these beaten-up growth stocks.
The permabears started shorting these names in droves when they'd already slumped into 90% drawdowns.
Talk about a reckless strategy...
When we look at the most heavily shorted stocks, Coinbase stands out with a short interest of almost 30%. With clear levels and a favorable risk/reward, we leaned on COIN as a vehicle to profit from the short squeezes taking place in recent weeks. We're seeing them all over.
Seriously, go through some of these charts.
Carvana, Tesla, and AI are all great examples -- these moves are no joke. Bed, Bath & Beyond was up over 90% yesterday!
Excluding price action itself, relative strength has to be the most underappreciated indicator.
It's impossible to outperform if you own assets exhibiting relative weakness.
If a stock is underperforming, there's a reason why. It's not until months after the fact do investors discover the "fundamental" drivers anchoring that stock.
The same can be said for when a stock is outperforming.
Look at it like holding a beach ball underwater. You can feel the pressure on your arms, and when that pressure is released, the ball explodes into the air.
Think about the selling pressure in the market: When the selling pressure alleviates, the stocks showing relative strength tend to be the first ones that shoot higher.
These principles are universal across every market.
We have different time horizons, objectives, goals, and appetites for risk.
It's for this reason that the endeavor of trading is often a lonely one; you're forced into fine-tuning what works best for your needs.
What works for me isn't going to work for you.
This is self evidently true.
It seems to me that one of the overlooked elements of this discussion is the variability of human personality.
This is something I've been pondering as of late, so I thought I'd lay bare my potential fallacious thoughts to see if we can strive closer to some answers.
When people ask us what's been happening in the world of crypto, this is the chart we show them.
Bitcoin -- and crypto more generally -- has been a big nothingburger for over a year. Especially with Bitcoin trading below its prior cycle highs, there was absolutely nothing to be done in this asset class.
Another positive week -- add it to the growing tally!
This is the first time Bitcoin's been up for four consecutive weeks since August 2021. Similarly, Bitcoin's 14-day RSI eclipsed its highest level going back more than two years.
We have a name for this price action...
Momentum thrusts.
We see them all the time in the beginning stages of new trends.
There's no denying that this move has been impressive. In fact, we'd even argue that it represents a structural shift in this market.
One of the most remarkable philosophical pieces of all time is Plato's "The Allegory of the Cave." It's commonly applied in various ways in today's society, making it one of the most significant analogies to come out of the field.
The story follows a group of people chained underground as prisoners, only knowing the wall in front of them and nothing else.
Behind them is a fire, and between the prisoners and the fire is a walkway. As people move on the walkway, the prisoners see the shadows cast on the wall.
