The Stock Market Tells the Truth
Stockscores Foundation for the week ending October 25, 2022
In this week's issue:
In This Week’s Issue:
- Upcoming Events
- Market Outlook – Stability in Stocks is Improving
- This Week’s Market Minutes video
- What’s Working Now – Swing and Position Trading Improving
- Trader Training – The Stock Market Tells the Truth
Stockscores Trader Training starts at the end of October with 4 free webinars. Click on the link below to learn more and register for any of these one-hour webinars:
FIND HOT STOCKS AND AVOID BIG LOSSES WITH THESE SIMPLE TECHNIQUES - Saturday, October 29, 10:15 am PT
HOW TO INVEST IN THE STOCK MARKET PROFITABLY - Tuesday, November 01, 6 PM PT
DAY TRADING FOR PART OR FULL TIME INCOME - Thursday, November 03, 6PM PT
HOW STOCKSCORES TRADER TRAINING CAN HELP YOU MAKE STOCK MARKET PROFITS - Saturday, November 05, 9:00 AM PT
As Investor focus turns from inflation and rising interest rates to earnings, we are seeing some stabilization in stocks. The buyers are coming back slowly which deserves a bit of optimism about “stock trading season” which tends to run from October till May. Today, the buyers are getting an added boost with a drop in interest rates and the US Dollar, investors showing that they believe higher interest rates have been priced in.
This Week’s Market Minutes video
Some short-term strength in the stock market last week will have many wondering if the stock market crash is over. This week I discuss three stocks to consider buying and whether the stock market correction is over. Day trade of the week on HBAN.
Click here to watch
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What’s Working Now
Daytrading continues to have the higher success rate than longer term trading styles but I am starting to see good patterns building for swing traders and the occasional position trade. With market’s stabilizing, companies with good fundamentals are getting bought at bargain prices. Provided the market can continue to hold above its recent lows, I expect swing and position trading opportunities to improve.
My swing and position trading ideas are provided with the Tradescores Alerts subscription
My day trading ideas are provided with the Active Live subscription
Trader Training – Find the Truth
The truth is hard to find. Everywhere you look, there are lies. Politicians are adept at telling stories to leverage our hopes and fears. Marketers sell us products that are bad for our health. Pharmaceutical companies push drugs on us that keep us sick and dependent. Investors push the companies that they are heavily invested in. Lies begin with words that take the focus off the facts.
The great thing about stock trading is that the truth always comes out. Emotion is punished. Lies are punished. Over time, not taking an unemotional look at the facts leads to losses. The market is the ultimate arbiter of the truth.
Admittedly, there are many big moves in the market that are based on lies. The “pump and dump” is all about a lie that is told to a crowd of the hopeful. Just as snake oil salesman leveraged people’s desire for the quick and easy cure, the stock promoter gives investors the story that they want to hear. These stocks rise quickly and then fall right back down to where they deserve to be. There is no court to pass judgement, just the efficiency of the market to find the truth.
Should we avoid these pump and dump stocks? The well promoted story that is often obviously full of, at best, a liberal and optimistic interpretation of the truth? No! The pump and dumps are great ways to profit.
What we must not do is believe in the story. We must trade these stocks fully aware that they are a bubble ready to burst. When the upward trend is broken, when the truth is coming out, take your profit and move on to the next opportunity. Never fall in love, never believe. Trust only the message of the market because it always tells the truth. It can take some time, but eventually the market figures it out.
Wouldn’t it be great if we had a market for the truth in all areas of life?
Hot stocks start market beating moves with abnormal activity. Strong price gains with higher-than-normal volume are the signs that investors are focused on some new information. If enough people believe, the stock goes up as more investors pile on. This market activity shows up in a chart and gives us a message. The buyers are in control and motivated. At that moment, the truth is that investors like the stock. It is a good time to buy.
The stock goes into an upward trend, defined by short pullbacks. The truth through this upward trend is that investors believe in the company story and the stock should be held. Pullbacks to the trend line are often good opportunities to buy more.
Eventually, the company fails to live up to expectations. The upward trend line is broken, often after the formation of a falling top. People listening to the story rarely see anything wrong because the lies that the story was built on remain believable. The most well-informed investors are the ones who are selling, causing the break of the upward trend line. Most others continue to believe.
These cycles of hot upward trends and bursting bubbles are not restricted to penny stock pump and dumps. These happen with big companies too. Go look at the charts of APRN, BYND, BBBY, PTN and GME, some of the hottest stocks of the past couple of years. Up on hype and optimism and down on the truth.
The market tells the truth. If you learn to understand the market’s message, you can capitalize and make market beating returns. Don’t believe what people say, trust what they do with their money.
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