There is an old adage on Wall Street, which is "The Trend is Your Friend" and we couldn't agree more, but most advisors fail to spot the subtrends in markets and take advantage. In every market, whether a bull or a bear, there are sectors and subsectors that are thriving. By screening markets, sectors, and companies for short, medium, and long-term trends, we find investments that have attractive risk vs reward. This helps us confirm the data we are seeing in our Macroeconomic and Microeconomic analysis, which ultimately creates more refined and effective investment strategies. Most other advisors ignore trends until it's too late and often over allocate investors at the wrong time by chasing fads.
Support and Resistance
Chart reading is more of an Art than a Science which means that nothing is guaranteed, but identifying areas where other investors are likely to buy or sell helps us find price points to buy or add to positions or trim or sell them. Previous pivot points, break-out areas, Fibonacci levels, and moving averages are price points where trading opportunities present themselves. These levels help inform us on buy and sell decisions in the short and medium term, which we pair with our fundamental valuation analysis to create powerful investment strategies. Other advisors simply allocate to their models with little strategic thought as to when to enter positions.
Prices of assets move in common and regular patterns because humans trade markets and make similar decisions over and over again. This is why history doesn't repeat but often rhymes. Economies move in cycles, but so do asset prices as the emotions of investing, fear, and greed, vacillate between extremes. Investors move from max pessimism to intense optimism in predictable phases. This perspective allows us to shake off the headlines and avoid getting caught up in hype or despair. These emotions play out at patterns on the chart, over both the long and short term. By keeping our eye on the true value of an asset through careful fundamental analysis, we can use pattern analysis to identify when extreme sentiment is presenting opportunities to buy or sell assets at attractive prices. Unfortunately, most professionals fail simply chase hype in order to pull in more assets, instead of being the voice of reason for their clients.