If I intend to accumulate something for the long haul, then it has to have one of two characteristics: (1) I expect it to keep going up for a very long time. That way, even if I get on at the wrong level, the damage is minimal. An example of this is the SP500 index. Or (2) I expect to be buying at historically low valuations. This typically means at 5 year low, but 10 years is even better. This way, the lower the price goes, the more likely it is to bounce back and I will be a net winner if I just stay the course and average down. Most things fall into this category. For stocks, 5 year lows is enough. Even 3 year lows would be enough if the market was not so overextended. For commodities, 5 years is a minimum and 10 years is ideal. There have been 10 year spans where various commodities just lost (oil, uranium, even some grains).
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As to the MA question, DEMA is daily EMA. I just used the weekly chart so you can see the levels more clearly because 5 years on daily is just too crammed. Anyway you chart it, back in January BABA was not above its 55 day exponential moving average, so it would not have pointed up back then. The 55DEMA could only have pointed up some time in February. By then you would have put in a stoploss to save you and you would have lost little money.
Here's the daily chart, schrts.co See how the MA is pointing down right now? If by some miracle BABA gaps up to 170 on Monday, the MA will still continue to point down. The stock has to stay above the MA for a while before the MA turns around. Then, and only then, will chart look so glaringly obvious that you should have bought b/c everything was pointing up. But right now you would not see that. You will have to decide for yourself, is this gap up sustainable? Is it going to close the gap? Is this some short squeeze that will come down crashing in a week? Many things are possible that the chart will not show you now. Only with the hindsight will the charts look so neat and clear.
Like I said, put up multiple charts of the same stock (SMH?) with its MA and indicators, say MACD and Stochastics, and look at 1, 15, and 60 minute charts for a day. Observe how the picture changes as the stock moves.
Have a great thanksgiving |
