A fundamental aspect in trading is the “timing”, that is the moment in which you decide to make the investment in a particular company.
Since there is no way to predict in advance with absolute certainty when to buy the shares of a company to have a 100% profit, the best thing you can do is try to choose a timing that allows you to increase the probability of conclude the trade positively.
Key Charts Levels
One of the most effective way to increase the probability of a successful trade by choosing the correct timing is to focus on the breakout of a Key Chart Level. Among the most important we find:
- Resistance Breakout
- Trendline Breakout
- Moving Average Breakout
Any company that has a price increase inevitably goes beyond one or more of these key levels, so being aware of when this happens can make a difference in trading.
Below we take Tesla‘s performance during 2020 as an example to explain the 3 key charts levels previously mentioned.
Resistance is a price level that has once or more stopped a stock’s price increase in the past. So it is a kind of barrier, and when the stock breakout it can resume the price increase. Any positive trend to exist passes from one or more resistances breakout.
In the image above you can see how Tesla’s price from the lows of March 2020 has increased to stop in the $ 867 area at the end of April 2020, which represented a resistance area.
On June 1, 2020, Tesla’s price returned close to resistance and breakout it, as reported here on BullDude.com on the same day in the article “4 Stocks Breakout a Resistance Today”.
From the moment of the breakout, the positive price trend resumes and in just 3 months Tesla increases the price by more than + 120%.
A trendline is a line that combines a series of lows or highs to identify the presence of a trend. The trendline indicates a positive trend if it combines a series of increasing lows, while indicates a negative trend if it combines a series of decreasing highs.
If the company is in a medium-long term positive trend (increasing lows for several weeks or months) and shows a short-term negative trend (decreasing highs for days or weeks), the trendline breakout of this negative short-term trend increases the probability that the company will start growing again to follow the positive medium-long term trend.
As you can see in the image above, Tesla breakout a first trendline on June 30, 2020 as reported in the same day article “4 Stocks Breakout a Trendline Today” here on BullDude.com, and a second trendline on August 12, 2020 as reported in the article “Tesla (TSLA): The Calm Before the Storm?” .
The breakout of the first trendline led to a + 90% increase in Tesla’s price in just 2 months, while the breakout of the second trendline led to a + 30% price increase in just 7 days.
Moving Average Breakout
The moving average of a financial instrument is calculated as the average of the prices of the last trading sessions. The potential signal of the beginning / continuation of the positive trend is generated when the price of the financial instrument rises above (breakout) a moving average of key number of past trading sessions (20, 50 or 200)
In the chart above you can see how Tesla had a collapse in price until mid-March 2020 due to the general collapse of the market due to Covid-19.
On March 19, 2020 Tesla breakout the 200-day key moving average (black line), as reported in the article “3 Popular Stocks Breakout a Key Moving Average Today” here on BullDude.com on the same day, and since then the price has increased + 380% in 5 months.
We have seen how to increase the probability of concluding a trade positively by choosing a better timing, i.e. waiting for the stock of a company to breakout a key chart level such as a resistance, a trendline or a moving average.
To take full advantage of the key charts levels, you need to be timely, that is to know that one of these levels has been exceeded the same day it happens, so that you can fully benefit from the potential upside.
For this reason within the membership here on BullDude.com we have dedicated an entire category (“Chart Patterns”) of exclusive articles dedicated to the companies that on that particular day exceed the key chart levels, including the 3 previously explained.
Tesla was chosen as an example to explain the 3 most important key charts levels because from the beginning of 2020 every time Tesla passed one, BullDude.com readers were promptly informed through the articles in the “Chart Patterns” category. This has allowed them to improve their trading by having a lot of timely information available every day.