Wishing Wealth Blog

I draw a green line on a monthly chart at a peak price that is not exceeded for at least 3 months. When it eventually closes above the green line it is a GLB, or green line break-out. Think of it as a stock that reaches an all-time high (ATH),  rests, and then breaks out again. As long as the stock closes above the green line, I hold it. I sell if it closes any day back below the green line. CAT had a recent GLB. See its monthly and daily charts. The strongest stocks trade at ATHs, especially after a bear market. I don’t buy fallen angels. (The red dots on the daily chart show when a stock may meet resistance at its upper 15.2 daily Bollinger band.)

There is a rule that if the major market indexes close the first 5 days of the year up it suggests an up  market for the year, and a decline suggests a down market. Last year the major indexes closed down but I saw no media pundits referring to this signal as predicting a down market in 2022. I guess no one likes to promote bad news. Well this year the major indexes closed up for the week, suggesting a bull market in 2023. But it was a volatile first week and maybe that is the type of market we will have, struggling but ending up. One site I found has said:

“According to Stock Trader’s Almanac, the first five trading days of January could predict the market’s direction for the year. The last 47 up First Five Days were followed by full-year gains for an 83% accuracy ratio and a 14% average gain in all 47 years. ”

In spite of this bullish prediction for 2023, after breaking out and getting a lot of media attention, ELF was pummeled on Tuesday. This is why one needs to use stop loss orders or put options for protection. My red dots on this chart show when a stock bounces down off of its upper daily 15.2 Bollinger band. Red dots warn me of possible declines or consolidations. Note the extraordinary volume on Tuesday’s decline. Is the season over for Santa’s ELF?