Today I will be talking about stock trading strategies. Perhaps one of the most important investing strategies is the so-called “cup and handle”. The general idea here is to look for a stock that has made a dip much like a cup that is currently flat lining, hence the handle. After the handle is formed the stock will usually “break out” and shoot up. This property is well illustrated in the graph below where you can see that through December the stock formed a cup and then broke out in the beginning of the New Year when it got up near the beginning of the cup. Another property illustrated in the graph below is the “death cross” and the “golden cross”. The death cross and the golden cross are formed when the twenty or in this case thirteen day moving average crosses over or under the fifty day moving average. A golden cross is when it crosses over and a death cross is when it crosses under. When you get a golden cross the stock will usually grow and when you get a death cross the stock will usually go down. The golden cross is perfectly illustrated at the beginning of the New Year when the thirteen-day moving average crossed over the fifty-day moving average and shortly after the stock shot up. One last tool for stock trading is the pennant flag. A pennant flag occurs when a stock takes a big jump (if the jump is down then the flag will indicate downward movement and if the jump is up then the flag will indicate upward movement) and then flat lines. But the range gets smaller and smaller so that you could draw a line over the top and the bottom of the lines and make it look like a flag. This property is sort of illustrated in the break out just before the New Year, you notice the lines get smaller before the break out. Over the next couple of weeks I will be talking more about stock trading and next week in particular I will be going over moving day averages, and some other strategies.
