April 26, 2019 at 9:30 PM #83092Nitin BhatiaKeymaster
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Accumulation Stage is one of the crucial phases of the Four Stages of the Stock Market. In this 5 part video series on 4 Stages of Stock Market, we are trying to find out the reasons why a particular strategy stops working? The 4 phases of the stock market are Accumulation, Advancing, Distribution and Declining.
In the 2nd part of this series, we will learn about the accumulation stage. It marks the beginning of the bull phase after sharp correction. The biggest dilemma for any investor is whether the current consolidation is part of the downtrend or it is an accumulation stage. To answer this confusion, the pre-condition is that stock should be in a downtrend for a minimum period of 6 months. The longer the period of a downtrend, longer the period of consolidation or accumulation stage.
In the accumulation stage, the stock trades near 200-day moving average and line becomes flat. The volatility or implied volatility of the stock is low and is not a hot stock.
You should follow range trading strategies. For example, if you are using the Bollinger band then you can near the bottom and sell near top and vice versa. You should avoid trading in the middle of the band. The best way to earn is by taking short positions i.e. in the direction of the existing trend.
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