Questionable Advice
I received a call last week from a reader asking for my opinion. She has cash on hand and looking for a long-term investment.
Her financial advisor recommended TD, a Canadian bank stock that has suffered a significant loss from its highs with the recent market correction.
She is a long-term investor investing in what I describe as Investor Class opportunities.
My definition of an Investor Class opportunity is one that is in a strong uptrend with the following criteria:
Price is above:
an advancing 30-week moving average which is above an advancing 40-week moving average; and,
the advancing 40-week moving average is above an advancing 50-week moving average.
Let’s look at a historical chart of the SPY ETF in order to identify an Investor Class opportunity.
As we can see in the above chart of the SPY ETF, all criteria of an Investor Class opportunity are met and if purchased at that level, remarkable gains were achieved.
The chart of the recommended TD stock is below.
The TD chart demonstrates that price is in a recent downtrend and below all my Investor Class moving averages, not meeting my Investor Class criteria.
Let’s be clear.
I have no idea if this is the bottom and price could bounce making it a great buying opportunity.
No one actually knows.
A purchase at this level could provide remarkable returns.
However, I consider it a high-risk trade and liken it to catching a falling knife.
Let me explain why.
Have you ever swam in a river?
Which is easier, swimming with the current or against it?
When you swim against the current you encounter more resistance and expel more energy than when swimming with the current.
This is similar to trading or investing against the trend.
Yes, it can be done.
But which is easier?
I know that I prefer to swim with the current and invest with the trend.
The Klarenbach Report will provide my interpretation of Technical Analysis providing opportunities that we are interested in.
My goal is to share some basic Technical Analysis that you can utilize in your investment decisions.
Drop me a line with any questions or comments.
I am active on social media posting charts and ideas.
You can find me here:
Twitter: @trentklarenbach
StockTwits: trentklarenbach
Tradingview: trent.klarenbach
I hope that you find the FREE Klarenbach Report worthy of your time and you choose to hit the subscribe button below.
Please share with anyone else that you think may enjoy it also.
Remember.. It is FREE!
Life is Good