Listen to the Podcast
Welcome to the Rapid Recap. I’m Sasha Evdakov, it is September 24th 2015 and welcome to this week's lesson. This week's lesson the core focus of this week's lesson is predicting stock market prices through the Snowball Effect.
If you haven't joined us before I want to once again welcome you for joining the Rapid Recap these are usually in-depth lessons think of this as going to a dance studio for an hour and learning how to dance.
In this case you get a different kind of lesson so you get to learn a little bit more about the stock market some insights about mental psychology effects with investing so that's my goal when you're watching these videos it’s to really give you some insight and learning about the market and when it comes to learning remember that learning is not just about getting knowledge and insight learning is about behavioral change so similar to if you first learn how to crawl when you’re a baby or little kid eventually you learn to walk and then you create a new behavior and then very rarely do you crawl on the floor.
The same thing here I'm hoping to shed some light some insight into you so that way you make changes in your life and learn and actually adjust your behavior. So this week's lesson predicting stock market prices I hope to give you some insight about the Snowball Effect so that way you can use it to change your behavior and i want to extend this lesson into really learning about awareness it's really more about awareness.
If we take this lesson even deeper the core of it is about awareness and being aware of behavior being aware of what happens in the future and we've discussed this kind of thing in the past and for some people it's just more difficult to grasp because we all live in our own little world, our own little bubble and then were part of the external world and all these things slowly start affecting us and sometimes we see things happening before our eyes but for some people it's more difficult to see those things pan out or play out.
In the market you have to be really good at seeing the cause and effect and seeing how things snowball and continue to play out for you to be successful.
If you're not good at that, if you're not able to see those things It'll be very difficult to be successful in the stock market unless you're just putting your money in the market and letting it sit and hopes of appreciation for dozens of years or decades.
In either case let's take a look at some stocks at how they're behaving how things are moving and get into the lesson and what I really mean and what the core is behind the lesson. This week what happened with the overall market we’ll just take the Down Jones you can see that we continued our selling pressure since the previous Fed announcement so we continue to move lower on higher volume and the market continued to roll over further which is something we expected.
If you look at the SPDRs the same things happening after we broke this upward support line but the one thing you do want to be careful of is that we did do a slight bounce at this previous swing point over here. so this is something to be mindful of. I still believe that we probably will head lower in time however there are a few stocks and things that kind of are catching my attention where you could see a short-term and what a short-term mean, well you could see a short-term maybe a couple months of a bounce and this is only because we've already sold off quite heavily and sometimes the market will bounce and then hold prices up higher.
For example things like a COKE you can see COKE is breaking out and this for one is telling me that there is some positive sentiment in the market to some level.
As well as you know P&G now has been consolidating for a little bit and now it's popping in volume, it’s starting to pick up so I’m not fully certain yet that this would start to roll other things over because the market doesn't look as healthy and if you watch the previous Rapid Recaps you know that I very much have been on the bearish side for many months but now I'm seeing if I look at the P&G right here you can see that this was the upward pattern this was the break and you can see from the nineties we're down to the seventies.
That's a twenty-point haircut or 22% nearly 25 percent which would be a quarter of the stock price so that's a heavy turn in this company.
You want to be mindful once you start seeing big companies like this one to start to roll over and it hasn't rolled over yet meaning it hasn't popped yet it's not really fully popping I wouldn't get in that long that's for me I would not go to the long side.
It would be maybe I would start to look at potential opportunities to start nibbling if I'm a value investor for let's say 4-5 years for maybe a retirement fund these kinds of things would be attractive, with this in mind my view on the overall market is still bearish I'm still looking at it for more of a bearish side.
I am more cautious bearish now because we did sell off quite a quite a while so I'm more cautious about the bearish state only because we've ran lower for quite some time but still my sentiment is that we should see lower prices so long as we keep pushing at this level on the market.
How do you really start looking and projecting at all these things how do I start seeing and evaluating this. Well, it's really based on energy, energy of what happens to stocks energy of what happens to the market sentiment and you get that through just years of looking at the markets years of looking up volume just years of looking at how things move, behave, and react.
It’s similar to looking and spotting the way that your friend behaves around certain issues or around meeting up for dinner, if they're typically late for dinner then they're going to probably be late next week for dinner that you invited them. If they're typically always get frustrated when you're talking about their financial problems then they’ll probably continue to be frustrated.
Typically people will behave and react in similar ways and human behavior. It's about energy, it's about seeing that future and with the market it's no different and I will share with you some of those critical charts I’ve shared in the past in the Rapid Recap so looking at the website which we posted a lot of different critical charges but here's what I want to mention to you if you didn't see the September 17th Rapid Recap the Federal Reserve one, we did play this video and you can see here on this video very likely that you can see here we talked about Bank of America and then we also talked about other financial stocks also in the market like Morgan Stanley and you can see that here Morgan Stanley was at $34 and if we just continue to play this video little bit also STI here was at $39.
Looking at how things play out and how things move let's just take a look at Morgan Stanley you can see that we were talking about it before over here at that 33-34 level now it's at 31.
STI the same thing you remember looking at it over here and now we're all the way down here we even looked at CIT take a look at this one. We took a look at Wells Fargo also moving lower.
We took a look at Goldman Sachs, another stock moving lower and there was just so many others and I'll mention a few of those in a little bit but how do you know that the market is continuing to move lower when especially you’re in the region of let's say you're in this region moving up.
How do you know that things are going to project and continue to move slower? Again it's about knowing your stock. It's about knowing the industry It's about knowing how stock prices move. Similar to understanding how your friend is going to behave or your mother is going to behave if you do something naughty or bad.
Same thing in the stock market when you know the behavior of a stock you're going to know what's going to happen so a stock that sold off very heavily, initially or recently that starts moving up lightly, starts nibbling around an issue eventually will come back down and sell off further so it's kind of like you know somebody gets really frustrated they have a big fit, they get very angry and then things calm down, things calm down but you didn't tell your parents what everything was happening you didn't tell the whole truth then again you tell them something happens and what do you know? They get angry again so there it is more redness in their face more redness on the stock.
This is what happens with stocks. People sell off a lot of people get out very early ordering their selloff position then you have some people that are like” it's done selling off thank goodness we are finished selling off and now we're going to continue moving higher” we're back where better we feel good and the company seems to be making a turnaround but then things continue to roll over and now those people that were feeling good say “Oh, now we're back in trouble oh my goodness we made the wrong decision so let me get out now” and this continues to accelerate.
That's typically what happens with companies it's a Snowball Effect it takes time so if you dig deeper into the charts here we still have positive sentiment eventually now we're getting some negative sentiment then we pop again, people feel good about the stock then more negativity comes in. There's more negativity then again we feel better then more and more people get negative, then again we feel a little better than even more people feel negative and were rolling over and notice how this curve slowly starts to round out, it’s a Snowball Effect the Snowball Effect that rolls the stock over and this is what it does is it builds energy to continue rolling and rolling and rolling further down the hill and that's what happens with these stocks and these companies and you can pick any stock I don't care if it's Wells Fargo I don't care if it's Apple or Goldman Sachs. I don't care if it's JP Morgan here it is the same thing.
All these stocks are doing the exact same thing, they rollover based on human behavior look at this rounding top they all round out because energy takes time to build and many people don't understand human behavior in the energy factor of how these things play out.
So if you're under 20 years old I'm going to be very nice and kind to you about it because you probably aren’t aware of how these things play out in the future. If you're between 20 and 30 years old then you should kind of start getting a grasp of reality of how these things play out in the real world, how human behavior acts, what your behavior whether that's a job, school or a workplace. How your behavior affects the rest of the company, how your behavior affects your students.
Imagine if you're in school for the younger generation if you're in school whether that's college whether that’s high school whether that's middle school and you’re watching this video congratulations by the way if you're middle school and you're watching this video but if you're younger imagine the environment and how different the environment would be if when your teacher asked you a question rather than just sitting there calmly at your desk you just go it's me raise your hand I got it I got it I know the answer.
How different it would be?
Now you don't have to scream and shout that you know the answer I'm physically actually just raising my hand but if you did it with energy with a smile raising that hand up nice and high rather than just lightly saying “hey you know, I know the answer” or waiting for the teacher to call on you.
If you actually just raise your hand with power and then how different the atmosphere of that class would be, not only for the teacher but for your peers, more people would continue to probably raise their hand so the same thing happens in the workplace.
Imagine if you started bringing in whatever, let's say cookies every single day at the workplace how that would change the behavior or the effect of everybody around you. Imagine if you started smiling every day more and more to people or contributing to them differently or giving them more. How things would change and the effect that would do to where you're at?
If you're thirty or forty years old you should probably get an idea of how this is happening and if you're fifty you definitely should understand how all this plays out. You should really start getting a grasp but if you don't you need to take a step back and just start evaluating things in how things move with cause and effect because it's all based on that.
The markets are based on cause and effect so if you're looking at stocks in the stock market and you're looking at stocks like Morgan Stanley and you're watching these stocks rollover like this and you're wondering why, it is because of energy, it is because of the human behavior, it is because of the snowballing.
They take time to build and you can take a look at Alibaba or BABA. Here the same concept happens. Here's our rolling effect to the downside here's our rolling effect over here to the upside so you can see how the energy right here was building for the upside it was an IPO we were building so we moved we built more energy, we continued up.
We got overextended at these points and now things started to roll over. We moved sideways here and then again we started to roll over, look at this acceleration how quickly it accelerates to that downside but it all takes time and is a building process you could take a look at this with, let's just say CATERPILLAR another great short.
Here again this stock has been consolidating for quite some time so when you look at this company here we have double almost triple tops so you can see we had nice power little consolidation another power higher, initial selloff powered higher, retesting initial selloff again, power higher initial selloff bomb. Didn't even get high enough there, coming back to support bouncing and then breaking it. Think about it if it keeps drilling like a jackhammer keeps drilling it.
What do you think is going to happen to that stock? Do you think it's going to eventually break down or you think it's going to build and bounce? I mean it could do either way but you watching where the energy is. If somebody keeps bringing you cookies every single day do you think of them as a nice person or a mean person. If someone keeps giving you a dollar every single day do you think of them as a nice person or a bad person?
Again think about it. If a stock keeps hammering away more frequently at this support level, what do you think is going to happen? The energy where is the energy pointing and a lot of people look at things in the short term so they get internet stock thinking that now we zoom in on this and we're looking only at this region thinking time is going to be different, this time my friend Penny who's always late is going to be on time but no that's not the case.
They think this time that stock is going to pop our higher and go to the moon. That this time it's different when it's really not, when you look at the bigger picture, no the sentiment is bearish and you could look at other companies.
Let’s just look at some of the other companies I’m looking at for shorts and what I'm doing. Here take a look another same exact chart set upward, pattern break moving lower looks good for lower prices you got by do that we talked about months ago. Boom there is support line breaking lower breaking that moving average continues to move lower.
AMTD, also another one upward pattern breaking but really it was more the banks when you're looking at the bank's we talked about last week so that's what I want to focus on this week it is the banks in the market this time that are continuing to break lower and if you haven't reviewed that previous Rapid Recap make sure to go ahead and review it because we really honed in on this and if you got in it even if you got it late on here even if you got in it a day or two later.
Let’s just say you got any here on the up day and you shorted it, you still would have been ahead because the energy. What's happening the Snowball Effect, what's happening to that stock, it's still moving lower.
Same thing with CIT, this is our Citigroup right here. Again moved upward so even if you got in it here on the uptake or at the third day where would you be on your position? Think about it even if you got it late still up a buck thousand shares, thousand bucks. So think about this how this affects your trading with this Snowball Effect.
Are you the person that is available to see these things panning out or playing out?
Are you the type of person that's able to recognize things in day-to-day life to see what's going to happen in the future are you the type of person that is able to see the energy and the movement of all these things at a deeper level so that way you can better predict future stock prices and a lot of people say you can't really predict stock prices and you know for me I think you know you never really know where a stock will go in fact things could change around tomorrow since we are oversold and we can power higher in the market and start heading up for a week or two and then eventually if the energy is weak enough then it will roll over back again and continue to sell off but we don't know where exactly the market will do on a day-to-day basis.
It's very difficult to predict things on a day-to-day basis and for this reason why I'm not very strong on day trading and I don't promote day trading as much I think it's great during specific market times but if you look deeper and you look at the stock market in terms of energy it's a lot easier to project and have higher probabilities in your favor if you look at the energy that the market moves in. If you look at how things behave however predicting day to day prices, day-to-day movements.
I mean that's anybody's guess but to be able to have higher probabilities for your trades to be in your favor that's something I think that you have a better opportunity or better chance or better probability figuring out.
It is about learning how to spot these opportunities based on the energy that you see in the markets so once you start getting a good grasp of how things move how things act and how things behave it's about learning how the stock market breathes and when you start seeing this when you start finding that rythm everything else slowly starts falling into place but really it's the cause and effect.
This creates the Snowball Effect for the stock market this creates future prices in the market and if you're not able to see that yet start trying to look at that in real life.
How does a person's action effect other people? How does you bringing in a book and giving it to someone affect them?
How does your environment in the workplace affect you?
How does your actions in the workplace affect other people?
Try and do something different and just make it a game of figuring out what the effect is. Wow of course always do things in goodwill good faith you know you don't want to be mean or cynical but if you're constantly looking at these effects and how things play out in the future, you’ll be much better at spotting the cause and effects on charts and in the market.
Hopefully this was a little bit more insightful for you. You have to really kind of dig deeper internally to start digesting all these information because it's not something that most people just see all of a sudden. It's for some people it is very difficult and I totally understand and I can totally relate I mean for me when I first started trading and looking at these charts you know I would look at it on a day-to-day basis and try and predict prices on a day-to-day basis but looking at the bigger picture, looking at the long-term when you're starting to look at stocks for the longer term it is much easier to predict prices for the longer term because you have that energy. You have that cause and effect and you have that Snowball Effect that plays out.
That's what you want to do once you start seeing the reverse you see a rounding bottomed once you start seeing things kind of changing directions a little bit maybe something that you know starts turning or consolidating sideways and then slowly starts moving a little bit like this then you can start saying “hey maybe things are changing” and that's why for me I'm starting to look well we’re a little oversold, we should start to maybe get at least a little bounce somewhere soon.
Definitely I would want to make sure I'm taking some profits but I'm not fully bullish again I'm still more bearish so as you start getting better and better at spotting these energy levels of the markets, how things are moving you'll start seeing all the different opportunities, you'll start seeing better probability in your trades you will start seeing better wins in your trades and really then the rest of it is easy.
Then you can go out play golf you can go swimming, watch your kids play tennis you can go enjoy and read a lot of books, go do some yoga. You can do a lot of different things with your free time whatever it is you want to do you can create training videos for someone else if you wanted to our coach them help a friend you know go donate your time at a homeless shelter.
Actually funny the last week over here you know I love donations and I love donating things to people so for me that that's my core in fact as I love the giving things, I love seeing the effect of people's smiles and this week actually when we were driving back from the grocery store, we actually only bought a bunch of chocolate because we go to the special grocery store to get a handful of special German chocolates and on the way back we noticed a homeless guy over there that was a bit and he was asking for food or anything that would help and here we are with the whole bag full of chocolates and so we go ahead and you know I made a U-turn and you know out of the car window go ahead and give them a bunch of chocolates through the window, only because you know we had so much chocolate for me I think chocolate always brings out a great smile in people's eyes and you know I go ahead give them a bunch of chocolate. To see the effect to see the smile of someone, when you are the cause of that is really enlightening.
Start seeing that in your day-to-day life and observing this and the more conscious you are about it the easier these stock charts, stock prices or just predicting future prices really gets, it just becomes a lot easier to project future stock prices if your understanding the cause and effect, if you understand about the Snowball Effect within stock prices. Start looking at that and you can study evaluate different charts.
GMCR for example how that rounding Snowball Effect takes off and first you notice that the snowball is light, it starts slow and then we take off faster. Eventually it takes off quicker and quicker just like a Snowball Effect.
Same thing with GoPro power higher then boom take off again so all these things they work off of energy and the better you can understand how the prices move in the stock market with energy the easier it all gets.
Alright thanks again for joining me I'm gonna post a few more critical charts that I didn't post in this week's recap there’s gonna be a bunch more in there or just following up on some of the charts that we talked about here today like Wells Fargo and you know Twitter by to a bunch of different charts in there and just go ahead and reevaluate them for you but really my analysis still stands and some of the charge that we're looking at over the last month still stand.
Keep an eye on those stocks take some profits as we continue to move lower and you know enjoy this the rest of the week it's the start of fall and great new beginnings should happen things get busier in the fall usually it's a great opportunity for the stock market as well coming up so things get a little bit hectic and busy and hopefully you're enjoying your time settling back into the normal environment to normal workplace situations and making the most out of it if you're not bring a piece of chocolate to someone and brighten up their day and the same will be rewarded to you.
Thanks again enjoy the rest of the week enjoy your weekend and I'll see you guys next week.