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Thanks I'll try that. My fault here that I got in at 36, which by any lights was the peak of a run up with no corroborating change in fundamentals i.e.increased earnings, favorable environment, etc.
What I hope the longer MA on a security I'm interested in shows is irrational high or low points, the fear/greed swing, not so much buy or sell here or here, but rather DONT buy or sell here or here.
I generally buy to hold.
I don't understand your question. You spoke of a simplistic system. I was saying take a 3 month daily chart, and if the stock closes above the 28 day MA, buy. Then the next time it closes below the 28 day MA sell. Then the next time it closes above the 28 day MA buy, etc., etc.
The best place for this method is in a tax sheltered account. You will be whipsawed, so be ready for that, but I think you will be pleasantly surprised at back testing this simple method on most securities. I guarantee you will avoid big draw downs as we recently have encountered. You would have been out of AGNC at 35 and ready for re entry @ about 31.60.
Check out AAPL. Would have gotten in last August @ 590 and gotten out Oct 12th @ 670. AAPL's @ 560 today, Ouch, saved!
Even from buying at 36, if you hold onto AGNC for a couple of years, you will get your money back. If you think long term (3 to 5 years) you'll still make a profit much better than a Bank Rate, Bond or CD. I believe you're smart in not getting on the emotional roller-coaster and
buying/selling willy nilly depending on what direction the wind is blowing.
"if you hold onto AGNC for a couple of years, you will get your money back."
When the fundamentals change by a drastic measure, the loss in share price will outpace the distributions. Annaly Capital is close to this position now. the distribution is what .50x4? and the share price has dropped three dollars?
Say for instance that in eighteen months the short term rates spike while long term muddles. Suddenly the mReit sector is trying to pay a $5 dividend on 1.75 in earnings.
Not likely but look at what is happening now, short term can't get much lower but long term keeps inching down.
At this point one of our faithful chimes in with liquid book value, that AGNC can keep retracting by selling inventory and buying back shares, until the climate improves.
One thing I have learned in all my years of investing is to never buy a stock after it has had a run up that is not typical. This basically forces you to buy stocks based on fundamentals because if you are using charts as an indication to buy stocks based on an upward trend then you are always buying after a run up if you are trying to get in on that trend. However, as you can see, the rides are usually temporary or have large pull backs because they over shoot. If you cannot understand why a stock increased significantly in price then it's probably not a good idea to buy it at that price. Many warned about the stock high price to book value and if they headed their own advice they probably did OK.
Of course some will point out Microsoft and how it increased in price for many years, year after year before it petered out. But if you researched MSFT at the time I think you would have found a valid reason to hold it based on fundamentals that would have allowed you to make that decision logically and not illogically based on its chart alone. If you did it based on the chart alone then you got lucky and you probably held past when its high growth rate declined and thus it no longer justified its lofty valuation after which the stock tanked and never recovered since, which was over 10 years ago. If they were not paying a dividend there would be no real reason to own MSFT today because it is no longer a growth stock, not in the least.
I’m not saying to ignore charts. You need the price history to gage when a stock is overbought, over sold, in favor, or out of favor because the market does have an emotional component that if you ignore you will regret it. However it should not be your only tool as it can be rather unpredictable and pretty random in nature.
Want a better rule? Buy when the stock is below book value and learn what impacts book value and what might cause it to go down in the future, or up for that matter. That is the fundamental view and I think it will do you better than looking at a chart. Charts don’t predict the future. They just tell you where you are at and how you got there and they give some indication to the investor’s emotional state of mind. If you want to get an estimate of the future over the long term, you need to understand what causes things to change in the future. A chart can’t tell you that. Most of these issues have to do with the Fed. However, I think that in the 2006 time frame if you did not understand the subprime bubble you could have been watching the Fed all you liked and you were still going to get killed because you were buying worthless paper. So you need to understand the future changes in the spread related to what he Fed is doing and you need to understand if the MBS’s the mREIT is buying are of adequate quality.
If you are trading options then the long term view doesn’t matter to you. I can’t help you there. That is not my style of investing.
I understand, I think, of what you are trying to say, although throwing out TA is ridiculous, IMO.
You certainly have heard of "Trading with the Trend", right? It was the first cardinal rule given when I first took my initiation Ken Roberts course on trading futures in 1990.
To get back to the opening posts on this thread, just back test any period of time(how about the past three months on the ^DJI ), with a simple 28 day MA and see how you are doing.(Buy when the PPS crosses above and sell when the PPS crosses below).Same applied to the 2007-08 bubble in housing you referenced. To get back there use a 5 year and a 100 day MA to simulate the 3 month on a 28 day MA. How did that work??
Discounting TA is a mistake. Yes, TA is based upon the immediate or distant past, and that past (as the present sentiment varies with it), will warn you that the public sentiment, you described, is changing. The TA trader does not care, at that moment, if Mr "Chips" is bailing from INTC(fundamentals)...he is interested in how the market "perceives" that news.
As I always repeat it doesn't matter if mReits are fundamentally being squeezed or not, if the market is wrong in their understanding of the company, it doesn't matter either. What does matter is their perception..for that is what drives price..and you can see it on the 28 day MA, just one of many TA guides.