Thread by @MarsiliosMM

Long term investing - buying the dips

thread

Many times this is very profitable - but sometimes you get wrecked

So we have these questions:

When to buy the dips
Also what is a dip
When to definitely NOT buy dips
When buying dips may work but is more risk

This is the NDX weekly chart showing 1995 to 2004

without price
only 5 indicators

weekly
10MA in blue
20MA in orange
50MA in purple
100MA in thin black
200MA in thick black

They all turn red when down-sloping

Now look carefully

In bull market years 50 100 200 all upsloping, occasional periods with 10 & 20 downsloping

Healthy environment, dip buying, any buying, paid big

The 50MA "rolled over" to negative Oct 2000
100MA rolled over Feb 2001

So these nail the top, but that isn't the first priority of long term investing

There was one left the 200MA, and that took longer to roll over

So basically we have a filter...

All MAs upsloping? Buy the dip.

4 out of 5 ? Probably same.

3 out of 5? More dicey.

2 out of 5? Can try, just more risky, where is your stop?

1 out of 5? High risk buy, means less size, risk management with stops, etc.

0 - NO

In any market regime we want to know what sector has the healthiest weekly chart in this regard

For example, after 2008, NDX led

W50MA upsloping Sept 09 - not the bottom, but so much left!

Weekly 200 upsloping July 09 - only a few months off the low!

Same period on XLF

W200MA downsloping all the way to 2012

Tech had so left banks in the dust

So with this in mind let's look at ARKK

200 & 100 nicely upsloping
50 upsloping but losing pace
20 actually upsloping
10 down

So OK to "buy the dip" even if 20MA turned over

50 would be some warning however, if that rolled over negative

Now I've added the price back in the candles, and Bollinger bands

Tag of lower band is one way to define dip, esp if up sloping or flat

In strong market this is all you get occasional pullbacks to weekly lower band

If weekly band starts sloping down then that is also a concern

ARKK daily, with RSI

Lastly we can zoom into the daily chart and try to buy when RSI is near 30 (arrows)

This works in overall uptrend, with some scares

If too many bear indicators then you will get wrecked

I could go further & add yearly pivot, but fact is even if price was below the YP, if holding that rising 200MA, then often those buys did work

Just a bit more risky when they don't

But if adding 1more thing, easy filter, is the asset above the YP, yes or no

If no, just wait

@tradingview moving averages are FREE

You might have to do a google search for the slope colored MA and tinker to show how you like it

good luck
ciao

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