📊Navigating the Market Like a Pro: Decoding $META Cycle
Alpha Hedge Strategy Breakthrough - Part 3
WALL STREET INSIDER REPORT
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Navigating the Market Like a Pro: META 0.00%↑ Stock Cycle for Ultimate Gains
Strategic Entry and Exit within the Alpha Hedge Strategy Framework
In alignment with the Alpha Hedge Strategy, our entry method is not solely based on traditional indicators like breakout highs but is deeply integrated with our understanding of market cycles and proprietary Alpha indicators.
For this project, we refined our entry criteria to include stocks that not only exhibit a strong uptrend but also align with our criteria of market cycle phase, historical volatility, and expectancy ratios. This approach ensures that we engage with stocks that are not just at a high point but are strategically positioned within their market cycle for potential growth.
Exits are a critical aspect of any investment strategy, especially when navigating diverse market cycles. In the Alpha Hedge Strategy, we use a dynamic approach to determine exit points, incorporating elements of downtrend breakouts as Donchian Channels, while also integrating our market cycle analysis and proprietary indicators.
The Donchian Channels provides a measure of a stock's volatility, helping to tailor exit points to the specific characteristics of each security.
However, our strategy goes beyond conventional Donchian Channels stops. We adjust our exit thresholds based on the current market cycle phase and the specific volatility profile of the stock as indicated by our Alpha indicators. This approach allows for more nuanced and adaptive exit strategies, accounting for both market conditions and individual stock behaviors.
For practical application, our system triggers an exit signal when a stock breaches its tailored exit level, considering our proprietary market cycle analysis. This signal prompts an exit at the opening of the first business day of each month, ensuring timely response to changing market conditions.
Entry and Exit Conditions
Alpha 1: Price Cycle Phase, with this data we analyze the present situation of the asset.
PHASE 1: Institutional Phase
During the Institutional Phase, prices recover after a significant decline, and smart money starts accumulating positions.
Key characteristics of this phase include a shift from selling to buying pressure. Investors can take advantage of this phase by:
Spotting Early Signs: Look for price price shift from a Downtrend to an Uptrend.
Identifying Promising Stocks: Focus on fundamentally strong companies with attractive growth prospects and increasing institutional interest.
Wait for the Uptrend Confirmation: Anticipation of the upcoming uptrend can be a problem, and cause severe losses, so, the investor should wait for the Uptrend confirmation.
PHASE 2: Basis Phase
Also known as the Accumulation phase, focuses on the characteristics and behavior of stock prices during this stage of the price cycle.
In Phase 2, stock prices stabilize after a significant decline, indicating a potential bottoming process. This are the key points regarding Phase 2:
Price Consolidation: Phase 2 is characterized by a period of price consolidation, where price stabilize after a downtrend. This consolidation often takes the form of a basing pattern, such as a sideways range or a rounding bottom.
Decreasing Selling Pressure: During Phase 2, there's a shift from selling to buying pressure that drove the initial decline. This reduction in selling pressure is an indication that the downtrend may be coming to an end.
⚠️PHASE 3: Wall Street Insiders Phase
Phase 3 is the ideal Return/Risk Point, investors are advised to ride the uptrend by buying and holding positions. The goal is to maximize returns as the market prices continue to rise.
In Phase 3, the Market is rising steadily, indicating a strong uptrend. this are the key points regarding Phase 3:
Strong Uptrend: Phase 3 is characterized by a robust uptrend in the Market. This indicates a period of increasing buying pressure in the market.
Higher Highs and Higher Lows: During Phase 3, the Market consistently reach higher highs and higher lows, reflecting the upward momentum and strength of the trend. This pattern confirms the positive price action and reinforces the uptrend.
Confirmation through Technical Indicators: The buying signal is set when there is a higher potential for returns and lower risk
Trailing Stop Losses: A trailing stop loss during Phase 3 to protect profits and manage risk in case of an abrupt reversion of the market. This strategy allows investors to secure gains while still giving the stocks room to grow, capturing potential further upside.
PHASE 4: The Public Phase
The Phase 4 refers to a stage in the life cycle of the market where widespread public participation and enthusiasm.
During this phase, the general public, including retail investors, starts showing significant interest and participation in the Market, contributing to its rapid price appreciation.
Key characteristics of the "public" phase include:
Hype and Media Attention: The market gains widespread media coverage, attracting the attention of the general public. News outlets, social media, and various communication channels amplify the hype and generate excitement around the asset.
Increased Retail Investor Participation: More individual retail investors, who may not have extensive investment experience, enter the market driven by FOMO (Fear of Missing Out) and the belief that they can profit from the asset's remarkable performance.
Speculative Behavior: Speculative behavior becomes prevalent, with investors often disregarding fundamental factors or valuations. Instead, they focus on the potential for further price increases and join the trend driven by the fear of being left behind.
Excessive Optimism and Euphoria: Market sentiment reaches a peak of optimism and euphoria. Investors may exhibit overconfidence and expect the asset's price to continue rising indefinitely, leading to irrational exuberance.
Rapid Price Appreciation: The asset experiences significant price increases, often at an unsustainable pace. Prices may detach from underlying fundamentals, and valuations may become stretched.
Larger Investment Firms and Institutions Exiting: As the bubble reaches its public phase, larger investment firms and institutional investors who were early participants in the asset may start reducing their positions or even exiting altogether, taking profits while the retail frenzy continues.
It's important to note that the Phase 4 of the Market is typically seen as a warning sign of a potential market correction or reversal. The excessive optimism and speculative behavior can lead to a significant sell-off ahead.
PHASE 5: The Top Phase
Also known as the Distribution phase or the Top, focuses on the characteristics and behavior of prices during this stage of the price cycle.
In Phase 5, the uptrend starts losing momentum, indicating a potential market top. Key points regarding Phase 5:
Weakening Uptrend: Phase 5 is characterized by a weakening uptrend in stock prices. The pace of price appreciation slows down, and the upward momentum starts to fade. This indicates a shift in market dynamics and a potential exhaustion of buying pressure.
Price Consolidation and Narrowing Ranges: As the uptrend loses steam, stock prices may consolidate within a narrower range. This consolidation pattern often forms a distribution area where supply starts to match or exceed demand.
Distribution Signs: Signs of distribution become more evident during Phase 5. These signs may include the presence of institutional selling, large sell orders, and resistance to further price increases despite positive news or market developments.
⚠️PHASE 6: The Decline Phase
In Phase 6, investors should prioritize prudent risk management and focus on capital preservation. This may involve considering defensive strategies such as hedging or moving to cash.
Also known as the Bear Market phase or the Top Reversal. In Phase 6, the market undergoes a significant reversal from the previous uptrend, indicating a transition into a bearish environment. Key points regarding Phase 6:
Bearish Price Action: Phase 6 is characterized by a sustained decline in stock prices, marking the end of the previous uptrend. The bearish price action is accompanied by lower highs and lower lows, reflecting the overall downward momentum.
Increasing Selling Pressure: During Phase 6, selling pressure becomes dominant, leading to a cascade of sell orders. Investors who were holding positions from the previous uptrend identify the Selling Point and start selling to protect their gains or limit their losses.
Breakdowns and Technical Weakness: Breakdowns below key support levels and technical weakness become more prevalent during Phase 6. These breakdowns can trigger additional selling and further exacerbate the downward price movement.
EXAMPLE: META 0.00%↑ 2020/2024 CYCLE
Observe the Cycle analysis applied to META 0.00%↑ from Apr/2020 to Jan/24
⚫Apr/20: Phase 1
🟠May/20: Phase 2
🔵Jun/20: Phase 3 (Entry Point at $224.59)
🟢Dec/20: Phase 4
🟡Dec/21: Phase 5
🔴Jan/22: Phase 6 (Exit Point at $338.30 +50.63%)
-72.46% of Drawdown avoided
⚫Dec/22: Phase 1
🟠Jan/22: Phase 2
🔵Feb/23: Phase 3 (Entry Point at $148.03)
🟢Aug/23: Phase 4
+148.70% of return in this Cycle from Feb/23 to 01/17/24
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