The conservative ‘buy on weakness’ or the more aggressive ‘buy strength’ type. Or do you have the discipline and ability to maintain a neutral profile and trade both with aplomb.

In my experience there are usually two types of stock buyers: the buy on weakness trend reversal type or the run with price strength or momentum type. Which one are you? There is a degree of emotion or feeling in both if you were to make the decision to choose.

Generally, I find women are the buy weakness, and men are the momentum type. Make sense? Probably when we think about it. Men would often be considered more likely to be reckless and thus choose the more aggressive approach whereas women tend to be more poised and considered in their approach and thus are more like to be the buy weakness type. Nothing wrong with either.

But if we are to employ the totally unemotional, totally neutral approach, we should be able to adapt to both and that really takes out any degree of emotion or personal preference left. If we choose either approach, we are probably overlaying a ‘preference’ of ‘like’ of one over the other, which we probably shouldn’t.

However, an investor may choose one over the other purely for simplicity reasons and that’s OK. So, simplicity can be a reason and so can preference. In the end this is an observation and discussion point on how we approach the market and how it affects us. Something to think about – traditional thinking suggests certain stages of market cycles are more likely to generate more of one type of buy signal over the other.

As our market stretches to new highs (August 2024) the New High signal proliferates and the Trend Reversal is scarcer, or that’s what we would think. More on that later. At market lows the Trend Reversal is most likely to deliver more signals. This is perhaps a good reason to engage with both signals if you want to be constantly engaged with the market. You may not, you may continue to maintain your simple one signal approach. But be prepared, this will leave you with plenty of time to occupy yourself with your favourite hobby during market stages when your signal is less likely to be generating signals. Good thing or bad thing? Your choice.

All markets are different, but the same. The unfold similarly on a macro level but the micro level is always different. Keeping that focus and reacting to the bigger picture of trend rather than the smaller micro level of day-to-day moves is a challenge. Our current market of 200 stocks puts the index at all-time highs but understanding the balance of Stock Picks with market capitalisation forces again challenges us.

With a Stock Pick Count of 42 stocks of 154 covered on an equal weight basis this projects weak breadth but when we consider the market capitalisation of those 42 stocks such as the banks and 5 of the top ten stocks amounting to a much larger percentage of the index something like 50% rather than the equal weight percentage of 42 Stock Picks of 154 (27%). Thus, why the market is at its highs as the big boys do the heavy lifting. This is not uncommon in our market.

Suddenly with 112 stocks neutral or trending down there you would think there must be for the most part be a proliferation of Trend Reversal opportunities. And you’re right so this all-time high market is not only presenting us with New Highs but also Trend Reversal opportunities.

Putting aside the complete simplicity of those who choose the one signal approach it would seem the sensible approach is to adapt both because it’s not until later that we actually understand what market we were dealing with at the time. We would normally expect all-time high market to generate more new highs like 2003/2006 bull market when the breadth was substantial and more like 70% of stocks were contributing to the market rally, unlike our current 27%.

This trait of a market that changes its spots and makeup (resources/financials) often enough is the main reason Stockradar offers both options for you. Your approach can reflect your own profile or your trading profile.