Major long-term uptrends

example 1

It is always easier to deal with a blow-off in hindsight! The steepening of the upward trendlines suggested the blow-off as it occurred. It is best to get out early on situations like this. Use the rule of nine new high columns to estimate the peak.

This is another example of the dangers inherent in long-term relative strength ranking
systems. The reversal is so fast that the portfolio manager gets bagged before the ranks decline enough to indicate trouble. In my opinion, longterm ranking systems require the use of a stop-loss discipline that most portfolio managers refuse to use.

example 2

These are examples of stocks that experience wild swings in both directions. Since stocks like this are almost always extremely speculative we must be willing to leave the party on “short notice”. The violation of an extremely steep up trend line is a “good enough” reason to step aside on a stock like this.

By W. Clay Allen CFA

Next: Major long-term down-trends - example 1

Summary: Index