EarningsBeats.com Digest for April 25, 2022
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Technical Analysis Can Provide Us Predictions of Future Price Behavior
Many complaints about technical analysis suggest it provides us visually what JUST happened. Well, I don't buy that at all. First of all, intermarket analysis ONLY tells us about what has already happened, BUT it paints us a very important picture about the market environment if we open our eyes. My 2022 bearish market call was at a time
when the S&P 500 traded at an all-time high. There was no Monday Morning Quarterbacking there. The charts I was looking at was telling me a story about the weakness AHEAD. That provides us a MAJOR advantage over everyone else in the stock market. Now analysts can't talk enough about how bad the market is, but where were they as we opened 2022? Bullish as usual (except for the perma-bears that are bearish in EVERY market environment and then claim victory the 2
out of 40 times they're right)! Another part of technical analysis that potentially looks ahead is slowing momentum, or negative divergences. Recently, right here in the EB Digest, I've provided a look into negative divergences on energy (XLE), Halliburton (HAL), and Steel Dynamics (STLD). It's part of what I do. It doesn't guarantee us a specific outcome. Rather, it simply alerts us to heightened risk, so that we're able to more effectively manage risk. On
Thursday at 1pm ET, I sent out our Daily Market Report to EB.com members and highlighted the negative divergence on the materials sector (XLB). At that time, the XLB was trading at 90.60. Check out what happened afterwards:
Divergences are a HUGE part of trading. If you're more of the buy-and-hold type, then who cares about a short-term signal, right? But if you're a trader, riding stocks lower after negative divergences print is a big cost of money. Why not eliminate the risk, move to cash, and look for better trades without the appearance of slowing momentum?
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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