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S&P500 shows distribution above 3700 level - Gerald Koh Stock Charts

The bull market since March 2020 has been rallied for whatever reasons, and it does not concern us as all the reasons will be priced in and shows on the chart. The bull market eventually pushes the S&P500 to a new high and it gained 80% from the V-shape pattern. The leading stocks took this advantage to rally and some gained as much as 1000% at peak. However, this idiom is always right, “What goes up must come down”, and it happened all the time in the stock market. As a stock trader, we mustn’t go long during this period as your trade might be easily hit your cut loss point, if the market continues to make the correction. On the other hand, I’m not suggesting you should go short, shorting is not an easy game.

We are lucky because the price action will tell us the current market phases, whether it is the bull market, bear market or sideways. Referring to the attached S&P500 chart on the post, the 7 arrows are identified as distribution days. These trading days show a lack of energy to rally with higher volume compared to the previous day’s volume. Two clear examples are 16 Feb and 19 Feb, the higher volume shows the sellers were distributing their stocks in hands and the price did not go up. By counting the number of distribution days that occurred in 6 weeks period, there is a potential market might continue to make the correction.

Presently, S&P500 is moving sideway and slowly it travels below the 10-day moving average and the 50-day moving average. There is no reason to hold stocks during this period, as the major market goes down so does the stocks. Trade with the market, do not trade against the market, the market does not know who you are and it does not care. Trade safely.


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