Wait For The Chart To Confirm The Story

It's not technical vs fundamental it's technical AND fundamental

In today's newsletter, we explore the synergistic use of story stocks and technical analysis to craft informed trading strategies. This approach not only embraces the narrative behind a company but also emphasizes rigorous technical checkpoints to establish entry points, stop losses, and profit targets.

The Concept Explained
A story stock is essentially a company whose products or services you are personally fond of or find compelling. However, mere affection for a product isn't sufficient for investment. This is where technical analysis comes into play—ensuring that your affection is supported by solid market indicators.

Practical Application
Let's consider the example of Owlet, known for its innovative baby monitoring technology. Despite the personal satisfaction and trust in the product, a prudent investment decision requires a closer look at the stock's performance and market standing. Recently, Owlet faced significant challenges, including a product recall due to FDA issues, which severely impacted its stock price.

However, with recent FDA approvals, there could be potential for recovery. This scenario provides a perfect backdrop to apply technical analysis. For instance, monitoring resistance points and setting price alerts can help in making timely investment decisions. If Owlet's stock reaches a resistance point of $7, previously tested twice post-approval, it might indicate a potential breakout.

Earnings and Market Movements
With Owlet's ability to sell again post-FDA approval, upcoming earnings could be pivotal. Investors should watch these closely as they can provide valuable insights into the company's recovery and potential growth trajectory.

Risk Management Through Technical Analysis
The ultimate value of technical analysis lies in risk management. It helps set clear parameters for entering and exiting trades, preventing the classic pitfall of 'holding to zero.' Setting strategic stops and understanding market trends are crucial, especially when dealing with volatile stocks.

Conclusion

Combining the narrative allure of story stocks with the empirical rigor of technical analysis creates a balanced trading strategy that respects personal preferences while firmly anchoring them in market realities. Whether you're a seasoned trader or a novice, this dual approach can enhance your trading decisions, offering both personal relevance and technical soundness.

Stay tuned for more insights and make sure to check our trading plan courses for a deeper dive into strategic market engagement. Happy trading!