In this third lesson, we’ll teach you how to know the mood or true market sentiment of the top 10 players of any stock.
Let’s say you already have a position in a stock. Its share price is going down, but it’s alright because it’s still within your tolerable risk. Let’s guess what you’d like to ask: “Is there a way for me to know if there are big players who are buying the dips of my stock?”
After all, it makes sense to give your stock a chance to reverse its direction, especially if there are big investors who are aggressively buying the dips, doesn’t it?
On the other hand, you’re also thinking that you should sell before your trailing stop gets hit, especially if the majority of the big investors are not interested in buying the dips.
We’ll give you three scenarios so you can visualize why it’s important to know the mood or sentiment of the top 10 players of the stock.
Scenario 1: Let’s say your stock is still moving above your trailing stop. The Momentum Power Indicator is bullish. You want to top up but you saw a huge Net Foreign Selling. You’re half-hearted to continue your plan to top up even though the Momentum Power Indicator is bullish just because you saw that the foreign fundies are bearish. However, you saw that the True Market Sentiment is bullish. That means the majority of the top 10 brokers bought the dips. Doesn’t that give you the confidence to pursue your plan to top up?
Scenario 2: Let’s say the stock is still trading above your trailing stop. However, the Momentum Power Indicator is bearish. Now, you’re torn between selling before your trailing stop gets hit and doing nothing until your trailing stop gets hit. But you see that the True Market Sentiment is bullish. Doesn’t this give you the confidence to hold your position because you see that the majority of the top 10 brokers are still interested in buying the dips?
Scenario 3: The stock is still trading above your trailing stop. You see that the foreign investors registered a huge Net Foreign Buying. Now, you’re asking yourself, “Does it make sense for me to top up because the foreign investors are aggressively buying the dips EVEN IF the Momentum Power Indicator is bearish?” But seeing that the True Market Sentiment is bearish, you decided not to pursue the plan to mimic what the foreign fundies are doing. You realized that the foreign fundies can afford to buy the major dips because they have billions in their pocket. You realized you need not to hurry in buying the dips when the majority of the top 10 brokers are not even showing signs an interest to buy by a significant degree yet.
We know that some terminologies in the scenarios we gave may not be familiar to you (e.g. True Market Sentiment, Net Foreign Buying, trailing stop, etc), but you’ll learn all of them in our online stock market course called The Evergreen Strategy in Trading and Investing in the Philippine Stock Market. This online stock market course is included in this subscription service.