I grew up in the Hedge Fund world. I was a software engineer for large investment banks, worked at several prominent hedge funds and the most important thing I learned is that if you can learn to manage risk, you can be in this game and succeed.
Anyway, from time to time I will send trade ideas and thoughts over to my genius Ivy league hedge fund friends. I am not an ivy league guy, but I can stand toe to toe with them any day of the week when it comes to picking stocks.
On Dec 8th, I sent this email. (on 11/23, I was thinking M was trying to bottom, I did not take a position, it was in Maybe mode. I am very patient)
I was basically telling him hey, the chart is ugly. To which he responeded.
Well maybe we bottom here at 34, and is ultimately right, but trust me, If this bottoms, and there is no sign of that happening, I will be on the train. I gaurantee you that. The price action will put me there, not the “valuation”. Valuation is BULLSHIT!
The point here is the market gives us places to place bets. Above levels we are long, below levels we are short end of story. As you can see, we were forming a triangle below the 50% retrace, not above. (big difference!). This was an easy short.
However the genius value idiots were buying this piece of shit. Pay attention guys. Study and you will win in this business, I promise.
Here is a study of Fibonacci levels on Macy’s. I want you to notice how I drew the Fib levels. I took the high in 2007 and drew it to the low of 2009. Notice how at each significan Fib level, the stock rested. Finally when it reached the golden ratio in 2015, it rolled over. There is no secret here what so ever. The market is driven by programs, if you can’t beat them, join them.
Now let’s look at the way down. Please take notice of how the stock paused at every significan Fib level on the way down as well. These levels are checkpoints. The next checkpoint in M is 31.25 the 61.8 fib. That is usually the golden ratio. Let that prove as support, before diving in.
If you don’t know what it means to prove as support, start following me and I will teach you. But basically you want to see a basing pattern there. Below 61.8 this gets ugly. Don’t get caught holding the bag.