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When a stock is trending upward, it can be difficult to determine when a meaningful correction will occur. Everyone wants to capture as much of the uptrend as possible, especially when momentum is strong, but rapid uptrends come with risks, so it’s important to have “selling discipline” to take profits. Become. We’ve seen a number of rising trends take hold on this momentum tape, especially with some of the market’s biggest players such as Microsoft, Nvidia, Amazon, Meta, Berkshire Hathaway, Eli Lilly, Broadcom, and JPMorgan Chase. I’ve seen it happen. Therefore, it’s important to have a plan for how to deal with stocks that have gone “parabolically,” meaning stocks whose uptrend has accelerated in momentum. Generally, the 20-day moving average (MA) is a useful measure of short-term momentum. This is especially useful for staying on the right side of a steep uptrend. His two examples of rising trends are Meta and NVDA. Both are in the photo below. Very simply, holding existing exposures is supported when the 20-day moving average is trending higher, as is currently the case for NVDA and META. If the 20-day moving average continues to rise for an extended period of time and then turns downward, it is a sign that momentum is losing momentum and the stock is due for a significant decline. Looking back, for both NVDA and META, the 20-day moving averages rolled over in early August 2023, prior to the mid-term correction phase in Q3 last year. We included the Ichimoku cloud model in the chart because it is a good measure of initial downside risk in a steep uptrend. The cloud performed particularly well on his META chart during the correction phase, resulting in the first support for his NVDA being found in early August as the correction began. The 50-day moving average is another useful way to assess initial support in uptrending stocks. As a general rule, we recommend reducing partial exposure when the 20-day moving average rises sharply and then rolls over. The discount rate should be kept in mind how the stock fits into the overall portfolio. A breakdown below cloud model or 50-day moving average support can often be a trigger to sell a stock, with the aim of reconsidering it from a medium-term perspective should it become oversold again. there is. —Katie Stockton with Will Tamplin Get free access to Fairlead Strategies research here. Disclosure: The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer. Fairlead Strategies Disclaimer: This communication has been prepared by Fairlead Strategies LLC (“Fairlead Strategies”) for informational purposes only. This material is for illustrative and discussion purposes only and is not intended to be, and should not be construed as, financial, legal, tax, or investment advice. You should consult an appropriate advisor regarding such matters. This material reflects the author’s current expectations and presents information up to the date indicated and may be revised by the author, but he is under no obligation to do so. This material may include commentary on a wide range of indices, market conditions, different types of securities, and cryptocurrencies using the field of technical analysis that evaluates supply and demand based on market prices. 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