Trading by Market Cycle


"The markets can remain irrational longer than you can stay solvent,” a quote often attributed to John Maynard Keynes, puts great emphasis on the importance of discipline, risk management, and a keen eye for price action, writes Chris Vermeulen of

I know most Apple (AAPL) enthusiasts will be rolling their eyes at this analysis, and that’s fine because the rest of us need people to buy our shares as we unload long positions or sell Apple short. All joking aside, the charts below clearly show some very interesting information you cannot afford to overlook. At minimum, take a quick glance at these charts, which tell the full story on their own.

The Four Stages of Apple and Research in Motion
Markets are cyclical in nature. There is a constant process of expansion and contraction, rally and decline that continues as the market determines the theoretical fair value of a security. The sum of these moves forms an unquestionable cyclical pattern consistent within all time frames.

During a cycle a stock enters different phases of support, from irrational exuberance typically found before its peak, to periods of widespread discontent where its price is continually punished. However there are never distinctly good or bad stocks.

Every “good” stock will eventually become a bad one and vice versa. There are, however, good trades; trades that reward an investor who has correctly anticipated a move and positioned himself accordingly.

It is important to note that this works with commodities like gold and silver, which are trading at a very interesting point in their life cycle.