Tesla or NIO: Risks in using ATH as Stock Trading Strategy You Should Know
A stock reaching a new ATH (All-Time-High) can provide both opportunities and pitfalls for traders. If the asset is reaching a new ATH on a regular basis, traders can recognize the upward trend, and invest accordingly. However, a strong technical analysis (TA) and fundamental analysis (FA) is also necessary in order to determine when the asset price will hit its resistance and begin to drop again. An all-time high should not, in and of itself be used to develop a trading strategy, but it can – and should be – one of several tools taken into account.
There are 3 risks in using ATH:
1. Emotional Investing
ATH can lead some investors to make impulsive and emotional investment decisions, buying into the stock based on the fear of missing out (FOMO) rather than a well-reasoned analysis. This can result in investors buying at the top of the market, putting them at a higher risk of losses if the share price declines.
2. Profit-Taking
When a stock reaches an ATH, some investors may choose to take profits, selling their holdings and causing the price to drop. This profit-taking can lead to short-term price volatility and potential declines in the share value.
3. Potential Market Corrections
Stocks that experience rapid price increases and reach new ATHs can become overvalued, increasing the likelihood of a market correction. A market correction occurs when a share price declines by at least 10% from its recent peak, and it can happen for various reasons, including profit-taking, changes in market sentiment, or shifts in economic fundamentals.
Hence beware when someone use only one TA indicator like ATH to advise you to "buy NIO stock" or "don't buy Tesla stock". The best practice is read up more than one analyst's reviews (opposite view), use more than one TA indicators and cross-check with FA like looking at company's earning report.
There are 3 risks in using ATH:
1. Emotional Investing
ATH can lead some investors to make impulsive and emotional investment decisions, buying into the stock based on the fear of missing out (FOMO) rather than a well-reasoned analysis. This can result in investors buying at the top of the market, putting them at a higher risk of losses if the share price declines.
2. Profit-Taking
When a stock reaches an ATH, some investors may choose to take profits, selling their holdings and causing the price to drop. This profit-taking can lead to short-term price volatility and potential declines in the share value.
3. Potential Market Corrections
Stocks that experience rapid price increases and reach new ATHs can become overvalued, increasing the likelihood of a market correction. A market correction occurs when a share price declines by at least 10% from its recent peak, and it can happen for various reasons, including profit-taking, changes in market sentiment, or shifts in economic fundamentals.
Hence beware when someone use only one TA indicator like ATH to advise you to "buy NIO stock" or "don't buy Tesla stock". The best practice is read up more than one analyst's reviews (opposite view), use more than one TA indicators and cross-check with FA like looking at company's earning report.
$BYD COMPANY(01211.HK$ $BYD Co.(BYDDF.US$ $S&P 500 Index(.SPX.US$ $Nasdaq Composite Index(.IXIC.US$ $Tesla(TSLA.US$ $VOLKSWAGEN A G(VWAGY.US$ $NIO Inc(NIO.US$ $Li Auto(LI.US$ $XPeng(XPEV.US$ $General Motors(GM.US$ $Ford Motor(F.US$ $Rivian Automotive(RIVN.US$ $MERCEDES-BENZ GROUP AG(MBGAF.US$ $TOYOTA MOTOR CORP(TOYOF.US$ $GEELY AUTO(00175.HK$ $Lucid Group(LCID.US$ $Stellantis NV(STLA.US$
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I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.
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Revelation 6 : Tesla for the long hold, NIO for the short.
ZnWC OP : Here is the article that suggests using NIO earnings to decide if the stock is buy or sell:
Should You Consider Buying or Selling NIO (NIO) Right Now?
cha Jin : valuation x 800 is TSLA. overweight
ZnWC OP : Here is another post about NIO stock: One bearish the other bullish in opposite view
2 Analysis Reports about NIO Stock contradicted each other within a day
ZnWC OP : Someone just posted an article using my post content about risks in ATH. He ignored the links shared about analysts report. The analysts use data and are more experienced than him.
By showing some complicated charts doesn't mean he is not be bias in the interpretation of data. You still have to decide to buy or don't buy based the points showed in the above article.