2J·

Chart analysis question: When do we speak of a bottom formation?

Again and again I read comments like: "Why don't you wait for a bottom?"when it comes to entering a share that is currently falling.

But what exactly is a bottom?

My personal definition would be:

A bottom is formed when the last low higher than the previous low low and additionally the last high is exceeded.

However, this definition is relative. An example: The share of $NOVO B (+5,32 %) .

I am convinced that the company has a lot of long-term potential and am considering further expanding my position.

But how do you determine the right time?

Should you buy the 1-month chart or is the monthly chart meaningless?
Should I use the SMA 50 - 200 lines as a guide?
Are there certain technical signalsthat should also be taken into account?
How do experienced analysts define a stable bottom?

I would be pleased to hear your views, as I have little experience in this area.

11 Commentaires

Moritz@leveragegrinding

So normally most people mean the following by floor:

(
Technical basis:
1. search for the app where candles are displayed (Tradgingview)
2. select the stock exchange with the highest volume (at the top of the search in Tradingview)
)

1. at least look at the daily chart, better weekly (one candle = one daily trend/one weekly trend)
2. there is no direct mathematical expression, but if the price has fallen and you have reached the lowest point on the screen, the candles must have held a level several times (min. 2 times, better 3 times). This is definitely not the case with Novo Nordisk.

Novo Nordisk: https://www.tradingview.com/x/WxKeOLzM/
no bottom.

A "bottom" is interesting, but a better indicator is when the price "bounces back" directly from a point.
Otherwise, a persistent price does not necessarily mean that the trend is reversing. It can also simply continue to fall.

So really bullish:

Example Carnival: https://www.tradingview.com/x/0BpxUTCI/
1. up volume (price is bought up again)
2. then a high above the last high
3. possible entry below in green box indicated by the last bearish candle in the previous move.
4. runs.

This is then a trend change from point 2). I would orientate myself more towards that, after that the talk of a bottom makes sense. before that it is nothing half and not whole.

Novo would therefore be relevant for me from here onwards if the price moves above this level (positive trend):
https://www.tradingview.com/x/XzQLe8R8/

and until then it is really interesting:

https://www.tradingview.com/x/o4TAKnd7/

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Patrick@Pazi3

Thank you for the detailed answer.

What indicators do you value? "If the ground doesn't do anything" 😉

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Moritz@leveragegrinding

@Pazi3 adjusted the comment a bit :)

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Christoph@ChrisBizz

Very interesting, thank you very much 👍🏻

But wouldn't it be better to evaluate NovoNordisk's share price in its home currency, the krona? I think it actually looks quite good from your point of view. The price is oscillating around the EMA 200 on the weekly chart and has formed 3 higher lows almost exactly on the SMA 200. A rise above 635 kronor (which is also the EMA 50 on the daily chart) would be a good signal in my opinion.

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Moritz@leveragegrinding

@ChrisBizz 1. the Danish stock exchange is not the one through which most American institutional investors buy. Chart movements are therefore not as accurate.
2. the average volume here is 5 M, in America 10 MIo
the larger volume is always the more relevant

3. one is the B share and the other the A share, I am not familiar with the asset now, I only read that from the name.

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Gomerdoc@Gomerdoc

But with shares like $NOVO B, that's just guesswork. There has now been a decent downturn, so if you catch something like that, you're lucky. In principle, technical chart signals are far too "risky" for shares with this fundamental quality: time in the market always beats "market timing" for such shares. Basically, some shares are always bought at their respective highs - viewed retrospectively three or four years later.....
a look at real long-term charts (20 or 30 years) often helps a lot in understanding.

This can also be seen in the example of $MCD. Waiting for any "dips" is far too exhausting. If you don't take into account the countless stock splits in the price trend since 1970, the price trend is infernal, the prices we see have already been subject to countless stock splits, and this curve is still actually from bottom left to top right.
So if you have a few years (investment horizon of ten years or so): then it's best to buy certain stocks exactly when you have the money for them...

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Moritz@leveragegrinding

@Gomerdoc partly agree, but in some cases it can be difficult to identify these quality stocks. I'm not so sure about the sector either.

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Heiko S.@heikospecht

Everything Moritz says.
I mainly look at the macro (i.e. really long term). I look for the macro trend and also possible long-term support and resistance lines.
I then add the EMA 200 and EMA 50 to the 1-day candlestick chart. As well as the SuperTrend.

Currently the falling trend is still intact. But it is slowly but surely heading towards a decisive node.
The worst case scenario would conceivably be another drop to €68 - but I don't believe that the "macro trend" will be broken on the downside.
So far, the day says that it is of the same opinion.
So.... in short: I think the share is just finding the "bottom". There may still be a fight at the EMA50 touch.

https://api.stock3.com/charting/7913984.image?application=grid&template=config&width=1280&height=720&client_id=grid

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Patrick@Pazi3

@heikospecht Thank you for your thoughts. I find the different approaches very interesting.

For me it's more like "reading coffee grounds" but I find Novo really interesting at the moment.
There was already a small positive impulse today.

Let's see what happens.

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Heiko S.@heikospecht

@Pazi3 yep Hims&Hers are no longer allowed to sell their replacement product for Ozempic and Wegovy in the USA. Hence the landslide-like decline of Hims and the good rise of Novo

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Heiko S.@heikospecht

Forgot to say: I would consider a switch of the SuperTrend on a daily basis as a buy signal.

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