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4 Stock Market Cycle

zebrablog.net - When analyzing stock prices, it must be decided for traders to master the cycle of the stock market. The reason is common, because traders can easily identify the latest positions in the stock market through the cycle.

That way the timing of buying, selling, or holding will be more precise. Then, what does the stock market cycle mean?

1. Accumulation

The stock cycle begins with stage 1 which is called stacking. The buildup is the stage where the stock market lies at its lowest span with trend ideals proving sideways. At this stage, the stock valuation has been considered discounted, as a result it looks attractive in the eyes of big funds such as institutions, fund managers, and foreigners.

As a trader, you might be confused, if the stock moves from the buildup to the next stage (uptrend)? This is where the underlying principle of technical analysis comes into play. A trader must be able to determine the upper limit or resistance as well as the basic limit or support of the current sideways.

Stocks will begin to explore the upward trend towards stage 2 when there is a breakout with a large business capacity. That means some positive affection, regional rumors, and general rumors have pushed stock prices to break the resistance zone.

Another identity that shows a sideways style leading to an uptrend is the occurrence of higher highs and higher lows. High high is a shoot that is bigger than the first shoot. On the other hand, a higher low is a valley that is bigger than the first valley.

If we look at the diagram above, AGII shares faced sideways for quite a while before finally leaving the bullish reversal cycle (stage 1) which was signaled by a breakout. The breakout leads to the bullish continuation zone accompanied by a larger business load than before.

Not only that, each cost movement also makes the latest higher high and higher low.

2. Participation

After exceeding the build-up stage, stocks that have proven a subsequent breakout enter stage 2 or the participation stage. Participation is a stock market situation that is moving up and confirms the formation of an uptrend. Participation is also commonly referred to as the mark-up stage.

In participation, retailers generally start to buy shares, see the trend has started to rise and often become very optimistic. This then causes the load capacity of the business to increase. As a result, by way of valuation, the stock starts to be considered expensive.

When viewed from the diagram, the participation stage makes several higher lows and higher highs until tomorrow the conclusion revolves around goals towards sideways or downtrends.

3. Distribution

Distribution is the stage of the third stock cycle (stage 3) in which selling behavior or profit-taking from market players, especially institutions, leads. Finally, the stock price that was initially in a bullish situation began to move sideways or up and down with a limited span during some time frames.

Usually, the distribution feature is accompanied by stock prices that immediately fall in a sharp way with the capacity of big business. After that, the stock price went up again with the capacity of a small business.

This situation persisted until the target of selling shares from big investors was successful. The stock price then advanced to stage 4 because there was no big buying energy from big funds.

Some patterns such as double tops, triple tops, and head and shoulders are patterns that are very often encountered at this stage. All three contain a bearish reversal pattern which indicates that there is a retrogression of the ideal to a shrinking style.

But it means to know that stocks that are still in stage 3, it is not certain that tomorrow will turn around in hopes of facing depreciation. When the stock price rises and consolidates in the upper position, the sideways trend that occurs may return to stage 1, depending on where the stock will move the next day.

If a breakout occurs, then the stock is still in the build-up stage and can continue to move up to stage 2. On the contrary, if a verification breakdown occurs, it means that the stock is in the distribution stage and has the potential to face depreciation.

4. Capitulation

Capitulation is the last stage in the stock market cycle which is indicated by price movements shrinking or downtrends. This is because the shares that have been released by big money at the distribution stage are currently spread freely in the market and controlled by retailers where they have different buying and selling strategies.

For traders who sell late in stage 3, of course, they want to face a floating loss until the next day the stock turns bullish. Those who are late in selling are commonly called nyangkangers.

But when the price drops even deeper, some reliable market players even see this situation as a sign that the stock price has reached the bottom level, which in turn is the right time to buy shares. Because theoretically, tomorrow The price will bounce off the lows and return to the build-up stage.

The stock market cycle consists of the stages of accumulation, participation, distribution, and capitulation. These four stages are just a few of the many parts of technical analysis that need to be understood.

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