Burton Wilde: Operational Strategies in a Bull Stock Market.
In comparison to a bear market, investing in a bull market is indeed easier. The ongoing bullish trend in the U.S. stock market has yielded substantial profits for many investors. The fundamental strategy in a bull market is to hold stocks; as long as the market conditions for stocks remain bullish, avoid hastily selling stocks. When trading U.S. stocks during a bull market, every dip in stock prices is an excellent buying opportunity. Let the stock prices continue to rise to levels that may seem unbelievable. Selling stocks arbitrarily during an upward price movement not only risks losing potential future gains but also wastes more funds when re-entering the market.
Throughout the strong bullish phase in the stock market, stock selection is a crucial aspect of the operational process. Not all stocks are profitable, and one must not be swayed by brief prosperity.
In the initial stages of a bull market, the rising prices are generally driven by high-quality stocks. If high-quality stocks are not performing well, and instead, speculative low-priced stocks are surging, it indicates a speculative trend, and caution should be exercised with preparations for exiting. If the upward movement of first-tier and second-tier high-quality stocks relies on the rise of speculative low-priced stocks, and most of the trading volume is concentrated in speculative stocks, suspicion arises regarding the sustainability of this upward trend.
It's worth noting that there's no need to overly worry about the possibility of stock price declines in the early stages of a strong trend. Typically, a downturn occurs when all investors in the stock market are profitable, and the initial decline is quite severe. The appearance of a downturn also marks the arrival of an opportunity for short-term rebounds. However, this rebound is your final opportunity, and once done, you should swiftly exit the stock market.
In the middle stage of a bull market, stocks with smaller market capitalization, particularly those with favorable themes, tend to rise more significantly. When the bullish market enters the main upward phase, it is the best time to purchase and hold small-cap stocks with outstanding performance. When selecting small-cap stocks, try to choose those with restrictions on relative valuations, as stocks with fixed relative valuations often lack the momentum for subsequent increases.
The final stage of a bull market sees the participation of third-tier low-priced stocks, and the entire stock market experiences a frenzy of speculative enthusiasm. While participation in this enthusiastic speculative game at this stage is not discouraged, it is crucial not to chase after third-tier stocks that have already been hyped, as doing so can lead to significant losses. Additionally, in the last stage of a bullish market, you should be prepared to sell stocks and exit the market at any time.
Furthermore, in a bullish market, it's important to remain vigilant for the danger of a market top. When stock prices continue to rise, and the trend of increasing trading volume persists for some time, it's essential to monitor whether stocks are reaching their peak. A typical sign of a market top is the sustained high trading volume, accompanied by a pause in the overall market's upward movement. By studying daily stock charts and other chart patterns, one can assess the signs of a market top, such as classic reversal patterns like "M-tops" and "head and shoulders." Always be prepared to retreat.
Of course, throughout the entire upward trend, stock prices will experience several more or less significant retracements, which are normal. Retracements mainly occur in stocks that have experienced a significant increase in a short period. High-quality stocks with smaller increases generally do not experience substantial retracements. Additionally, the duration of retracements is not usually extended.
If a high-level consolidation continues for an extended period, it indicates a scarcity of funds chasing higher prices in the market, and the future market may likely develop downward.